In the Crowded Consumer Health App Market, Investors Advise CEOs on How to Stand Out From the Rest

18 Jul

By Karen Deyo, Investor Research Analyst, LSN

The number of consumer digital health apps has been growing at an enormous rate over the past few years. A study done in November of 2017 by IQVIA found over 300,000 apps available, with hundreds more added every day1. These apps can be tied to wearable sensors, related to wellness areas such as mental health or weight loss or related to chronic disease management, to name a few possibilities. What with more people turning to their smartphones to complement their medical care, and the number of apps flooding the marketplace, how can a new consumer health app catch the attention of investors?

Gyan Kapur, Managing Director of Bayes Ventures and Digital Health CT, a new digital health focused incubator, stressed that to stand out, companies need to have a special premise and team, as well as the ability to demonstrate actual traction. While formal clinical data is not a necessity, if a company has no clinical data that makes it crucial to have other evidence of market traction, such as retention, a good viral coefficient etc. However, Gyan stressed that ‘while not all companies have this data, those that do are much more likely to get funded.’

Sarah Sossong, Principal at Flare Capital Partners, highlighted the importance for potential investors and customers to see early demonstration of market traction and preliminary evidence of your app’s impact on clinical outcomes and costs. For example, some apps have opted for a freemium model out of the gate to get broad consumer adoption. Significant engagement is a great proxy for value, impact, and need, and can be a great starting place for negotiating B2B contracts with payer, employers, or health systems. In today’s highly cost-constrained environment, these same payers, employers, and health systems will also be under pressure to show impact, or risk budget cuts, so it’s also essential for entrepreneurs to be thoughtful about quantifying impact and pick early partners equally dedicated and resourced to demonstrate the app’s efficacy on clinical outcomes and cost reduction. Together, market traction and demonstrable impact can provide evidence of a good underlying business model that will enable a larger path forward and long-term success.

However, entrepreneurs must have a good business plan in mind, and one that does not rely solely on a consumer app – to be successful in the long run, there needs to be a larger path forward, whether that involves partnerships with healthcare providers, a B2B aspect or a larger platform that will be in play. Dr. Sohaib Siddiqui, Managing Partner at Kettlebeck Ventures, agrees that an app is not sufficient for a complete business model, but should only be a first generation product. He highlighted, ‘there are so many consumer digital health apps in the app store, with many more added every day, that it’s easy to get lost.’ Sohaib said that for him to be interested in investing, the app should be a tool, but not the only product, for a company to be able to scale and remain relevant to the market. However, in addition to market traction, Sohaib stressed the importance of proving the benefit to the patient, and how the app can improve care, and to be able to prove value, not just claim it.

Finally, evidence of market traction, a good business model for future product development and proof of the efficacy of your app for the consumer are not all – it is also important to remember that, as potential investors, they all want to see what the return on investment will be. Finding investors for a consumer app can be an uphill battle, and the startups that succeed will be those that provide a needed service in a unique manner that cannot be easily duplicated.

  1. https://www.iqvia.com/institute/reports/the-growing-value-of-digital-health

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