The high hopes for digital health were boosted last month with the initial public offering of fitness tracking company Fitbit, which at press time had a market capitalisation of $8.7bn. As a result of the flotation, public investors have doubled their money and there have been huge gains for the corporate and venture capital backers of the company. There is now greater enthusiasm in the search for efficiencies from employing scalable lower-cost software innovations to help people become healthier.
The most popular story on our website last month involved Qualcomm Ventures, the corporate venturing unit of the US-based technology company, which returned its entire $100m Life Fund on paper from its investment in the business, while Sapphire Ventures, in which Germany-based technology company SAP is the sole limited partner, and SoftBank Corporation, a Japan-based conglomerate, are both sitting on even bigger stakes.
In light of these developments, it was interesting to moderate a panel of corporate investors interested in health technology startups at TechTour’s Healthtech Summit in Lausanne this month. The panel included US-based healthcare company Merck’s Global Health Innovation Fund’s Bill Taranto, food and nutrition company Nestlé’s Valerio Nannini, Charity Kufaas, of medical device company Medtronic, Angelo de Rosa, of medical device company Boston Scientific, and pharmaceutical company Novartis’s Ulrich Muehlner.
The discussion dwelt on how the pharmaceutical, medical device and nutrition sectors were converging and how the groups were becoming keener to partner one another as well as with startups. There is also huge potential for technology players to come into the sector. In discussions on digital health on the sidelines of the conference, corporate participants flagged Google’s innovations as among the most interesting, while some of the innovations being dreamt up by heavily-funded healthcare startups in Silicon Valley were described with enthusiasm.
Of course, some of the enthusiasm is still grassroots. The outsize win for Fitbit is for a business that healthcare incumbents view as a consumer company, rather than the more heavily regulated healthcare innovations that comprise their core business. Yet the increased possibilities for preventative healthcare and digital applications are clear.
Perhaps of significant symbolism was the decision to have Alexander Osterwalder, co-founder of Strategyzer, speak at the Lausanne conference. Osterwalder is one of the most famous evangelists of the lean startup movement, a rapid-fire method of business formation more commonly used in consumer technology startups, and perhaps less obviously applicable to healthcare. Osterwalder said he worked on a pilot in Washington for the National Science Foundation bringing lean to healthcare.
He said he and Steve Blank, another well-known lean evangelist, had initially been “very sceptical”. Yet Osterwalder said even in healthcare, “it is very impressive how much you can reduce uncertainty and improve the chances of success”. The idea that healthcare, a sector characterised by heavy regulation and rigour, is ripe for the rapid iteration experimentation of the lean startup method is a fascinating and slightly terrifying thought.
Chatting afterwards with a health entrepreneur, he joked that lean startup methodology “was a little cultish for his tastes”. Yet what seems clearer than ever is that more and more people in healthcare are getting religious about software.
Goodbye Arvind, welcome Wendell
As we went to press, news emerged that Arvind Sodhani was leaving Intel Capital, the corporate venturing unit of the semiconductor company, in January – having built the group into an investment machine that has deployed more than $11.5bn in capital. There is perhaps no greater endorsement of a corporate venturing executive than that of his chief executive, Brian Krzanich: “Arvind transformed Intel Capital into the most successful technology venture capital group in the world.”
As the chair of our advisory board, Claudia Fan Munce, head of IBM Venture Capital, the corporate venturing unit of the US-based technology company, said: “In the last decade Arvind has been the leader that best represented the corporate venture community with his business performance, his passion for entrepreneurs, and his generosity in lending his lustre and network to other members of the corporate venture community.” Tracy Isacke, head of corporate venturing relationships at Silicon Valley Bank, dubbed Arvind “a titan”.
His successor is Wendell Brooks, president of mergers and acquisitions at Intel. He has big shoes to fill. Yet as Isacke said of Brooks’s appointment: “Having just delivered the biggest-ever acquisition for Intel [the $16.7bn acquisition of semiconductor company Altera], I am sure he will have ambitious plans for Intel Capital.” The success story that is Intel Capital must be a hugely exciting and daunting group to manage. We will watch this transition with great interest.