Investing in the digital health sector
This month it has been revealed that Amazon’s Alexa is to offer health advice, the government is investing half a billion pounds in hospital technology, and EY suggests NHS datasets could be worth up to £10 billion a year. The NHS – the UK’s single-entry healthcare system – is actively open to innovation; which combined with a strong tech ecosystem, political support and an open regulatory framework, is setting the UK up to be a healthcare force on a global scale.
The demand for healthcare services is on the rise, driven by an ageing population, an increase in chronic diseases such as diabetes and cardiovascular disease, and a population that wants to be at the centre of their own care. The tech community is quick to provide personalised digital health solutions by developing AI tools to diagnose disease, combining real-time data with apps, and wearables for those living with diabetes, dementia and heart problems.
A report by Global Market Insights states that the global digital health market is set to exceed $379 billion by 2024, due to increasing demand for remote monitoring services, as well as favourable government initiatives and funding for adoption of digitalised systems. The UK digital health market was valued at $4 billion in 2017 with the early adoption of telecare services, large central government programmes and a strong existing base of hardware – as well as increasing prevalence of smartphones and apps – and is forecasted to reach $28.3 billion by 2025.
StartUp Health data showed the sector was supported by $14.6 billion of venture capital funding last year with it being celebrated as the “most-funded year” since it began tracking the market in 2010. The ability to have a deep and broad impact, the rise in successful exits and an influx in corporate entities funding start-ups, are some of the reasons VCs are looking to invest in this innovative sector.
Digital health companies follow a path from developing their idea, through to early-stage funding, often from venture capitalists, scaling up in partnership with corporate investors and finally exit through IPO or acquisition. Rising venture capital funding, including private equity and corporate venture capital in the health IT sector, is likely to escalate the market growth, as more investors start to see and understand the opportunities of the sector.
We have partnered with RYSE Asset Management LLP for a second year on the RYSE Digital Health Call, inviting early-stage companies to apply for up to £5 million per company to get to their next level of growth. We spoke with Claudio D’Angelo, Co-Founder and Equity Partner, to find out his thoughts on the sector and why people should apply for the Call.
Tell us about your background.
After successful careers in banking, investment advisory and management, my business partner, Shabir Chowdhary, and I decided to focus on real assets and disruptive technologies. We acquired an investment management company at the beginning of 2015 – now RYSE Asset Management.
What is RYSE?
RYSE is an FCA authorised and regulated investment management company. We identify, support, and invest in early-stage digital health companies, to commercialise and scale within the NHS and other healthcare delivery systems.
We founded RYSE with the aim of investing in impact technologies and looked at a number of verticals within this space to see where we could add value. We chose three sectors to focus on: digital health, foodtech and edtech – with digital health being the priority at this stage.
How did you come to partner with DigitalHealth.London and MedCity?
We soon realised that, even with our strong financial background, we valued the assistance in validating the science behind healthcare technologies. We decided to look for a partner that could support us with the validation of such innovations.
We selected DigitalHealth.London and MedCity for our digital health venture due to the quality, breadth and strength of expertise of their board members, as well as their knowledge, processes and track record in the digital health sector to date.
Why have you chosen to invest in digital health?
Our verticals of choice not only present potentially very interesting investment opportunities – in highly explosive market areas – but also carry a significant ‘feel-good’ factor.
We are developing our own metrics to measure social impact and are committed to our ambition to ‘Make healthcare better’ by supporting digital solutions that can make a difference to consumers, while providing our investors with early winners and a diversified portfolio in a very relevant vertical.
What are the investment opportunities in the sector?
Digital health is truly revolutionary. It will enable every operator in the sector to re-shape its production processes, its service provision and it can improve patient health and wellbeing.
Tech has a huge potential to develop solutions to long-standing problems within healthcare and to get them to patients quickly – as an investor, this is particularly appealing. It’s a very exciting time to be investing and we’re keen to work with early-stage companies to support their growth.
What types of companies have you worked with?
We attracted almost 300 investee companies in our first RYSE Digital Health Call and undertook due diligence on 109 finalised applications. Our role is to assess the science, technology and the quality of the management teams driving the companies, the potential impact of the technologies on the healthcare system and people’s lives, whilst also assessing the market size and commercial opportunity.
We seek to ensure that the funds are deployed to early-stage companies with the best chance of making a difference and the potential to realise a healthy return on investment for our investors.
Investments have been made into a blood testing pathology platform, LiveSmart, and a skin lesion AI assessment technology, Skin Analytics. We were impressed by the founders, their traction in their respective markets, and their company mission. The CEOs have a great commercial approach and have developed long-term partnerships with counterparts who are fast-tracking their successes.
What are you looking for now?
We specialise in a niche vertical which at the same time hosts a very wide range of technologies and applications. We welcome all digital solutions that can make healthcare better.
At the moment we believe there is a lot of room for improvement in the care of the elderly and the management of chronic disease.
What do companies receive from this programme?
We intend to invest in companies seeking up to £5 million in funding but we are happy to support more advanced technologies or businesses requiring larger sums of capital.
The founders and management teams may benefit from advice and support in assisting them to reach their next stage of growth. They may also benefit from follow on capital and the ecosystem we have created, which includes access to a number of advisors who can help navigate and partner with the NHS, private medical insurers, healthcare providers and pharmaceutical companies etc.
RYSE, DigitalHealth.London and MedCity is a powerful combination. Consequently, companies working with us can derive substantial benefit and endorsement which carries a lot of value in subsequent conversations around funding and distribution. Through the partnership with DigitalHealth.London, they can get access to the NHS decision and policy makers, as well as hospital trusts, to further validate the technologies.
Our approach is very different to many other investors and we believe our chosen investee companies should be driven by their management team, with our support, without intervention in their day to day choices.
Find out more about RYSE here: https://www.ryseam.com/en/
Read about the RYSE Digital Health Call and apply here: https://digitalhealth.london/ryse/