The exponential growth and proliferation of entrants in the digital health industry over the course of the Covid-19 pandemic have naturally opened the door for consolidation and roll-ups, according to insights from a recent panel discussion at Engage at HLTH in Las Vegas.
Anuradkhika A., Systems Vice President of Strategic Partnerships and Innovation at CommonSpirit Health Ventures, expressed a provider-centric view, challenging the potential for numerous niche solutions to coexist long-term.
“Consolidation is a byproduct of you already figuring out which company has been able to demonstrate the most impact and has seen the most penetration happen”, Anuradkhika A. said. Digital Health Consolidation Is Meant To Happen, VCs Say talks about these industry trends more extensively.
One area ripe for consolidation is mental health, which gained substantial attention throughout the pandemic. Anuradkhika A. noted that while the onset of Covid-19 led to welcome innovation, there are limitations on how many direct-to-consumer mental health companies can efficiently function alongside each other. She described a health system handling 90-100 different mental health platforms as unfeasible, suggesting a more platform-centric approach and viewing consolidation as an expected outcome.
Already, consolidation is beginning to occur, as reported by Maria Toler, founding partner of SteelSky Ventures, also on the panel. Toler revealed that many companies were rolled up this year due to their inability to raise funds or for other reasons, especially in women’s health and the broader digital health landscape. This, she points out, circling back to Anuradkhika A.’s previous point, strengthens the argument for consolidation in the digital health space.
She also mentioned that companies are being sold for much cheaper, thus creating more opportunities for consolidation. Toler asserted, “Companies are being sold for pennies on the dollar…”, and added that some startups are more accepting of roll-ups, despite the common dream of owning a billion-dollar company.
While the path of consolidation presents several challenges and complications, this trend is viewed as a necessary and natural phase in the digital health sector’s growth and evolution. As the digital health sector advances, stakeholders in the legal, medical, and venture capital communities should prepare for this ongoing market consolidation.