Impact investing and digital health
Digital health is an increasingly hot topic, attracting the attention of tech giants from Apple to Facebook, and the global market is estimated to be worth £43bn by 2018. Propelled by the “Silicon Roundabout” of tech entrepreneurship, the “Golden Triangle” of scientific research from Oxford, Cambridge and London, and the NHS’ commitment to enhance its efficiency through digitalisation, the UK is quickly establishing itself as a leader in this market.
At ClearlySo, nearly a third of our early stage investment clients are focused on tech-enabled health and wellbeing across a wide spectrum – from Open Bionics, who employ 3D printing to create affordable bionic prosthetic arms, to Thrive, who develop apps to help people treat mental health conditions such as arachnophobia with gamified cognitive behavioural therapy.
Health is a socially and politically charged space – now more than ever in the face of austerity cuts, privatisation of public services, monopolies on public service contracts, and data protection issues. So where do impact businesses, and their private investors, sit amongst all this?
We recently held an event to explore the theme of impact investing in health and wellbeing further, with a focus on the role of angel investors. Our panel featured:
- Guillem Singla Buxarrais, part of the 2016 Enterpreneur First cohort and co-founder of Neurofenix, a (prototype-ready) product and sensor-based gaming platform making stroke rehabilitation accessible, effective, and enjoyable.
- Rachel Murphy, Delivery Director at NHS Digital, leading the digital transformation of the NHS, including overseeing NHS.UK and transforming NHS Choices, the health information organisation that receives 48 million visits a month.
- Stephen Critchlow, a serial entrepreneur and investor. He is the founder and CEO of Evergreen Life, a Personal Health Record app, which allows people to take control of their health. Prior to Evergreen Life, Stephen worked in the NHS for 15 years before founding Ascribe, which he sold he sold and is now EMIS secondary care, the largest IT supplier to hospitals.
Prior to the event, we also reconnected with the first business our angel investor network ever invested in, Ieso Digital Health, which provides online one-to-one therapy on behalf of the NHS in secure “virtual therapy rooms”, and has since grown rapidly, becoming the largest provider of online CBT in the UK and treating over 10,000 patients.
Impact businesses: shaping the future of healthcare
While all three businesses we spoke to – Neurofenix, Evergreen Life, and Ieso – work in different areas of health and social care, some common themes emerged throughout our conversations.
All these businesses have identified new, innovative ways to provide additional value to existing services, often born out of first-hand frustration of what is currently on offer. Stephen, for example, (originally a pharmacist) founded and started his own company when he realised it was the only way to affect the changes to hospital clinical systems for which he saw a clear need.
There is a growing demand for ‘people-powered healthcare’, where health care providers support patients to manage their own health in their own homes, leading to cost savings, increased affordability/accessibility, increased system efficiencies and patient empowerment. We need to emphasise the ‘Health’ in ‘National Health Service’ – instead of viewing it as a National Sick Service, where we only interact it with health care providers when we are already sick. Products such as Fitbit can be seen as indicators in this growing interest for looking after our own health, something that Evergreen Life is tapping into with its Personal Health Records app, as well as demonstrating the value of a more preventative approach to health.
Neurofenix empowers people to take control of their stroke rehabilitation through their effective homebased rehabilitation system, that addresses the issues of low availability of therapists and high costs of physiotherapy. Importantly, Neurofenix makes the therapy engaging and fun for the user.
By increasing availability, and creating more flexibility, Ieso is offering patients more control over how they access therapy sessions, with the majority of sessions taking place between 5 – 10 p.m. In Ieso’s case, it’s important to note how they also support the therapist community, by offering flexible working alongside the other, face-to-face therapy sessions they deliver for the NHS, and by providing training programmes in digital health.
Use of data
Ieso’s use of data is key to their therapist support. Having worked with more than 10,000 patients over the years, Ieso has full, anonymised transcripts of hours and hours of therapy sessions, full of potential learnings on what therapists with consistently good outcomes are doing. Ieso are currently using AI to search through this vast amount of data and identify correlations, which will feed back into Ieso’s training and development programmes for therapists.
With Neurofenix, tracking patients’ data is key to help motivate the individual, and other users, by providing information on expected rates of progress. “We are seeing that people are willing to exchange their data in return for a service.,” says Guillem, co-founder of Neurofenix.
Data management also falls under NHS Digital’s sphere of activity – both within the NHS, ensuring that health and social care professionals have the tools they need to manage patients’ data, as well as ensuring the outside digital health providers are both digitally and clinically sound. Through their work engaging with outside providers, NHS Digital are also exploring ways to create a smoother route to market via the NHS…
Route to market
With its yearly budget of around £30bn for non-pay spend, the NHS represents an attractive market opportunity, with huge potential to scale. But it also carries a reputation of being slow, archaic, and impossible to break into for many start-ups.
Joining the NHS from a career spent predominantly in the private sector, Rachel Murphy (Delivery Director at NHS Digital) faced an organisation that operates unlike anything she was used to. “ ‘Joint venture’ is a foreign concept to the NHS, and we’re never going to be in a position to buy tech companies,” says Rachel. “My role at NHS Digital is to improve how the NHS collaborates with and procures from outside, innovative companies.” As an example, Rachel oversees the recently-launched NHS Digital Apps Library, which features a collection of Apps designed to improve patient experience that people can trust. All the Apps featured on the website are approved, or being tested by, the NHS.
For a business looking to break into the NHS, it might appear to be a huge, intimidating whale, but Stephen advised to view it more like a shoal of fish – if you drop a stone into it, you will quickly see each fish move in a different direction. Start-ups need to strategically target local and regional divisions of the NHS, such as hospitals or CCGs to find champions for the product.
Ieso is one of the approved apps featured on the Library, and while Charlene Waterworth, Head of Marketing at Ieso, acknowledges breaking through NHS bureaucracy was “a challenge”, overall it has been hugely beneficial. “We can now clearly say, ‘we’re using exactly the same models and data analyses, and our methods are as good as the other, ‘traditional’ modalities of care,” explained Charlene. “We’re proud to be pioneers in digital mental health care.” The NHS is also a good selling point and seen as a ‘centre for excellence’ for selling into new markets, such as the US.
The NHS-first approach will not suit every start-up, however. While there is some grant support available for health start-ups that need to prove their concept and efficiency, the process of applying for and winning these grants can be incredibly time-consuming. For a start-up like Neurofenix, who are keen to quickly establish their position in the market, approaching the NHS as their initial customer would have been too challenging. In the UK, there are number of accelerators affiliated with universities – Neurofenix’s co-founders, for example, participated in Entrepreneur First, a pre-seed investment accelerator, where they had 3 months to develop their idea.
Now, they will engage first with private therapy clinics, which they have found less ‘passive’ and more responsive than the NHS in terms of embracing innovation. Guillem did add, however, that NHS clinicians are good collaborative partners in giving feedback and trialling their prototypes because their time is not tainted by being driven by revenues as private clinics are.
Role of private investors
Angel investors also play an important role in helping digital health start-ups navigate and scale in this complex landscape of UK health and social care, by bringing not only investment, but also a commercial insight from having seen various business models, specific industry experience, and their professional networks. Among the investors from ClearlySo’s network, there are several investors who have supported as board representatives, active non-executive directors and mentors/advisors to the founders which is incredibly supportive at the early stages of these companies’ growth.
“This is a huge part of why I wanted to work with ClearlySo,” said Guillem. “I looked through their portfolio of previous entrepreneur clients, and saw we shared similar values, and felt confident that they would be able to introduce me to the right investors that would help my business.”
Stephen had some perhaps more unconventional advice, urging investors to go a little bolder: “Even if a start-up doesn’t have everything figured out on a commercial side, as an impact investor, if you see that it will add unique value that hasn’t yet been realised – get involved,” he said.
For Ieso’s Charlene, her advice for investors is to look for a cultural fit, and find a management team who are truly committed to delivering change.
With this event, we are of course still just scratching the surface of the complexities of impact investing in digital health businesses. If you are interested in finding out more about impact investing as an individual investor in health and wellbeing (or in any other sector), please don’t hesitate to get in touch.