Move over tech startups, health is the new holy grail

A chain-smoker trying to wean himself of the cigarette addiction.

A doctor holographically planning surgery on a patient before actually doing it.

A war veteran living with PTSD finding relief by confronting the trauma until the anxiety is manageable.

A sufferer being to visualize their acute pain and learning to manage it better rather than using opioids.

These use cases are actual startups — Lucid Care, EchoPixel, Limbix, and AppliedVR respectively, and they are just examples since they are many competitors. AR and VR have indeed tremendous uses in health, published extensively in the media, but it’s certainly a nascent sector in a nascent industry. The biggest traction is arguably in medical education, for instance, Dell Greater China has developed a VR surgical training getting deployed in 10 medical schools.

But overall there are no major exits yet and only a handful of companies past series B, this snapshot from larger landscape from Digi-Capital highlights some of the more visible startups:

What will it take for these use cases to become widespread reality? This post will focus on three specific levers that need to move further:

1) Leverage Points

The two most salient categories of use cases in the future are improving doctor’s performance and helping people with mental health.

The first category is about selling into the healthcare system — providers or payors means long sales cycles and the obvious early adopters tend to be wealthy systems or research-oriented hospitals especially academic centers. But there are low hanging fruits amongst integrated systems, which have a stronger incentive to reduce costs, and smaller hospitals in rural areas, which have fewer doctors and thus are sometimes more open to tech innovation.

The second category is about tackling a large market that is often undiagnosed or misdiagnosed, besides being mostly underserved. The obvious go-to markets are targeting self-insured employers, which have an incentive to keep their employees' more productive, or wealthy patients directly. But entrepreneurs should not underestimate the cost-benefit of leveraging a VA or an AARP; once you are in those systems you get tremendous scale and are also hard to displace.

2) Reimbursements

Arguably the holy grail. In the US there is no clear answer when CPT codes specifically for AR / VR or even existing ones around say telehealth can be used for reimbursements. But we do see some early signs in emerging economies where the healthcare infrastructure is more fragile, especially with large populations. In China where the WHO reports the ratio of doctors to patients is about half of the US, at least clinical education through mixed reality is gaining ground. The country has seen a surgery being advised from thousands of miles away and a startup claiming 3,700 practitioners teaching medicine through its platform.

3) Priming The Engine aka Exits

Exits are arguably the single biggest lever to help the ecosystem burgeon because it means more startups and more VC funding. The bad news — there are none so far in this space, at least significant ones. IPOs are rare in general and until there are scalable business models, highly unlikely in this space. So the exits will most likely come from M&A from Big Tech focused on expanding into healthcare or traditional healthcare companies avoiding being disrupted themselves.