Compared to its renown in the Medical Device Cluster, the Minnesota economy is less-recognized as a leader in Digital Health. According to data collected by Rock Health, a Digital Health incubator, the growth of venture funding for Digital Health outpaced Software, Biotech, Med Device and all other venture verticals in 2014. It’s clear, seeds have been sown to grow a successful Digital Health market in Minnesota, but there’s work to be done — especially considering the industry potential.
Rapid investment in Digital Health
Let’s follow the money. According to Rock Health, the following six Digital Health categories received almost half of the nearly $2 billion of all Digital Health funding in 2014.
- Analytics and Big Data: Data aggregation and analysis to support a wide range of Healthcare use cases
- Healthcare Consumer Engagement: Consumer tools used in purchasing Healthcare services or Healthcare insurance
- Digital Medical Devices: Software/hardware designed to treat a specific disease or condition
- Telemedicine: Delivery of Healthcare services through virtual channels
- Personalized Medicine: Software to support the practice of medicine customized to an individual’s genetics or preferences
- Population Health Management: Platforms to manage population health during the shift to risk-based payment models
According to the Rock Health report, the Digital Health deal volume has tripled in the last three years, primarily driven by an increase in early deals in the Seed and Series A stages — precisely the area oft lamented as anemic in Minnesota.
Digital Health, compared to Medical Device, does not need very much money, sometimes $100,000-250,000 is enough to get a company started. More is needed to accelerate the business. To avoid disruptions in our Healthcare Cluster, it’s important to embrace, collaborate and educate our high net worth individuals and the associated angel networks and early stage VCs about existing opportunities.
Put differently, Healthcare consumes about 17-18% of our GDP, or about $3 trillion. Studies have shown that through techniques such as “hotspotting” costs can be cut by as much as a third. In other words, Healthcare waste elimination is a trillion dollar market. Medication adherence, ER diversion, personalized medicine and behavior change are key drivers to unite consumer and clinical principles.
Maximizing opportunity in Minnesota
Michael Porter’s work “The Competitive Advantage of Nations” provides a framework to understand the creation and ability to sustain prosperity via tightly coupled, locally-concentrated “Clusters.”
Clusters have the potential to affect competition in three ways: I) by increasing the productivity of the companies in the Cluster, II) by driving innovation in the field and III) by stimulating new businesses in the field. In the modern global economy, leveraging continued innovation is more important than natural endowments such as low cost labor, raw materials or a harbor. Economic activities are embedded in social activities; ‘social glue binds Clusters together’.
Now is not the time to rely on past progress while other regions collaborate to strengthen industry clusters in ways that will drive tomorrow’s success. Instead, it’s time to pick up the pace and connect strategic leaders in Minnesota Healthcare to boost prosperity in 2020 and beyond.