It’s time for investors to redefine how we evaluate digital health startups

This was a record-breaking year for private investment across digital health. Investors poured billions of dollars into digital health solutions with great promise of driving innovation in a highly antiquated and inefficient industry.

While digital health has captivated the attention of investors and received validation from consumers, providers and healthcare stakeholders, early-stage entrepreneurs are being required to address the highly complicated yet mission-critical question: How can I show value and ROI?

The problems these companies are addressing are enormous, and the potential to help consumers and their families is even greater — key metrics that shouldn’t be overlooked.

With any new innovation, proving out a financially substantiated ROI case requires a combination of time and data, and digital health is no exception. In healthcare, proving ROI ultimately means calculating how much a digital health solution has either improved in outcomes or realized in cost savings for the sponsoring organization and its members.

While a claims-based ROI analysis is a crucial long-term measurement of success, industrywide innovation will require stakeholders across the ecosystem to initially think creatively and consider proxies for demonstrating value early on. Rather than allowing claims data to be an inhibitor of innovation, investors must reframe their focus on the long-term direction of the business, the value delivered for the end user and the broader impact of the company on the healthcare system as a whole.

Three key questions can help reshape measurement and investment in early-stage startups:

  • What is the problem being solved?
  • What can be measured to identify early indicators of success?
  • Why (and how) is the experience delivered so much better than the status quo?

What is the problem being solved?

Digital health solutions are solving some of the biggest challenges facing our society today. Take access to mental health care, for example. During the COVID-19 pandemic, about four in 10 adults in the U.S. reported symptoms of anxiety or depressive disorder.