In defense of tech-enabled services

U.S. digital health funding hit an all-time high at $29.1 billion in 2021 – or approximately 8.8% of the total U.S. venture capital investment. But there’s no doubt that 2022 is a very different year.

With health-tech companies taking a beating in the public markets, there’s been a lot of questions about the “investability” of the sector. Every day when we read the news, we hear about companies sharing layoff announcements and struggles to raise follow-on rounds. And given that health-tech is still relatively nascent, there are fewer examples to point to of long-term success in the public markets.

With this uncertain macroeconomic backdrop, the debate we hear often in the VC world is essentially this: Software versus Services. In other words: Is the optimal pathway to making a return in health care and improving the lives of patients, providers, and other stakeholders to invest in software, or services made more efficient by software?