The Next Digital Health IPO (I Hope)

Going public — doing an IPO — is considered a major success for founders and investors. Whether it’s a true sign of success or not, it’s a great way to return money to investors and for employees and founders to cash out some or all of their shares.

IPOs have been on my mind a lot recently with the Castlight IPO, the recent reports on revenue for private health companies, and now the recent news of another large strategic round of funding for AirStrip. Apparently speculating about IPOs is fun, with a story published earlier this month about potential upcoming IPOs in healthcare. I read a story by Michelle Snyder a few years back on the same subject.

The IPO market is a strange one. I’m not sure I fully understand it. Take Castlight, for example. That’s an IPO I can’t really wrap my head around. My impression is that ever since the dot-com bubble, revenue needs to be significant to go public. I always use $100M as a solid metric to hit, although I realize that other factors also play in.

Castlight had $13M in revenue last year. It went public with that and reached reaching a valuation of over $3B! Today it’s valued at about $950M, which still seems absurd. Castlight was also the #2 company on Michelle Snyder’s list from two years ago, so I think it was likely to get to IPO regardless of performance.

For a more critical assessment of the Castlight IPO, here’s a great article on it. One thing I didn’t know that was in the article was that 16 percent of Castlight’s revenue came from Walmart last year.

Now that I’ve come clean with my lack of understanding of the current IPO market, I thought it would be fun to do my own speculation about the next digital health IPO. If you look at the lists of potential horses in the race in the articles linked above, there are some real contenders. I’ll start with the biggest names that I don’t like as the next IPO.

I throw out Practice Fusion as a real option. I think it’s in an interesting place because it’s raised so much money at very high valuations. That funding and the ad-driven business model make Practice Fusion a difficult acquisition target. But can it hit the revenue targets it needs to hit to go public? After Castlight, who knows?

ZocDoc is a curveball to me. I’m skeptical it has the revenue and retention to go public, but it’s raised so much money that I wonder if the investors want to cash out sooner than later. If it’s raised money at $1.6B valuation, I imagine it is getting ready to go public pretty soon, despite the CEO saying recently that the company is not planning an IPO.

I think Doximity will go public, but I don’t think it’s going to be the next digital health IPO. It seems likely Doximity will continue to grow as it’s beyond the tipping point from a network strength perspective.

That brings me the big name that I think will be the next digital health IPO (or at least I hope it is): AirStrip. I have no idea if AirStrip has plans to IPO, but I think its continued growth and strategic investments, most recently $25 million, are going to get it to the public market pretty quickly. This is pure speculation.

While Doximity, Castlight, ZocDoc, and Practice Fusion are certainly good for digital health, at least in terms of press, I think the following differences make AirStrip interesting:

  • AirStrip is a true healthcare enterprise mobile health success with a business model that is repeatable.
  • It leverages data sources that are considered a disaster to access (devices and EHRs).
  • It is mobile, or at least mobile first. It’s different from the other mobile health successes people refer to — iTriage and Epocrates.

It helps validate a lot of the speculation about mobile health on the enterprise side. It’s not a huge success for the consumerization of healthcare people, but it’s a big deal because it proves that mobile design and unifying data for clinicians, outside the EHR, is very valuable. It did this while all the major EHRs talked about or launched their own mobile offerings for clinicians.

I remember seeing AirStrip back in 2009 and thinking, "Wow, that’s really cool, but I wonder if it will actually succeed when it moves beyond fetal heart rate monitoring?" An IPO would go a long way to answer that for me and the industry.


Travis Good, MD/MBA, is co-founder of Catalyze. More about me.

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