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Why Tech Giants are acquiring Health Startups for billions?

Tech giants have started expanding their footprints beyond the traditional market for a long time- however in the last decade, these giants of the digital ecosystem have started disrupting the healthcare sector. In this article, we will delve deep into the phenomenon of tech giants trying to get leverage in the healthcare sector.

  • Amazon acquired One Medical for $3.9 Billion and launched Amazon Pharmacy in 2020 as a prescription and delivery service.

  • Apple also acquired Tueo Health, a startup developing an app that tracks breathing during the night for children who have asthma.

  • Google acquired fitness wearables company- Fitbit for $2.1 billion to expand its WatchOs capacities and gather more data.

  • Microsoft acquired speech recognition company Nuance Communications for $20 billion to expand its healthcare offerings.

Why are tech giants acquiring health startups?

The phenomenon of big tech delving deep into healthcare was pioneered by "Athena Healthcare." In 2007, the company went public and amassed massive support when its shares rose by a record 97% on its very first day of being open to the public.

Athena Healthcare proved to the technology world that you can use a modern innovation-based technology sector and disrupt the healthcare sector which runs on a traditional backdrop. This success paved the way for various other companies and subsequently, Big Tech understood the inherent value of healthcare and started acquiring them.

Although healthcare always seemed to be a favorable sector to bring in disruption due to various inherent problems inside the traditional system, the hordes of government regulations paired with various directives and bureaucratic hurdles made it an unpleasant sector to get into. However, as the bureaucratic system improved this phenomenon was synonymous with rising demand for data-driven models which could process and filter information in unique ways while carving out innovative information resulting in a shift to a model which was more relevant to the current times and created a fertile ground for various technology companies to dive in.

If we observe the market from a different perspective we will be quick to realize that healthcare needs insights from technology companies to understand the economy and bring in modernization while healthcare seems to be a ripe ground for various technological companies due to its complex nature and paired with the gravity of the need of innovative solutions to save a life this phenomenon was quite successful.

Needed improvement in Healthcare

The basic modernization bought in hospitals was the inclusion of electronic health records which saved a lot of bureaucratic hurdles for hospitals. However gradually other sectors started to improve wherein IoT and predictive analysis and quick prescription based on real-time data became a part of the daily treatment manuals.

This wave of modernization brought across various verticals of the healthcare sector has resulted in higher levels of customer satisfaction along with a higher efficiency across the administrative side of hospitals. The technological advancements have helped hospitals to bring in major cost-cutting measures across healthcare.

Recently the focus of technology has shifted to disrupting the issues like inoperability, security issues, labor issues, and various other serious issues that are plaguing the whole system. Greater price transparency across the market for healthcare services lets users get acquainted with the original price and cut out various intermediaries like brokers and middlemen who used to inflate the price.

Various data centers that use to store tons and tons of medicare data have started becoming inefficient due to the shift to cloud-based systems for data storage purposes.

Rise of investments in Healthcare

In 2006, Castlight Healthcare, A SaaS-based startup entered the market and by 2014 it had released its IPO and gained massive capital, and generated high profits. Another SaaS-based startup- Zenefits had shown rapid growth across the healthcare sector with its combined value surpassing more than $500 million in its very first year.

Post-pandemic investment has also increased significantly, Healthcare start-ups have raised more than $80.6 Billion in just 2020 alone, Analysts point out that this number will increase further. Some of the start-ups that have raised more than $100 million+ are Doctor on Demand, Grand Rounds, and Doximity.

Teladoc Health is the largest provider of telehealth medical consults whose stock went up 750%, This points out the insane investment flow in the healthcare sector even CVS (Pharmacy Giant) started offering jumped into the telehealth market.

Major acquisitions in the healthcare sector

The emerging healthcare sector has caught the attention of big tech companies which have finally realized the value potential of these markets as a result they have started a quick consolidation of various small startups and companies operating across the healthcare sector. This consolidation has been brought about by acquiring these startups and incorporating them with their companies and as a result, gaining quick access to these markets. The recent acquisitions across the healthcare sector are as follows

Alphabet, the parent company of Google acquired the wearable brand "Fitbit" in a deal worth $2.1 billion. This move was constituted to bring about innovation across the healthcare sector and open up a world of new possibilities.

Microsoft acquired Nuance at a whopping price of $19 billion to leverage its voice recognition and various speech-related technologies across the healthcare sector.

Why are tech giants acquiring health startups?

Although the market has seen various acquisitions and mergers of small healthcare startups being incorporated into big tech companies, Amazon has paved the way for a revolutionary concept in the market. Amazon is looking forward to bringing healthcare services to your doorstep based on a subscription model through the Amazon Prime interface.

The tech giant looks forward to providing primary care services to individuals with the help of the subscription-based model. There will be a bunch of services paired along with this model but the central idea is to bring in customer loyalty toward a care provider.

Amazon already runs such a model and has a footprint across various cities on a global basis and is already operating the subscription-based model with great success. Apart from this, They have also acquired startups like the online pharmacist "Pillpack". Along with this, it has also launched various services like a new Halo view healthcare brand along with an innovative method of testing for Covid. These measures point toward the fact that Amazon is building a digital healthcare ecosystem with plans to dominate the sector.

In the current scenario, the barriers between technology and healthcare have been destroyed, directly pointing to the fact that innovation will rule the healthcare sector.

These waves of innovation will directly address the inefficiency across the traditional healthcare sector and bring overall inefficiency to the sector.


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