Why Are Investors So Keen on AI-Driven Health Tech Companies Like Tempus

3 weeks ago

2024 - A Big Year for AI Healthcare Companies

Did you know? 

1 out of 4 dollars is going towards health tech companies that are leveraging AI. 

Last year, U.S. Venture Capitalists invested $7.2 billion in AI healthcare companies, 21% of total VC healthcare investment. 

If we talk about 2024, $2.8 billion has already been invested in AI-driven health tech companies. 

An ultimate dominance of AI in healthcare investment.

According to Silicon Valley Bank reports, venture capital deal activity in Artificial Intelligence (AI) for healthcare has increased dramatically over the last five years, expanding at double the rate of the total technology industry. 

AI-leveraged health tech companies outperform non-AI-utilizing companies in seed and series funding rounds.

Tempus AI Rises After US$410.7 Million IPO

Tempus, a medical data firm that provides data & analytics tools, and AI for precision medicine, raised 15% on its IPO opening day.

The interesting news is, Tempus recognized itself as an AI company, even though its AI revenue is $5.5 million just 1% of its total revenue.

The company is trying to embed more and more AI in their products, and investors are also showing their interest. The jump in Tempus AI stocks is a recent example of it.

Tempus AI has secured $1.3 billion in funding over nine funding rounds.

Since 2019, more than 30 U.S. healthcare AI companies have achieved unicorn status, according to SVB's data.

Need of AI in Modern Healthcare

Healthcare is the most crucial and largest sector in the U.S. economy. More than 3 trillion dollars are spent on healthcare every year. 

It is also the largest job provider than any other industry in the United States. 

However, all's not well in the U.S. as healthcare costs are significantly high and increasing. Even after spending far more on healthcare per capita than in other countries, access to healthcare is worse in the U.S.

The rest of the world is not different. 

Here, Artificial intelligence comes as a silver line that can reshape the practice of healthcare. AI can identify patterns, extract insights about complex systems and make the process fast and affordable.

3 Healthcare Areas Where AI Will Make a Big Impact

AI is all set to soothe the lives of patients, doctors, and hospital administrators in less time and at a fraction of the cost.

AI is reinventing modern healthcare through machine learning that can predict, comprehend, learn, and act.

There are 3 sprawling fields of healthcare where AI will make a big impact. 

1. Clinic

A. Imaging

When it comes to AI, It is quite good at identifying objects in images, like tumors, skin lesions, and retinal diseases. 

That's why providers are using AI-supported computer vision to detect health conditions in medical images.  

AI leverage in Imaging has attracted startups including Caption Health, PathAI, Paige, and Zebra Medical Vision to develop tools for automated medical image analysis. 

B. Patient Intake and Engagement 

AI-enabled chatbots are simplifying the patient intake process. Through a simple text, they can access the healthcare center, get automated clinical advice and learn about their care plans. 

Interaction through AI reduces the cost, brings easy accessibility, and enhances communication; a better care for all.

C. Remote Treatment

Covid-19 worked as a catalyst for remote health care. Receiving treatment through telehealth has become a standard practice for many patients. 

However, remote healthcare will reach its full potential only when it is empowered by AI.

Now healthcare institutes are investing in AI platforms that can remotely monitor patients’ health.  

D. Precision Medicine

Precision medicine is one of the most promising things everyone is expecting from the AI-driven healthcare system. 

AI in healthcare can create a personalized treatment for the patient based on his genetic, environmental and behavioral context.

Tempus AI is the most prominent company pursuing the vision of precision medicine and has had success in raising $620 million from investors including NEA and T.

2. Administrative

A. Clinical Management

The moment a patient decides to visit the doctor there are tons of papers and manual work that begin taking place. Documentation consumes the provider's time and makes the procedure inefficient.

AI in clinical management can automate patient check-in, benefit and verification discovery, claims processing, invoicing, prescription orders, supply chain management, and more. 

B. Data Management

Data management in healthcare is one of the most challenging tasks. Stringent legal limitations, antiquated software designs, and skewed stakeholder incentives all impede valuable data exchange and collaboration.

As AI deals with large and complex databases, its application in healthcare can make data management seamless.

C. Medical Documentation

Electronic health records (EHRs) have made the entire documentation process very complicated. From taking patients’ notes to giving prescriptions, it consumes a lot of time.

AI can reduce this burden from the provider's shoulder by streamlining the entire documentation process. 

3. Pharma

A. Drug Discovery & Manufacturing

AI-enabled healthcare can accelerate the drug discovery and manufacturing processes.

It can quickly screen the drug compound and predict the success rate based on biological factors.

B. Clinical Trials

AI can assist in identifying the best candidate for a trial based on history and disease conditions, as well as additional variables such as infection rates, demography, and ethnicity, to represent the most afflicted. 

What Do Experts Say About AI Hype?

"It's no surprise that AI is dominating the discourse right now. But, one of the more surprising takeaways is how fast it's growing in healthcare. As compared to tech, it's growing two times as fast, not in terms of dollars or deal volume, but deal pace," Raysa Bousleiman, vice president, venture capital relationship management, life science and healthcare at SVB, said in an interview. 

"Tech has been ahead, unsurprisingly, in terms of AI investment and adoption. But now that we've seen some very early players start to play out, we're really seeing some of this pickup. I think people are really starting to warm up to the idea and realizing that it's here and it's going to be adopted soon," Bousleiman said, noting that healthcare providers recognize integrating AI into their operations can give them an advantage.

Wait & Watch Approach

Certainly, there is a growing interest in AI-based startups in healthcare, and it's also attracting investors around the world. 

But some investors are hanging around in this transition period as AI technology is evolving very rapidly and nobody knows what it may look like in future.

During a recent panel discussion at a conference in Washington, D.C., thINc360  – The Healthcare Innovation Congress, Doba Parushev, managing partner and vice president of venture capital at Healthworx Ventures, said the investment firm has yet to place a bet on generative AI. Healthworx is the investment and innovation arm of CareFirst BlueCross BlueShield.

"It's early, things are moving very fast and it's hard to tell what's actually real," Parushev said.

What Exactly Are Investors Looking For? 

Recently, there has been a massive explosion of AI-driven health tech startups worldwide. 

Each of them is incorporating AI technologies to attract investors.

But VCs are expecting something else!

They are more interested in asking the fundamental question.

"What problem are you solving and what value can you add?"

It shows along with AI-driven technology, your startup needs to deliver value to your customer. 

A value that can bring change to people's lives by providing effective healthcare.

Sys Creations: Adding Values to Health Tech Startups

We at Sys Creations have 10+ years experience of working with a wide range of healthcare startups.

It empowered us to have a deep market understanding and identify the gaps that may be you’re missing and we can help you to fill them.

Once you connect, we will assist you in each step of the process while making sure that your product not only integrates the latest AI technologies but also meets the real needs of the healthcare market.

From product discovery to final deployment, Sys Creations stands as a strong companion in your crucial journey.

Explore Your Product Development Journey with Us & bring your startup vision to reality.