HBI Deals+Insights / News

Can digital health’s new unicorns live up to their valuations?

When a start-up gets valued, it’s not so much about what the company is worth today but more about how it is expected to perform over the next few years. High fundraising rounds come with big expectations from investors – will Europe’s digital health companies be able to deliver?

Last week Babylon was valued at over $2.2bn off the back of a $550m funding round that included Saudi sovereign fund PIF and Centene as big investors. It’s the biggest ever fundraising round for a digital health company in Europe and comes with a lot of pressure to perform.

The company still has a huge burn rate and is likely to eat through that $550m pretty quickly, particularly as CEO Ali Parsa, who remains the majority shareholder, says it will be used to enter new markets and make new products. Such a high valuation probably came because Parsa wants to dominate America and Asia and Babylon’s new investors will have the contacts to facilitate partnerships in new markets.

It might struggle in America, as the large player Teladoc already works with insurers like UnitedHealth, and so partnerships will probably come with healthcare providers or other administrators. A pairing with Centene looks likely. Asia is a much more fragmented market but Babylon is established there through work with insurer Prudential (Hong Kong) and telecomms provider Tencent (China).

Europe’s other two large digital health companies – doctor booking rivals Doctolib and DocPlanner – have instead said that they want to focus on improving penetration and products in their own markets and are less concerned about internationalisation for now. That is perhaps more achievable as it comes with a lot less risk.

Big promises of dominance across multiple markets sound more impressive than trying to get more business in the markets that you already operate in, which might explain the high valuations. However, it’s certainly going to be harder to make it work.

We would welcome your thoughts on this story. Email your views to Rachel Lewis or call 0207 183 3779.