New report finds one in four dollars invested in healthcare going toward
companies leveraging AI
SAN
FRANCISCO, June 11, 2024 /PRNewswire/ -- Venture
capital deal activity in Artificial Intelligence (AI) for
healthcare has surged the past five years, growing twice as fast as
the tech industry overall. A record one in four healthcare
investment dollars goes to companies leveraging AI, according to
the latest report from Silicon Valley Bank (SVB), a
division of First Citizens Bank.
Leveraging SVB's proprietary data and insights, SVB's
AI-Powered Healthcare Experience report provides an in-depth
look at current fundraising activity and challenges, macro trends
and emerging technologies in healthcare, with a specific focus on
AI enablement related to patient care and provider options.
"The current and future impact of AI on the patient journey
could not only provide lower costs but also better patient
outcomes," said Raysa Bousleiman,
co-author on the report and vice president, Life Science &
Healthcare venture capital relationships at SVB. "While companies
may face challenges to adapt to the AI-enabled future, we are
optimistic about the innovations we see on the horizon and in the
growing investment in these companies."
The report analyzes four key themes shaping the future of AI
across the patient journey, including:
- Administrative AI may be low-hanging fruit: Despite the
buzz around AI for drug discovery, the majority (60%) of healthcare
AI dollars are going towards administrative and clinical uses.
Investors are especially drawn to administrative AI because it
often faces fewer regulatory and adoption hurdles than clinical
AI.
- Doing the diligence: Companies that can leverage a
provider's existing infrastructure in their new product may find
preference among VCs. For example, 70% of US provider's use EPIC
for their Electronic Health Record (EHR) and AI companies in the
EHR space may find themselves with a leg up if they establish
interoperability with the EPIC system.
- Startups flexibly delivering value: Organizations often
favor established players when purchasing AI solutions. To overcome
this, startups must clearly articulate why they're the better
choice compared to larger incumbents that organizations might
already have as partners. Startups' flexibility is their strength.
Massive adoption and margins are not as crucial for startups as
they are for established big tech, and the bottom-up nature of
startups lend themselves to working closely with physicians.
- Patient diagnostics face challenges: Especially with
AI-driven diagnostic tests, there are challenges from navigating
the regulatory environment to managing high costs and securing
quality data.
Key 2024 Report Findings:
Investors see the opportunity
- Since 2022, seed and series A pre-money valuations for
healthcare companies leveraging AI have outpaced those not
utilizing it. The report found that $2.8
billion has already been invested in AI Healthcare companies
in 2024, with SVB projecting the sector to see $11.1 billion in VC capital deployed across the
full year, the highest it has been since 2021. While SVB estimates
fewer funds focused on healthcare and AI will close than in
previous years (66 in 2024, down from 101 in 2022), it also
projects that total funds raised in 2024 will tower over 2023
($16.9 billion compared to
$9.7 billion).
Adoption Will Make or Break AI Healthcare Companies
- While AI Healthcare companies
across the patient journey are receiving increased funding in 2024,
the immense costs of developing generative AI, industry
consolidation, and limited education and training resources for
healthcare professionals on technological advancements can impact
adoption. Companies that can access data, partner with clinicians
and hospitals to leverage patient data, and partner with big tech
companies are better suited to deploy AI at scale.
Bright Spots and Roadblocks Within Patient Diagnosis AI
Companies
- While AI patient diagnostics accounts for 52% of the total AI
investment in clinical solutions, there is a significant gap in
access to quality data and computing power necessary for training a
model to the point where it can accurately diagnose. For the
economics to make sense in the near term, companies must
demonstrate the value of their diagnostics. Diagnostic imaging has
seen impressive growth, with trailing 12-month investment doubling
since Q1 2021. Notably, half of this recent surge in investment has
been in cardiovascular disease solutions.
Learn More
For a preview of the AI-Powered Healthcare Experience report, click
here:
https://www.svb.com/trends-insights/reports/artificial-intelligence-ai-in-healthcare
SVB is a leader in providing market insights on sectors across
the innovation economy. For the complete library of SVB's signature
reports, please visit Market Research Industry Trends &
Insights | Silicon Valley Bank (svb.com)
About Silicon Valley Bank
Silicon Valley Bank (SVB), a division of First Citizens Bank, is
the bank of some of the world's most innovative companies and
investors. SVB provides commercial and private banking to
individuals and companies in the technology, life science and
healthcare, private equity, venture capital and premium wine
industries. SVB operates in centers of innovation throughout
the United States, serving the
unique needs of its dynamic clients with deep sector expertise,
insights and connections. SVB's parent company, First Citizens
BancShares, Inc. (NASDAQ: FCNCA), is a top 20 U.S. financial
institution with more than $200
billion in assets. First Citizens Bank, Member FDIC. Learn
more at svb.com.
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SOURCE Silicon Valley Bank