June 23, 2017
Mary Ann Azevedo is an Austin-based business writer who has written for Venture Capital Journal, San Francisco Business Times, Crain's and Silicon Valley Business Journal.
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Trying to get an appointment to see a doctor and then carving time out of a busy schedule for the visit is almost a luxury these days.

But with significant advances in telemedicine and a recent easing in regulations, it’s increasingly common for people to get treated via telephone, texts, email or video for everything from basic ailments to mental health-related issues such as depression.

More Dollars, More Exits, More Growth

In recent years, funding in telemedicine startups has seen major increases. Globally, venture capitalists funded a total of 46 telehealth deals in 2013 with investments amounting to $93 million, according to the Mercom Capital Group, “a global communications and consulting firm.” By 2016, VCs had pumped $660 million into 86 telemedicine and remote monitoring deals—a nearly seven-fold increase in funding.

One of the sector’s highest-profile exits occurred in July 2015 when Dallas, Texas-based video visits telehealth company Teladoc raised $156.8 million in an initial public offering. The company was one of the first to develop an app to enable remote visits with a doctor.

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Another high-profile startup in the space is New York-based Talkspace, an online and mobile therapy provider that raised a $15 million funding round led by Norwest Venture Partners. Existing investors Spark Capital, SoftBank, Metamorphic Ventures, and TheTime also participated. That round brought the startup’s total funding to $28 million. While the company and others like it have received some criticism, there’s no denying that patients’ increased demands for convenient and virtual care are only rising.

With fewer regulations, the telemedicine space is poised to grow even further in coming years.

In Texas, for example, legislators in May approved SB 1107, a bill that eases some of the state’s more restrictive requirements for telemedicine. The law eliminates the need for an in-person consultation to establish a physician-patient relationship prior to providing telemedicine services.

In the U.S. alone, major telemedicine companies such as Teladoc, American Well, and a slew of other startups will soon be able to legally compete in all 50 states.

Technological Foundations

Technology has come a long way since Vesalius Ventures CEO and Managing Partner Dr. Bernard Harris Jr. conducted the first telemedicine conference from space with the Mayo Clinic in 1993.

The former astronaut and MD, with his team at the NASA Johnson Space Center, developed much of the diagnostic hardware that was used to communicate with researchers on the ground from space. Those researchers were then able to analyze that data from a distance and provide medical advice over the phone. (Harris also holds the distinction of being the first African-American to walk in space.)

Fast forward nine years and Harris launched Houston-based Vesalius Ventures Inc. as an accelerator to provide funding for fledgling telemedicine startups. The premise behind Vesalius is to identify cutting-edge business operations in the areas of telemedicine, medical information, and technology. If necessary, the fund will also provide seed-stage financing and initial management talent.

Along with partners such as Sevin Rosen Funds, Fremont Ventures, and Boston Scientific, his firm has funded seven telemedicine companies—several of which have had significant exits.

In 2008, for example, German industrial giant Bosch acquired Health Hero Network Inc., a Vesalius portfolio company. Health Hero Network developed and sold technology that allowed the remote monitoring and management of patient health data.

More recently, Vesalius led a $5 million round for Palo Alto Health Sciences, which describes itself as a digital therapeutic company focused on revolutionizing the mental health industry with clinically proven, non-invasive, drug-free solutions.

To Harris, the biggest game-changers for the telemedicine field have been the changes in communication technology.

“When we first started up in 2002, you had to have a dedicated T2 line in order to conduct a two-way telemedicine session,” he recalled. “AT&T, for example, had to run special lines to take care of the data load. Now we can do the same thing with phones or tablets. And that has allowed a lot of the innovation you’re seeing happening today.”

Harris remembers years ago considering investing in a company that had a glucometer connect to a pager to send a diabetic’s glucose measurements to a call center.

“My partners and I thought at the time things were moving so fast in the mobile space that those problems would be solved in a couple of years,” he said.  “And, we were right. Now glucometers have Bluetooth that can interface with a phone or computer and results can be tracked, and trended. A child taking their blood sugar can even have the results automatically sent to a parent’s phone.”

Making Healthcare Convenient And Timely

Austin-based Medici is aiming to take the on-demand health model to another level by connecting patients to all of their existing doctors via text or video through a single app. Many startups in the space have connected patients to doctors with whom they have had no prior relationship, noted CEO and founder Clint Phillips. The company raised a $24M round last fall from high net-worth individuals and has since launched in the U.S. and South Africa with plans to launch in other countries by the end of the year.

“Plenty of companies like Doctors on Demand, MDLIVE and Teladoc provide a patient with a call center doc,” Phillips said. “You don’t know them, they don’t know you. There’s no context or records involved. And your medical record becomes fragmented.”

To Phillips, Medici has great growth potential because, quite simply, “people want to speak to their own doctor.” And by doctor they mean everyone from your endocrinologist to your veterinarian. Plus, doctors don’t view the company as a threat since it claims to enhance or protect their business ­– not replace it. Medici is HIPPA compliant and provides malpractice insurance in an effort to provide a “safe” environment for doctors, Phillips added.

The startup has approached doctors with the ability to communicate via text, phone or video with their patients and many are enthusiastic about the possibility, according to Phillips. This month alone, about 600 physicians have downloaded the Medici app. Medici makes money by charging doctors a fee for every encounter they have via the app.

Thanks to telemedicine, “people are no longer having to drive 75 minutes to get a refill,” Phillips said. “Some doctors can even work from home a day or two out of the week.”

Telemedicine appears to be poised for potentially explosive growth as startups clamor to cash in on patients’ increasing demands for convenience.

Illustration: Li-Anne Dias