Snow? In Nashville? Yep. The setting for ViVE was abuzz with how bad the winter weather would be, but quieter in other, more telling ways. This year’s gathering was smaller, more subdued. You could hear yourself think and we all seemed to be thinking about the same thing — the market.
For some time now, fresh capital has been frozen. There are many reasons for this; for instance, post-pandemic shakiness, the ever-present threat of recession, and healthcare promises that went bust. But the net of it is the same: an industry on the hunt for fresh answers seems stuck in an investment iceberg of its own making.
Read on to see what I mean — and if there’s a thaw anywhere in sight.
Two years and counting
Permafrost is a complex environment of soil, rock, ice and organic matter. The soil is the active layer that thaws and refreezes continually while the deeper layers stay rocky and frozen like they have for eons. Stated more simply, permafrost is any ground that stays completely frozen for at least two years straight (credit to Patrick Walsh @Ziegler for this perfect analogy).
Not coincidentally, nearly two years ago, the unthinkable occurred: Silicon Valley Bank (SVB) collapsed. What we thought was built on a solid foundation of rock and ice was on shakier topsoil than we ever imagined.
SVB’s collapse reflects what was — and still is — happening in the market, a never-ending cycle of:
- investment ambivalence
- reading the interest rate tea leaves
- and playing recession roulette (yes? no? maybe?).
It all begs the question: When it comes to fresh capital, is the top layer still frozen, is it thawing, or is it just a little less cold?
As we learned from those perceptive souls at ViVE examining the landscape, the answer is complicated. It depends on what kind of company you are, the team that’s leading you, and whether your innovation is solid or slushy.
That last point is critical: everyone can feel the chill. So when the warm winds of investment start to blow, only the most innovative, weather-tested solutions will be deemed worthy.
Soil, rock, ice… or melting dog poop?
With that being said, let’s take a closer look at the state of our permafrost.
The soil is the market’s dry powder: plenty of it, to LP’s chagrin — investors’ patience running thin — sitting on dry powder can be explosive, in all the wrong ways.
The rock is the “local” layer: the smaller-market and company-level strategies that companies could once rely on, but which have since turned from solid, dependable rock to loose, slippery pebble.
The ice is market macros: the cycle of inflation, recession, and DC’s rocketship, rollercoaster.
Embedded in all of that is organic matter — both dead and alive — ranging from hearty microbes worth watching to frozen puppy poop better left buried. It takes time for invesors to get a good whiff. Some of these embedded companies are rotten to the core, others in decay, with plenty still teetering.
In this market, survival for just about everyone has meant a series of half measures that help companies survive but not thrive—bridge rounds, continuation vehicles, skeleton teams and more.
Forecasting amid uncertain skies
When the market appeared to be warming back up, things got a bit complicated. An uncertain financial horizon seeks to price through federal budget cuts, pesky inflation, tariffs, etc.
A few are just fine. At ViVE, Abridge announced a $250M raise, Insight Partners united VBC safety stalwarts Azara and i2i, and others like Cecelia Health are quietly amassing clients with interdisciplinary virtual specialty care. Amid frozen soil, they found a river of capital and clients that is flush. But some companies will never recover. A good half of them seem in serious trouble, many in a digital space that was once on solid ground but is now sinking fast.
The permafrost giveth and taketh away. From where I sit, the companies that will endure will do three things right:
- Be About Business: Solve actual problems that matter now, the ones that create sufficient pain. It’s the rare buyer who wakes up thinking “Today, I need to guy buy some Transformation, Revolution, and Disruption.”
- Simple Beats Buzz: Communicate in plain language; buzz is cheap and diluting. Stop deluding yourself that Buzzword Bingo works. Instead, choose what’s hard: using common language to clarify your value and separate yourself from the masses.
- Earn Trust, Not Clicks: Like value-based care before it, AI means everything and nothing. Pretenders and Real-Dealers operate in the same market. Stop chasing vanity metrics and invest in genuine thought leadership, proof, and products built from the outside in — not the inside out.
Six more weeks of permafrost?
As we all know, Punxsutawney Phil saw his shadow, promising six more weeks of winter. But how much longer before the market’s permafrost thaws and the deals start to move again?
However our investment Spring arrives, we should hope it arrives gradually. While we want – and need – capital movement, it’s time we dispense with any yearnings to return to the free-fllowing investment climate of years past. Things were too hot to be sustainable.
With that being said, as we watch and wait, we have plenty to chew over. We’ve see too many high valuations combust, too many so-called stable institutions falter. We should take these lessons learned to help engineer stable growth ahead, rather than inflate any valuation spreadsheets.
Whatever the season, we’re always helping our industry grow. There’s plenty of action to be taken while we wait for the coming Spring.
Download our full research report, The New Healthcare C-Suite Agenda: 2024-2025, to learn more about top strategic considerations, where healthcare organizations are investing in technology to achieve those, current clinical and operational use cases for AI and where hospitals are exploring new ways to leverage AI, and more.
