AI Investments Dominate Healthcare; Silicon Valley Bank Releases New AI Patient Journey Report
Venture capital investment in AI for healthcare has surged, now capturing one in four healthcare investment dollars. This growth outpaces the tech industry, with $2.8 billion invested in 2024 alone and projections of $11.1 billion for the year. A new report from Silicon Valley Bank (SVB) highlights the significant role AI is playing in healthcare, focusing on administrative and clinical uses. Key themes include the appeal of administrative AI, integration with providers' existing infrastructure, and the challenges of AI-driven diagnostics. Despite fewer funds closing, the total amount raised in 2024 is expected to surpass 2023, reaching $16.9 billion.
- Venture capital investment in AI for healthcare has surged, now capturing one in four healthcare investment dollars.
- Healthcare AI investments have grown twice as fast as the broader tech industry.
- $2.8 billion invested in AI healthcare companies in 2024.
- Projections indicate $11.1 billion in healthcare AI VC capital for 2024, the highest since 2021.
- Total funds raised in 2024 expected to reach $16.9 billion, significantly higher than 2023's $9.7 billion.
- Administrative AI attracts 60% of healthcare AI investment due to fewer regulatory hurdles.
- Valuations for AI healthcare companies have outpaced those not utilizing AI since 2022.
- Diagnostic imaging investment has doubled since Q1 2021, with significant focus on cardiovascular disease solutions.
- Fewer healthcare and AI-focused funds are expected to close in 2024 (66) compared to 2022 (101).
- High costs and challenges in securing quality data for AI-driven diagnostics.
- Immense costs associated with developing generative AI.
- education and training resources for healthcare professionals on technological advancements.
- AI healthcare companies must overcome significant hurdles to demonstrate the value of their diagnostics.
Insights
The report highlights a substantial shift in healthcare investments towards AI, with one in four investment dollars now allocated to AI-driven healthcare. This is significant as it underscores investor confidence in the transformative potential of AI in the sector. The projection of
Short-term: Increased funding could lead to significant stock performance boosts for companies leading in AI healthcare. Long-term: The focus on interoperability and administrative AI solutions might yield more sustainable growth as these areas face fewer regulatory hurdles compared to clinical AI.
The report's emphasis on administrative AI reveals a pragmatic approach by investors, focusing on areas with fewer regulatory barriers. Administrative AI can streamline operations, reduce costs and improve patient management systems without the intensive oversight required for clinical AI solutions. This could translate to faster implementation and quicker ROI, offering a safer bet for investors. Additionally, the focus on diagnostics within cardiovascular disease is noteworthy due to the high prevalence and significant impact of these conditions, implying a strong market need and potential for substantial health benefits. Nevertheless, the challenges in securing quality data and regulatory approval for diagnostic AI solutions highlight the risk factors inherent in this domain.
Short-term: Companies with robust administrative AI offerings are likely to see quicker market adoption. Long-term: Successful AI diagnostic tools could revolutionize patient care, but face significant hurdles in the interim.
The integration of AI in healthcare, particularly in EHR systems like EPIC, points to a significant technological advancement. The report's finding that 70% of US providers use EPIC underscores the importance of interoperability. AI companies that can seamlessly integrate with existing systems stand to gain a competitive advantage. The flexibility of startups in the AI space, contrasted with the rigidity of established players, provides an interesting dynamic where innovation might outpace traditional methods. However, the immense costs and need for partnership with big tech companies to scale AI solutions pose challenges.
Short-term: Startups that can integrate with EPIC and other prevalent systems may gain traction. Long-term: Partnerships with big tech are important for scaling AI solutions in healthcare.
New report finds one in
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 $11.1 billion $16.9 billion $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
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SOURCE Silicon Valley Bank
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