As the U.S. population has grown older, more and more senior care startups have launched, with most targeting the aging-in-place space.
In the past five years, in fact, venture capital firms have invested more than $2.5 billion into a seemingly never-ending list of elder care and home health startups, according to a recent Crunchbase report. While the influx of capital is partly due to long-term demographic tailwinds, it’s also because of the highly innovative nature of health care.
“There has been a rise in investor interest because the demographic shift is undeniable,” Primetime Partners Managing Partner Abby Miller Levy told Home Health Care News. “However, I think what has really driven the shift in the past five to seven years has been investors’ interest in health care as a place to innovate.”
Overall, the number of Americans 65 and older will more than double over the next 40 years, reaching 80 million by 2040, according to the Urban Institute.
As a VC firm exclusively focused on aging services and senior care, New York-based Primetime Partners has honed in on this space. The company provides seed and early-stage investments in products, services, technologies and experiences related to aging.
In addition to demographics and innovation, the COVID-19 emergency has accelerated both the number of entrepreneurs entering into the aging services sector and investor interest. In 2021 alone, VC entities have invested more than half a billion dollars into U.S. senior care and home-based care startups, Crunchbase reported.
“One of the things that happened during the pandemic is, you couldn’t pick up a newspaper or watch the news without broad-scale awareness of how seniors were managing amid the pandemic,” Levy said. The news cycle covered everything from the crisis in nursing homes to older adults’ reactions to getting vaccinated. That had a tremendous impact on investor focus, as well as on entrepreneurs’ interest.”
Additionally, entrepreneurs and investors were often personally invested, Levy noted. A significant portion of the people launching or backing senior care startups have older family members that have been affected by the public health emergency, she said.
On top of that, the COVID-19 crisis opened the door wider when it comes to reimbursement and potential revenue streams. That, too, allowed more companies to enter the senior care game.
“I talked to entrepreneurs all the time who said, ‘Unless there’s a payer reimbursing for this, the business model won’t work,’” Levy said.
Several Medicare Advantage plans began paying for remote monitoring technologies and services aimed at mitigating social isolation, for instance. Meanwhile, the U.S. Centers for Medicare & Medicaid Services (CMS) made huge advances toward reimbursing for new models of care, such as hospital-at-thome programs.
Searching for staying power
It’s in this environment that companies such as DUOS and Tomorrow Health launched.
Backed by venture capital giant Andreessen Horowitz, Tomorrow Health and its digital marketplace deliver medical supplies and equipment directly into its patients’ homes. The company, which began operations in April 2020, already operates in 29 states.
For Tomorrow Health, it was all about addressing a pain point felt by home-based care providers. Tomorrow Health Co-founder and CEO Vijay Kedar noticed that providers often had trouble obtaining manageable, reliable and consistent medical equipment and supplies for patients.
Additionally, the public health emergency increased the demand for medical equipment and supplies, particularly oxygen and respiratory supplies.
“We saw … the existing cracks in the home-based care ecosystem — some of the challenges in the operations and logistics of actually obtaining the medical equipment and supplies that patients needed,” Kedar told HHCN. “As retail locations closed across the country, patients and providers struggled to manage the coordination and processing of the critical equipment and supplies that patients needed at home.”
Essentially, Tomorrow Health is angling to become an Amazon-like service for home-based care providers. Since launching, the company, which announced $25 million in Series A this April, has partnered with more than 125 health plans and hospital systems.
But even with plenty of firepower, Kedar realizes that not every senior care startup makes it.
The ones that do must offer “an incredibly strong” value proposition to the customer, he said.
“That’s what separates an enduring and scalable business from those that have strong products but don’t have the capability for continued growth — a relentless focus on driving value to each of the stakeholders you serve,” Kedar said.
From 2016 through 2018, there were between 62 and 68 deals to fund senior care or home-based care startups in the U.S., according to Crunchbase. That jumped to 83 in 2019, then hit 91 last year.
DUOS is a New York-based company that helps place expert personal assistants — “Duos” — into the homes of older adults. The company officially launched earlier this month, with the announcement of $6 million in seed funding from investors Redesign Health and Forerunner Ventures.
While DUOS has a direct-to-consumer business model, the company has started to strike deals with large B2B customers within the Medicare Advantage and dual-eligibility spaces. It has similarly turned to risk-bearing providers as well.
DUOS’ value-add is that the company addresses the social determinants of health while helping seniors age in place, co-founder and CEO Karl Ulfers told HHCN.
“They really do want to be able to age independently in their home, so the value proposition to an older adult is we fuel their independence,” Ulfers said. “The value proposition from an [informal] caregiver perspective is to directly ease the stress and the burden they encounter.”
For context, roughly 44 million people in the U.S. step in as informal caregivers. These are spouses, partners, friends or family members who assist with activities of daily living (ADLs) and possibly even medical tasks, according to San Francisco-based nonprofit Family Caregiver Alliance.
Even from the early stages of the company, DUOS saw a lot of VC interests, but Ulfers pointed out that interest does not always translate into an investment.
“The last domino to fall that really led us to this funding was our pilot testing, both from an enterprise perspective and also from a direct-to-consumer standpoint,” he said. “We were able to really prove that this model was going to drive high levels of satisfaction, which we measured by [net promoter score].”
On the other hand, one challenge early-stage companies often face is being creative with the resources they have.
“We have a value at Tomorrow Health, which is ‘do more with less,’” Kedar said. “It’s about having the most thoughtful and scalable use of existing resources, and being lean and efficient.”
Ultimately, what separates startups that are able to go the distance and the ones that fizzle is a deep understanding of the senior population.
“Really understanding what they need, and how that need is critical,” Ulfers said.
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