Ben Fine was shooting the breeze with a group of fellow Toronto doctors in 2018 when a perennial complaint arose: “In every aspect of your life, things are getting better with the aid of technology, except in your day job,” he recalls.
A year later, he co-founded HaloHealth, a ‘business angel’ network through which 200 Canadian physicians have invested C$2m in early-stage health-tech. Not only does a doctor’s sign-off instil confidence among investors, it helps fledgling companies find customers and capital, Fine says.
Across Canada — which experts say has a world-class but outdated health sector, plus strong local talent and accommodating patients — entrepreneurs are helping to solve the problems that they have witnessed at first hand.
The Covid-19 pandemic has proved to be a catalyst for the health-tech movement, gaining it the attention of traditional investors, family funds and venture capitalists. “[This year] already is shaping up to be one of the biggest funding years for venture dollars going into North American healthcare,” says Megh Gupta, a partner at Wittington Ventures, a Toronto VC group with a focus on health. “We’re living in a bit of a new world now . . . You kind of let the genie out of the bottle.”
Canadian health-tech companies raised more than $300m in the first three quarters of 2020, double the sum raised in all of 2019, according to PwC Canada. The accountancy firm estimates that the Canadian digital health market was worth more than C$5bn as of 2020.
“We were growing, on average, by 10 per cent to 15 per cent every month in 2018 and 2019,” says Brett Belchetz, chief executive of Maple, a telemedicine provider that allows patients to see doctors virtually in under two minutes for as little as C$49. The Covid-19 outbreak led to Maple tripling daily patient visits to 3,000 between March and May 2020. Revenues also tripled. “No company is set up to grow that quickly,” he says.
Although the federal government has shown little interest in telemedicine, despite Canada’s remote northern communities, its provinces have scrambled to roll out their own platforms.
Maple, which operates outside the regular healthcare system, kept waiting times below two minutes by adding new healthcare providers, who now total 1,500, to cater to 2m patients. “It really showed that virtual care can scale in a way that physical healthcare systems cannot,” says Belchetz, who started Maple in 2015 after working as a doctor.
Toronto-based PocketHealth, which is digitising the sharing of medical imaging, was also born out of frustration. Rishi Nayyar started it with Harsh, his brother, after Harsh was handed a CD containing an ankle X-ray following a tumble on a San Francisco tennis court.
“We raised a $6.5m [funding] round last April, which coincided with the pandemic and every hospital administrator in the US and Canada waking up and realising: ‘Oh my God, I can’t burn CDs any more’,” says Nayyar.
Three months into the pandemic, PocketHealth had tripled its deployments and its platform is now used by hundreds of North American hospitals and clinics.
Smaller players such as CleanSlate UV, which sanitises smartphones, have also succeeded. “Our goal was to triple our sales this year, but we’ve seen about 900 per cent year-on-year growth,” says founder Taylor Mann. Initially envisaged for use in hospitals, its sanitising devices are also found in care homes, transport hubs and offices.
Start-up chief executives say that, because of Covid and waning interest in established sectors, such as oil and gas. it is not hard to find capital. “Investing in digital health was significantly de-risked because the risk of not investing increased so much,” says Nayyar.
In September, Maple received C$70m funding from Shoppers, Canada’s largest pharmacy chain, while Montreal company Dialogue Health Technologies raised C$100m in March via an IPO.
Meanwhile, increased M&A activity suggests that the sector is maturing fast. “They are adopting the US model of acquiring smaller Canadian health-tech companies left and right, therefore creating a secondary market and a more readily accessible exit point,” says Luke Sheen, a co-founder of HaloHealth.
Challenges remain for digital health companies in Canada — where chief executives have long complained of risk-averse investors before relocating to Silicon Valley.
One of the biggest difficulties is privacy legislation. In Ontario, digital health groups must operate under the Personal Health Information Protection Act (P-Hipa), which came into force almost two decades ago.
Others see risk in overvaluations. “When an industry gets hot, you have a flood of investors and for that particular industry, you get a lot of dumb capital moving in,” says Belchetz.
But while savvy investors will question when the euphoria will end, the effect of Covid-19 and a vast US market for Canadian start-ups have filled many with confidence. “When people figured out online banking, did they ever want to go back to having to go in to see a teller to pay a bill?” asks Belchetz. “The answer is no.”