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A Deep Dive into Australia’s HealthTech Ecosystem

by | Oct 18, 2023 | Accelerator, Fund

As we unveil Australia’s latest HealthTech fund – LX Health, which will sit alongside and support our national Accelerator, and Community, it’s important to talk about the current state, challenges, and future for HealthTech in Australia.

Ask any Aussie, and you’ll typically hear a sense of pride in our healthcare system which the Federal Government spends more than $105 billion annually (The Australian Parliament). This is rapidly increasing year on year, and consistently ranked among the top five in global reports. However, despite this, we still face significant challenges, such as access to affordable care, speed of service, and healthcare fragmentation. Fortunately, the solution to many of these challenges lies in one simple yet powerful word – technology.

HealthTech today stands approximately a decade behind the transformation witnessed in FinTech 3.0—an industry that underwent a revolution, breaking free from traditional banking systems. This transformation in FinTech was largely catalysed by regulatory flexibility, which paved the way for a startup boom. A similar pattern is emerging in HealthTech, with the emergence of smaller-scale regulatory initiatives that foster innovation, and compliance hand in hand.

Overview of the Australian HealthTech Market 🔭

The Australian HealthTech industry has experienced remarkable growth recently. In 2023, the Australian HealthTech market reached an approximate value of $3 billion (Statista). Contrastingly, the total spending on all healthcare in Australia for 2023 amounted to around $250 billion (AMA), with an annual increase of approximately 2.5% over the last five years. However, this spending represents only about ~1% of the total value of the HealthTech market, underscoring its immense untapped potential.

Australian HealthTech Startups 🚀

Over the past five years, several significant HealthTech startups have emerged on the scene.

A notable success story is Harrison.AI, which secured an impressive $130 million in Series B funding—a landmark achievement for an Australian startup. They use state-of-the-art AI and partnering with healthcare specialists, to create best-in-class AI diagnostic solutions to help solve healthcare capacity challenges.

Another standout player is Eucalyptus, valued at $560 million, offering a direct-to-consumer virtual health provider model. Despite its simplicity, they have proven to be a game-changer in healthcare accessibility, delivering impressive performance and raising substantial capital.

The highly complex brain mapping startup Omniscient Neurotechnology (o8t) raising $40 million in series B. They use AI machine learning and MRI scans to map the brain so doctors can treat conditions with more accuracy.

VALD, a Queensland-based company, has risen to become a global leader in musculoskeletal assessment and rehabilitation, raising $36 million and serving elite sport consumers in the US and UK, including NBA, and Premier League athletes.

Seer Medical, a diagnostic monitoring company based in Victoria, recently raised $34 million in a series A funding round, marking its successful entry into the US market.

Excitingly, Midnight Health, another Queensland-based startup, is rapidly gaining ground with a similar model to Eucalyptus, securing around $24 million in Series B funding. They provide access to treatments, prescriptions, and education.

There’s a thriving ecosystem of hundreds of early-stage HealthTech startup heroes that are either bootstrapping, or raising smaller amounts from family and friends, often in the range of thousands of dollars. In order to see these early startups join the ranks of the above list, better access to funding, and support is crucial to build quality products and grow.

Australian HealthTech Investors 💰

Australia now boasts several Venture Capitalist that invest in HealthTech or prioritise it as a key industry. The following funds have made substantial investments in at least five Australian HealthTech startups per VC. Includes AirTree, Blackbirds, Giant Leap, SquarePeg, Brandon Capital, Main Sequence, Folklore, and the angel group known as Australian Medical Angels.

Australian HealthTech is also catching the attention of global investors, exemplified by Harrison.AI‘s $130 million investment from Horizons Ventures. According to Boston Consulting Group, global investors participated in around 40% of the deals in years 2020 and 2021.

In comparison to previous years, excluding the exceptionally inflated capital raised in the post-COVID 2021 period, 2022 marked a standout year for Australian HealthTech startups. They collectively secured approximately $300M in funding, while MedTech and BioTech raised an additional $400M (2022 State of Australian Startup Funding Report), underscoring significant progress within the sector. However, according to the Q1-Q3 2023 data from the SASFR, HealthTech has had a slower start compared to the previous year. Hoping it will catch up by the end of the year.

Additionally, there are angel-mentors and VC partners associated with LX Health, which directly invest in early-stage HealthTech startups within the LuminaX accelerator portfolio. These investors have been actively involved in the last three cohorts of the HealthTech accelerator, supporting the entire cohort or selecting startups from each batch.

Furthermore, there are government funds and programs which support HealthTech investments, such as the Medical Research Commercialisation Fund (MRCF), primarily focused on biomedical discoveries, and the Medical Research Future Fund (MRFF).

However, despite significant investment activity in Australia, there remains ample room for early-stage HealthTech investment, especially in Queensland, which lags behind Victoria and NSW in capital distribution, mainly due to the presence of VC firms, and focused government initiatives in this sector.

Future 🔮

Despite its complexities and challenges, the opportunity for HealthTech founders and investors is substantial. The future of Australian healthcare is on the brink of significant advancement, primarily driven by technology, including AI. As technology continues to mature and integrate into healthcare systems, it holds the promise of addressing issues related to access, affordability, and healthcare fragmentation. Ultimately, this integration will enhance the quality of care provided to Australians. The HealthTech landscape in Australia is on a trajectory of continuous growth and innovation, ensuring a healthier and more technologically empowered healthcare system. However, it requires increased capital allocation to startups, especially those in the early stages. I believe that this sector will experience significant growth over the next five years, and we are excited to work with our partners, mentors, community members, and investors to help Australia’s HealthTech reputation, not only meet, but exceed the stellar reputation our healthcare systems enjoy.

 

by: Dren Xërxa, Director of LX Health – ground zero for Australian HealthTech startups.