Issue #3
Benchmarks for growing health tech businesses | Three books about the technology wars | Industry Primer: Telecom | Free Tools- Roic.ai, FormDs, System
Shipping In Moonlight (1853) by Ivan Konstantinovich Aivazovsky
Source: Artvee
VC 🚀
Benchmarks for growing health tech businesses
By Bessemer Venture Partners
Annotations
Healthcare SaaS enterprises are akin to cloud B2B software firms. The top-line revenue generated by these companies are highly recurring, and are measured by contracted annual recurring revenue (CARR) and annual recurring revenue (ARR). Ex: Doximity and Veeva.
Tech-Enabled Services refer to healthcare startups that provide care or navigation support to patients through either B2B2C or D2C models. These services can range from hybrid care to fully remote engagement with patients and may operate on a fee-for-service or fee-for-value basis. The revenue generated by these services is primarily transactional, but tends to be recurring as they treat chronic conditions and are often purchased by enterprises or consumers through subscription models. Ex: Livongo and Accolade.
The cost of delivering care represents roughly 75% of the US$4T spent on healthcare in 2021, which can be directly addressed by utilizing tech-enabled solutions. Administrative costs account for the remaining 25%, with only around 10% of that currently being attributed to technology and software expenses. Despite rapid growth in SaaS spending within healthcare, we are still in the early stages of digitization, leaving ample opportunity for automation and reductions in admin costs.
Source: Bessemer Venture Partners
The total addressable market (TAM) of tech-enabled services dwarfs that of healthcare SaaS, US$7-10B compared to US$100B. Tech-enabled services tend to experience an average YoY growth rate of 100%, surpassing even the growth rate of cloud-based businesses. Also, they achieve this growth while spending notably less on sales and marketing - nearly 30% less than cloud-based businesses as a percentage of revenue.
For healthcare SaaS, the appropriate key performance indicator (KPI) to evaluate enterprise value (EV) is ARR. For rapidly expanding healthcare SaaS companies, a conventional EV/ARR metric can be utilized. While the precise valuation multiples may fluctuate over time, the average and median values over the past five years have been approximately 7.2x and 6.3x, respectively. For tech-enabled services EV/ Gross Profit is more suitable as it factors in growth while also encouraging gross margin improvement.
Geopolitics 🌏
Three books about the technology wars
By Noahpinion
Annotations
Source: Semiconductor Industry Association
The U.S. currently has the edge when it comes to semiconductors with all basic components in the semiconductor supply chain in the hands of the U.S.or its allies. The U.S. handles the design software and the high-end lasers for lithography, Germany specializes in making lithography mirrors, while Netherlands and Japan make the lithography machines, the U.S., UK, and South Korea design the chips, and Taiwan and South Korea have perfected the fabrication of chips.
China’s current global dominance in wireless equipment is primarily due to Huawei. The tech giant’s dominance is driven by various factors such as, cutthroat corporate culture, best-in-class research division, rampant IP theft, close ties with the Chinese security services, and state subsidies that give it much deeper pockets than its counterparts.
Finance 💷
Industry Primer: Telecom
By Stock Spotlight
Annotations
The telecom industry consists of:
Telecom equipment manufacturers: Involved in the production of phone lines, servers, optical fiber, antennas, etc. Ex: Motorola, Ericsson, Cisco, and Qualcomm.
Services and infrastructure operators: Companies within this segment operate infrastructure for the network providers. A service provider operates mobile phone towers and rents access to them to 3-4 different mobile operators. Ex: American Tower, and Helios Tower.
Network operators and providers: These companies provide internet access or cable TV and are the providers that end-consumers are familiar with. The segment usually functions as a monopoly or oligopoly with just 2-3 players. Ex: AT&T, Verizon, and Comcast.
Specialized communication: Specialized communication is sub-divided into two categories:
Satellite communication: Competition is heating up in this space due to the likes of Musk’s Starlink Project and Bezos’ Kuiper.
Secure military communication: Driven by the increasing usage of drones and electronic warfare, the defense communications equipment market is expected to grow at 10% annually from 2019 to 2029. Ex: BAE, Thales, and Raytheon.
Large telecom companies are expected to grow at the same rate as the overall sector or the country’s economy. Companies with not too much debt and good service quality, trading at relatively cheap prices make for good investments. Telecom equipment manufacturers are more riskier than companies like AT&T due to the need for high R&D investments to ensure their products don’t get outdated.
Free Resources 💡
Roic.ai: Comprehensive information on more than 37,000 US public companies, available for free.
FormDs: All US startups and investment firms file Form Ds with the SEC (Securities and Exchange Commission) when they raise money. So the website uses Form Ds to extract useful information such as amount raised, whether it was through debt/equity, etc.
System: System uses AI to help you find, synthesize, and contextualize scientific literature.
For more free resources (150+ websites and tools), please check out Searching (it’s a Notion database that I’ve created).
Excellent analysis presentation with the semiconductor and telecom industry segment.