top of page
  • Lloyd Price

Healthcare SaaS: Still shining in the investment landscape?

In the ever-evolving realm of healthcare technology, are SaaS systems still illuminating the investment horizon? These systems, akin to utilities like gas, electricity, and Wi-Fi, have solidified their place in modern healthcare delivery, intriguing investors with their inherent indispensability. Yet, a notable downtrend in HealthTech SaaS valuations raises the question: Is this descent indicative of a waning interest in HealthTech SaaS or a strategic reallocation of investment focus across the broader HealthTech landscape?

HealthInvestor chats to HealthTech M&A Advisor Lloyd Price to find out more.

Price goes back two decades ago, when the first healthcare software companies emerged, ushering in the era of healthcare SaaS. Pioneers like Cerner, Meditech, Allscripts and Epic introduced comprehensive electronic patient record systems (EPR) systems to medical facilities through annualised SaaS business models. Simultaneously, smaller players delved into various domains, from e-prescribing to maternity care, reshaping both primary and secondary care through SaaS-driven products and services. Over time, the industry witnessed heightened competition and an influx of venture capital funding. Technological advancements expanded SaaS from software to encompass devices and applications, such as specialised tools for diabetes management. This transformation extended SaaS products from administrative functions to being embraced by clinicians and patients, reflecting the dynamic evolution of the market.

The distinguishing advantage of SaaS lies in its “write it once, sell it many times” model, one-time software development that can be leveraged across multiple clients, leading to substantial profit margins, Price explains: “Notable success stories, like virtual care provider Teladoc Health, specialised in acquiring software and SaaS firms, exemplify this lucrative model. Teladoc Health acquired 12 companies in the last 10 years like InTouch Health, Best Doctors and BetterHelp. Investors have identified SaaS in healthcare as a distinct niche, appreciating its dependable revenue streams, strong cash flows, and long-term contract commitments. In the healthcare realm, contract durations typically span three to five years, with EPR solutions often extending to 10 or 15 years. The reliability of SaaS combined with pre-developed software positions healthcare SaaS as a favored choice for venture capitalists and investors seeking elevated margins and predictability.”

Recent trends and challenges: The three C's

Price observes three key trends in the HealthTech SaaS landscape in recent years:


“Post-pandemic, the healthcare technology landscape witnessed a recalibration of confidence. The rise of virtual care and remote consultations, epitomised by the so-called ‘zoom boom’ sparked heightened investor interest. However, the narrative didn't unfold as anticipated, with Microsoft's Teams platform emerging as a more effective healthcare solution due to its established industry presence. Despite initial optimism, many digital health and health tech companies that went public experienced steep declines, reshaping market sentiment. Notably, the slowdown in mergers, acquisitions, and IPOs reverberated throughout the financial ecosystem, leading to a marked drop in market confidence.”


“Secondly, market corrections emerged as a prevailing theme caused by HealthTech company share price decreases resulting in their valuations being swiftly recalibrated. Previously inflated growth projections led to a mismatch between projected and actual growth rates, prompting a correction in market expectations. In the UK and the US, rising costs of staff, particularly locums and agencies, contributed to healthcare expense inflation. In this scenario, healthcare organisations sought cost containment strategies, often decreasing IT and Digital budgets which directly affected innovation and technology adoption overall.”


“Last, the healthcare technology landscape witnessed a surge in commoditisation, as numerous players offered similar platforms, apps, and APIs. With most companies targeting specific specialties and integrating with hospital EPR systems, differentiation became a challenge. To succeed, companies needed to focus on vertical integration, finding specialised niches, pricing strategies in synch with hospital and health systems, evidence generation, and strategic growth. The market trend leaned towards vertical-focused companies rather than those attempting to disrupt multiple segments.”

HealthInvestor asks about investor sentiment and future prospects. Price says: “The love for software and SaaS among investors remains unwavering, with their interest driven by the allure of the abovementioned recurring revenue and scalable and predictable models. However, heightened experience has led investors to critically assess the performance of HealthTech SaaS compared to SaaS in other sectors. While the sector retains appeal, meeting higher standards due to this comparative analysis has become imperative.”

He adds that valuations vary across the healthcare SaaS spectrum, with cheaper valuations at the lower end of the market and safer, albeit larger, investments at the high end. For Price, the mid-market, marked by problem-solving and established customer bases, offers attractive opportunities. The choice of investment strategy depends on the type of investor and their stage of involvement, whether early-stage venture capital or more established funds, he says.

So, where would Price invest next given the current market conditions and trends? “Technologies aimed at reducing elective care backlogs, self-management, and behavior change are particularly promising,” he says. “Innovative solutions that streamline care delivery, enhance administration efficiency, and address operational pain points are highly sought after. A notable trend is the emergence of value-based care models, promoting risk sharing and cost savings. Second or third-time founders with strong relationships in the sector are increasingly favored.”

Looking ahead, Price outlines the sector's growth potential which remains substantial, contingent on unique offerings, well-demonstrated value, and alignment with evolving healthcare dynamics. Challenges such as increasing commoditisation, the need for evidence-based solutions, and adapting to changing investor sentiment will shape the trajectory of HealthTech investments.

Engage with the HealthTech Community

HealthTech M&A Newsletter from Nelson Advisors - Market Insights & Analysis for Founders & Investors. Subscribe today!

HealthTech M&A Advisory by Founders for Founders, Owners & Investors. Buy Side, Sell Side, Growth and Strategy mandates - Email

HealthTech Thought Leadership from Nelson Advisors - Industry Insights & Analysis for Founders, Owners & Investors. Visit


Related Posts

See All


Screenshot 2023-11-06 at 13.13.55.png
bottom of page