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Financing the health care Internet
1School of Public Health, University of California, Berkeley, USA. jamie@socrates.berkeley.edu
Health Affairs (Project Hope)
|February 24, 2001
Summary
The e-health industry experienced rapid growth in venture capital and public offerings, but a technology crash led to significant stock declines and an impending consolidation phase. This shift impacts the future of internet-related healthcare firms.
Area of Science:
- Health Informatics
- Business and Finance
- Technology Management
Background:
- The e-health sector experienced rapid expansion fueled by venture capital and public market enthusiasm.
- Increased competition and unmet earnings expectations created significant market pressures.
Purpose of the Study:
- To analyze the financial life cycle and market trajectory of internet-related healthcare firms.
- To understand the impact of market volatility and industry consolidation on e-health businesses.
Main Methods:
- Analysis of venture capital funding trends in the e-health sector.
- Examination of initial public offering (IPO) data and post-IPO stock performance.
- Assessment of market impact following the technology sector crash.
Main Results:
- Venture capital investment in e-health surged from $3 million to $335 million within two years.
- Twenty-six e-health firms completed IPOs, raising $1.53 billion, with 18 experiencing over 100% post-IPO appreciation.
- The technology crash caused over 80% stock price declines for 21 e-health firms.
Conclusions:
- The e-health industry's rapid growth phase has concluded, marked by significant financial setbacks.
- The sector is entering a period of consolidation, integrating e-health and traditional healthcare entities.