Download - SVB Consumer digital-health-report-2016
Consumer Digital Health How Market Shift Is Leading to New Opportunities
Steve Allan CFA Head of SVB Analytics [email protected]
Scott Winder Director [email protected]
Alex Lee Manager [email protected]
Emily Wengel Associate [email protected]
Written by SVB Analytics:
Table of Contents
2
3 Consumer Digital Health: Introduction & Financing Trends Overview
9 Healthcare Consumers: Fundamental Needs of the User
13 Financing Trends: Shift Toward Clinically Driven Consumer Health
17 Fitness/Wellness: Adapting to the Market
22 Disease Management: Growth Opportunities
28 Market Outlook: Assessing Consumer Health Opportunities
30 About the Authors
31 About Silicon Valley Bank and SVB Analytics
Consumer Digital Health
Consumer Digital Health: Market Shifts to Focus on Engagement and Improved Patient Outcomes
Consumer Digital Health 3
Consumer Digital Health Companies address the needs of patients and healthcare consumers
Investment trends in digital health are shifting from consumer wellness applications to clinically driven solutions that drive better health outcomes at lower costs.
This next wave of financing focuses on encouraging consumers and patients to change health-related behaviors, underscoring the greater opportunities for companies with solutions that create value for payers, providers, employers and consumers.
This is the second in a series of reports from SVB Analytics examining Digital Health. In this report we:
• Analyze broad consumer health trends and business models
• Examine the shift in investments from consumer wellness to clinically focused solutions
• Describe adaptation strategies of consumer wellness and wearables companies
• Explore potential areas of opportunity in disease management
Digital Health Landscape
Consumer Digital Health 4
Patients / Consumers
In our first report, we provided a framework that landscaped the digital health sector. In this report, we focus on consumer digital health investment trends.
Focu
s on
Hea
lth O
utco
mes
Employers / Payers
Life Science / Other Systems / Healthcare Professionals
Focu
s on
Hea
lthca
re C
osts
Enterprise Wellness
Risk Adjustment / Payer Administration
Value Based Care
Enterprise Health Management
Data Driven Payers Patient Engagement / Benefits
R&D
Operational
Patient / Professional Interaction
Clinical Operations
Patient Surveillance
Image Management / Analytics
Electronic Medical Records
Decision Support & Analytics / Predictive Medicine
Marketing / Customer Experience
Networking / Education
Care Coordination / Communication
Population Health Management Practice Management & Operational Workflows
Professional Search Insurance Search Social Support Genetic Screening
Disease / Medication Management
Education Fitness / Wellness / Wearables / Tracking
Telemedicine Remote Monitoring
Patient-Clinician Communication
Digital Therapeutics / Pill Plus
Focus on Consumer Health: Categorizations
Consumer Digital Health
Patients / Consumers
5
Telemedicine Remote Monitoring
Patient-Clinician Communication
Digital Therapeutics / Pill Plus
Patient / Professional Interaction
• Disease Management Disease/Medication Management Digital Therapeutics
• Monitoring Remote Monitoring
• Communications Telemedicine Patient-Clinician Communication
Clinical Enablement • Fitness / Wellness
Fitness Wellness Wearables Tracking
Consumer Activation • Medical Education
Education Social Support Genetic Screening
• Provider Search Professional Search
• Insurance Insurance Search
Education and Transparency
Less Clinically Focused
More Clinically Focused
For our analysis, we looked at three key themes: clinical enablement, consumer activation and education and transparency.
We also grouped consumer digital health into seven categories, and focused on fitness/wellness and disease management.
Professional Search Insurance Search Social Support Genetic Screening
Disease / Medication Management
Fitness / Wellness / Wearables / Tracking
Education
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
0%
10%
20%
30%
40%
50%
60%
70%
2011 2012 2013 2014 2015 2016 (E)
Tota
l Fun
ding
($M
)
Perc
enta
ge o
f Tot
al F
undi
ng
$(Consumer)
ConsumerFunding (%)
Consumer Digital Health Financing Trends Overview
Consumer Digital Health 6 Source: Rock Health Database; 2011-2016Q2 SVB Analytics Analysis 2016(E) is extrapolated based on 2016HY
About 55% of all digital health investments since 2011 have been in companies whose technologies interface with the consumer in some manner. This reflects the convergence of technologies to drive and measure improved health outcomes and cost savings, and funding is following.
Investments in Consumer Health Companies as a Percentage of Total Digital Health Investments
(2011 to Q2 2016)
0%
10%
20%
30%
40%
50%
60%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2011 2012 2013 2014 2015 2016 (E)
Tota
l Fun
ding
($M
)
Crossover InvestmentsFinancings without Strategic InvestorFinancings with Strategic Investor% of Deal Count with Strategic Investors
Strategic Investors Actively Investing in Consumer Digital Health
Consumer Digital Health 7
Consumer Digital Health Investments (2011 to Q2 2016)
* Crossover investments represent investment rounds greater than $100M that are led by a crossover investor Source: Rock Health Database; 2011-2016Q2 SVB Analytics Analysis 2016(E) is extrapolated based on 2016HY
Top Strategic Investors Focused on Consumer Health
The number of deals with strategic investors participating has slowly increased over time, as tech, life science, healthcare and insurance companies seek to partner and collaborate with startups.
1
2
3
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8
0%
10%
20%
30%
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50%
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$200
$400
$600
$800
$1,000
$1,200
$1,400
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$1,800
$2,000
2011 2012 2013 2014 2015 2016(E)
Tota
l Fun
ding
($M
) Crossover InvestmentsFinancings without Strategic InvestorsFinancings with Strategic Investors% of Dollar Investments with Strategic Investors
0%
10%
20%
30%
40%
50%
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
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$1,800
$2,000
2011 2012 2013 2014 2015 2016(E)
Tota
l Fun
ding
($M
)
Crossover InvestmentsFinancings without Strategic InvestorsFinancings with Strategic Investors% of Dollar Investments with Strategic Investors
Strategic Investors Shift to More Clinically Focused Investments
Consumer Digital Health 8
Other Consumer Digital Health Investments* (2011 to Q2 2016)
Clinically Focused Consumer Digital Health Investments* (2011 to Q2 2016)
Strategic investors have recently shifted their attention to clinically focused startups as they begin to see how technologies designed to affect patient behavior can generate better health outcomes and cost savings.
* Crossover investments represent investment rounds greater than $100M that are led by a crossover investor Source: Rock Health Database; 2011-2016Q2 SVB Analytics Analysis 2016(E) is extrapolated based on 2016HY
*Includes Clinical Enablement Companies *Includes Consumer Activation and Education and Transparency Companies
Consumer Digital Health 9
Healthcare Consumers: Fundamental Needs of the User
Challenge Fundamental Need Solution
Lack of choice and price transparency
Consumer-Friendliness
Improve consumers' access to healthcare and their user experience by making healthcare easier to use
Poor health literacy Knowledge Create access to education and relevant and personalized health information
Lack of tools to manage health and wellness Engagement
Engage and affect behavioral change in healthcare consumers to better manage their own health
Consumer Digital Health 10
Overview: Empowering Patients Is Key to Fixing Healthcare System
Consumer Digital Health Framework
Consumer Digital Health 11
Knowledge Engagement
Fitness / Wellness / Wearables/ Tracking
(for leisure)
Disease / Medication Management
(incl. Fitness/Wellness)
Professional Search
Insurance Search
Remote Monitoring
Social Support
Genetic Screening
Education Digital
Therapeutics / Pill Plus
Consumer-Friendliness Challenge: Lack of choice and price transparency Solution: Improve consumers' access to healthcare and their user experience by making healthcare easier to use
Knowledge Challenge: Poor health literacy Solution: Create access to education and relevant and personalized health information
Engagement Challenge: Lack of tools to manage health and wellness Solution: Engage and affect behavioral change in healthcare consumers to better manage their own health
Consumer-Friendliness
Patient-Clinician Communication
(incl. Telemedicine)
Knowledge Engagement
Consumer-Friendliness
Consumer Digital Health Framework
Consumer Digital Health 12
Consumer-Friendliness Challenge: Lack of choice and price transparency Solution: Improve consumers' access to healthcare and their user experience by making healthcare easier to use
Knowledge Challenge: Poor health literacy Solution: Create access to education and relevant and personalized health information
Engagement Challenge: Lack of tools to manage health and wellness Solution: Engage and affect behavioral change in healthcare consumers to better manage their own health
Consumer Digital Health 13
Financing Trends: Shift Toward Clinically Driven Consumer Health
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2011 2012 2013 2014 2015 2016 (E)
Tota
l Cap
ital
Inve
sted
($M
) DiseaseManagement
Remote Monitoring
Communications
Fitness / Wellness
Medical Education
Provider Search
Insurance
Total Capital Invested by Category (2011 – Q2 2016)
Financing Trends: Historic Investment Trends Weighted Toward Wellness
Consumer Digital Health 14
The advent of the quantified self movement in the early 2010s attracted significant capital, especially in the fitness and wellness category.
Source: Rock Health Database Q2 2016, Pitchbook, 2011-2016 Q2; SVB Analytics Analysis 2016(E) is extrapolated based on 1H 2016
More Clinically Focused
Less Clinically Focused
Disease Management
Remote Monitoring
Communications
Medical Education
Provider Search
Insurance Search
Fitness / Wellness
Clinical Enablement
Education and Transparency
Consumer Activation
Financing Trends: Rise of Clinically Driven Consumer Health
Consumer Digital Health 15
Percentage of Total Deal Count Over Time by Category (2011 – Q2 2016)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015 2016 (E)
DiseaseManagement
Remote Monitoring
Communications
Fitness / Wellness
Medical Education
Provider Search
Insurance
There has been a gradual shift toward increased investment activity in the more clinically focused categories of disease management, remote monitoring and communications.
Source: Rock Health Database Q2 2016, Pitchbook, 2011-2016 Q2; SVB Analytics Analysis 2016(E) is extrapolated based on 1H 2016
More Clinically Focused
Less Clinically Focused
Disease Management
Remote Monitoring
Communications
Medical Education Provider Search Insurance Search
Fitness / Wellness
Clinical Enablement
Education and Transparency
More Consumer Focused
Financing Trends: More Clinically Focused Companies Receiving Early-Stage Funding
Consumer Digital Health 16
Investment Amount by Stage of Development (2011 – Q2 2016)
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Early MidLate Total Deal Count
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Early MidLate Total Deal Count
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$0
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2011 2012 2013 2014 2015 2016(E)
Fund
ing
($M
)
Early MidLate Total Deal Count
The clinically focused areas of disease management and patient-provider communications are seeing an increase in early-stage funding, indicating new startup formation; consumer activation and education and transparency companies are maturing, with fewer early-stage rounds raised.
Source: Rock Health Database Q2 2016, Pitchbook, 2011-2016 Q2; SVB Analytics Analysis 2016(E) is extrapolated based on 1H 2016 Early – Seed and Series A, Mid – Series B and C, Late – Series D and later
Clinical Enablement Disease Management Monitoring Communications
Consumer Activation Fitness/Wellness
Education and Transparency Medical Education Provider Search Insurance Search
Consumer Digital Health 17
Fitness/Wellness: Adapting To The Market
Fitness/Wellness: Decline in Valuations and Investment Size
Consumer Digital Health 18
Median Pre-Money Valuation of Fitness/Wellness Companies
(2011 – Q2 2016)
Median Invested Capital of Fitness/Wellness Companies
(2011 – Q2 2016)
$0
$5
$10
$15
$20
$25
$30
$35
$40
2011 2012 2013 2014 2015 1H 2016
Med
ian
Pre-
Mon
ey V
alua
tion
($M
)
Valuations and financing round sizes have declined in 2016 due to increased competition and shifting investor interest toward clinical applications, forcing wellness companies to adapt.
Source: Pitchbook, 2011-2016Q2; SVB Analytics Analysis
Series B Series A Series Seed
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edia
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apit
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M)
Strategy Description Examples
Strategic Exit Sell business to strategic partners
Acquire Acquire companies to build clinical programs
Partner Partner with academic institutions to conduct clinical studies and provide ancillary data
Develop Develop features or pivot business model in order to collect real world data or gather clinical-grade data
Consumer Digital Health 19
Fitness/Wellness: Companies Adapt to Changing Marketplace
As investors move toward more clinically focused strategies, wearables and wellness companies are executing different strategies to adapt to this shifting landscape.
11/11/2015 $250M $64M 3.9x
3/25/2014 $100M $37M 2.7x
2/12/2016 $85M $16M 7.4x
8/5/2015 $235M NA NA
2/4/2015 $474M $18M 26.3x
2/4/2015 $85M $6M 13.7x
12/6/2013 $150M $24M 6.3
Fitness/Wellness: Exit to Sports and Fashion Companies
Consumer Digital Health 20
“If you don’t have a brand, it is hard to be legit in this space.” – Sonny Vu, Chief Executive and co-founder of Misfit
Acquirer Target Date Deal Value ($M)
Invested Capital (IC $M)
EV / IC Multiple
Soft
war
e H
ardw
are
Source: Capital IQ SVB Analytics Analysis Wall Street Journal - Fossil Group to Buy Misfit for $260 Million
Sports Fitness Apparel
Fashion Tech
Facing declining investor interest, companies that are not adopting clinical strategies are instead choosing to sell to sports and fashion retailers. Among those, software-focused firms are receiving the highest exit multiples.
$6.5B IPO Partnership: Study on weightloss and breast cancer prevention Announcement: 200 clinical studies run on Fitbit / Fitabase App Hire: VP Digital Health from Walgreens
Acquisition + Personnel
2013 2014 2015 2016
Fitness/Wellness: Companies Partner, Acquire or Develop Clinical Technologies
Consumer Digital Health 21 Source: Company Press Releases, Mobihealthnews, FastCompany, clinicaltrials.gov, Fitbit S-1
• Two 510k approvals • Real-time patient monitoring on
physician smartphone • CEO of Spectros becomes Chief
Medical Officer of Jawbone
Acquisition
Jawbone, Fitbit, and Scanadu started in consumer wellness and have made acquisitions, formed partnerships and started internal developments to adapt to the changing marketplace.
Consumer Clinical
• Has “FDA approval… [and] understands how to run a clinical trial with hospitals and wellness providers.”
• 87 patents, >500 trillion data points • “Partnered… for diabetes prevention”
Regulatory: Announces Plans for 510K Submission
• Forms clinical advisory board • Announces plans for clinical
trials
$10.5M Series A
Used for clinical development and regulatory approval in U.S. and China
$35M Series B
Acquire
Partner
Develop Kickstarter: Branded as DIY Vital Signs Device
Consumer Digital Health 22
Disease Management: Growth Opportunities
General Disease Management and Vitals Monitoring
Solutions that help patients manage any type of disease
Medication Management
Solutions that help patients adhere to and manage their medications
Disease Specific Solutions that help patients manage one specific type of disease or disorder
Disease Management: Approaches to Engaging Patients
Consumer Digital Health 23 *Includes both Disease Management and Remote Monitoring companies and deals Source: Rock Health Database Q2 2016, Pitchbook, 2011-2016 Q2; SVB Analytics Analysis
Percentage of Total Capital Invested by Category* (2011 – Q2 2016)
30%
8% 62%
Disease management and remote monitoring companies are shifting to focus on a specific disease to help patients and providers better manage the condition as opposed to providing general solutions aimed at patients facing different diseases.
Consumer Digital Health
Source: Interview with TJ Parker, August 19, 2016 23
“I don’t think you can scale a business in healthcare without working directly with the clinical entities like payers and providers.”
– TJ Parker, CEO
How PillPack Is Taking on Medication Management: An Interview with TJ Parker, CEO, PillPack
Consumer Digital Health 25
Online pharmacy that uses technology to help people take medication in a timely manner
Key Success Factors for Consumer-Centric Disease Management: Expertise in Both Healthcare and Technology | Patient-Centric Design
Operating in the Clinical Space Consumer health companies need to develop sound business models because the patient is not the only customer – the payer is also the customer.
“The healthcare system is moving towards a pay for performance model. Pharmacy should do the same and no one is truly doing that today.”
Source: Interview with TJ Parker, August 19, 2016
Most EXPENSIVE patients take 5+ prescriptions / day and have trouble coordinating their medication.
Advice to Entrepreneurs • Spend time with your consumers: figure out their pain points and
understand their core problems. And whether you can solve their problems with technology alone or if you need to become a provider.
• Know who your customers are and what they are willing to pay for.
Poor Adherence
Prob
lem
So
lutio
n
Manage complexity for patients • Automated sign up and refills • Coordination with payers • Staff available 24/7
0
5
10
15
20
25
2011 2012 2013 2014 2015 2016 (E)
Disease Management: Increasing Focus on Behavioral Change and Complex Disease Management
Consumer Digital Health 26
Number of Investments in Disease Management and Remote Monitoring Sectors (2011 – Q2 2016)
There has been a steady rise in investments in companies aimed at behavioral change, while the niche targeting complex diseases is more nascent.
Source: Rock Health Database Q2 2016, Pitchbook, 2011-2016 Q2; SVB Analytics Analysis 2016(E) is extrapolated based on 1H 2016
Behavioral Change Psychiatry Metabolic
Degenerative and Complex Diseases Orthopedic Oncology Neurology
“Remote Monitoring 1.0” Cardiovascular Respiratory
Disease Management: Opportunities in Complex and Degenerative Diseases
Consumer Digital Health 27
Degenerative and complex diseases, which are difficult to manage and account for a significant portion of U.S. medical expenditures, have received comparatively lower digital health investments, signaling the space is ripe for disruption.
Source: Rock Health Database Q2 2016, Pitchbook, 2011-2016 Q2; SVB Analytics Analysis AHRQ - Total Medical Expenditure by Conditions in US, 2013
Total Medical Expenditure, by Chronic Conditions in U.S.
2013 ($B)
Total Investments in Disease Management and Remote Monitoring Sectors by Chronic Conditions in U.S.
2011-Q2 2016 ($M)
24%
9%
22%
11%
14%
10%
9%
$- $50 $100 $150 $200 $250
Metabolic
Psychiatric
Cardiovascular
Respiratory
Orthopedic
Oncology
Neurology
*
34%
15%
19%
12%
6%
2%
4%
$- $100 $200 $300 $400 $500
Metabolic
Psychiatric
Cardiovascular
Respiratory
Orthopedic
Oncology
Neurology
*
Behavioral Change Psychiatry Metabolic
Degenerative and Complex Diseases Orthopedic Oncology Neurology
“Remote Monitoring 1.0” Cardiovascular Respiratory
10%
6%
-3%
1%
-8%
-8%
-5%
Difference
*Excludes trauma or injury-related conditions
Consumer Digital Health 28
Market Outlook: Assessing Consumer Health Opportunities
Progression to Clinically Driven Consumer Health Solutions
Consumer Digital Health 29
Exits
Remote Monitoring 1.0
2010–14 Fitness/ Wellness
2012–16 Disease
Management
2014–18 Digital
Therapeutics
2016–20
• Led by the medtech sector • Point solutions • Rely on traditional
reimbursement
• Rise of quantified self movement
• Tech investors galvanize market with investments into consumer hardware and software
• Focused on fitness and wellness
• User-friendly cloud/mobile solutions, clinical-grade devices and data analytics
• Engage patients to actively manage their health
• Target financiers focused on controlling health benefit cost and improving outcomes
• Predictive and personalized clinical intervention
• FDA-regulated, provider-prescribed, combination solutions
• Demonstrate clinically proven efficacy and cost savings
High-Flyers
We have seen the sector's focus move from traditional devices aimed at a specific solution to consumer devices. Now, the focus is on digital solutions for disease management. Going forward, clinically proven software and hardware will be integrated to drive better health outcomes and cost savings.
Source: Pitchbook, Company websites SVB Analytics analysis
About the Authors
Consumer Digital Health 30
Steve Allan, CFA Steve Allan is the Head of SVB Analytics, responsible for the three areas of information services provided to the innovation economy: Strategic Advisory Services, Compliance Valuations, and Insights. Strategic Advisory Services provides consultative guidance around valuations, benchmarking and inorganic growth strategies. Compliance Valuations issues valuation opinions for private companies. Insight focuses on studying trends and opportunities in the private venture-backed innovation ecosystem. Steve brings a strong financial background and passion for entrepreneurship to his role at SVB Analytics.
Steve earned a master’s in business administration from Duke University's Fuqua School of Business and a bachelor's degree in finance from the University of Notre Dame.
Head of Analytics [email protected]
Emily Wengel Emily Wengel is a Valuation Associate with SVB Analytics, responsible for conducting due diligence and financial analysis on valuation engagements for early-stage, venture-backed life sciences companies.
Prior to joining SVB Analytics, Emily worked as a business analyst at BioMotiv, an early stage biotech accelerator. Emily graduated cum laude from University of Pennsylvania, where she earned a bachelor of science in economics and a bachelor of arts in biology.
Associate [email protected]
Alex Lee Alex Lee is a Valuation Manager at SVB Analytics, responsible for conducting due diligence and financial analysis on valuation engagements for venture-backed companies in the Life Science sectors.
Prior to joining SVB Analytics, Alex worked as a consultant for biopharmaceutical companies, diagnostic companies and medical research institutions, assisting in corporate development, product commercialization and strategic advisory activities. Alex holds a master’s of bioscience degree from Keck Graduate Institute and a bachelor’s of science degree in biochemistry from the University of Nebraska-Lincoln.
Manager [email protected]
Scott Winder Scott Winder is a Director at SVB Analytics, responsible for managing client valuation assignments and issuing valuation opinions. Prior to joining SVB Analytics, Scott was a manager in the Business Valuation practice of Deloitte Financial Advisory Services LLP based in San Francisco. While at Deloitte, Scott provided financial advisory services related to mergers and acquisitions, accounting compliance, tax reporting and strategic planning for clients in the technology and life sciences industries, with particular experience in the biotechnology and biopharmaceutical industry segments.
Scott holds a master's degree in business administration from the Haas School of Business (University of California at Berkeley), and a bachelor’s degree in human biology from Occidental College.
Director [email protected]
About Silicon Valley Bank For more than 30 years, Silicon Valley Bank has helped innovative companies and their investors move bold ideas forward, fast. SVB provides targeted financial services and expertise through its offices in innovation centers around the world. With commercial, international and private banking services, SVB helps address the unique needs of innovators.
Consumer Digital Health 31
This material, including without limitation to the statistical information herein, is provided for informational purposes only. The material is based in part on information from third-party sources that we believe to be reliable, but which have not been independently verified by us and for this reason we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction. SVB Analytics is a member of SVB Financial Group and a non-bank affiliate of Silicon Valley Bank. Products and services offered by SVB Analytics are not FDIC insured and are not deposits or other obligations of Silicon Valley Bank. SVB Analytics does not provide investment, tax, or legal advice. Please consult your investment, tax, or legal advisors for such guidance. ©2016 SVB Financial Group. All rights reserved. SVB>, SVB Financial Group, and Silicon Valley Bank are registered trademarks. 0916-232
About SVB Analytics SVB Analytics, a non-bank affiliate of Silicon Valley Bank, serves the strategic business needs of entrepreneurs, corporates and investors in the global innovation economy. For more than a decade, SVB Analytics has helped global business leaders make informed decisions by providing market intelligence, research, and consulting services. Powered by proprietary data, SVB Analytics has a unique view into the technology and life science sectors.