By: Tim Gordon
It’s easy to forget that Q1 and Q4 of 2021 were bookends for the same calendar year. The outlook at the start of last year was far from certain without hindsight on our side – vaccination rollouts were slow and mismanaged, our healthcare workers were getting the jab, but most of us had resigned ourselves to not being vaccinated until summer or fall at the earliest, if even in 2021. Digital Health seemed to be leading the recovery after monster third and fourth quarters from a funding perspective, but we had hardly come to feel like we were on easy street. Fast forward through an unprecedented year of Digital Health funding, and unquestionably the wildest talent market I’ve ever seen, and here we sit with no sign of the latter slowing down.
As we reflected on the year, and then looked ahead, we got a good sense for what dominated the discourse, and we have some thoughts on what will in 2022.
Growth and Tech roles have dominated our open search slate for the last 18-24 months. Everyone under the sun is looking for a CGO to sell value-based care to payers, or a top tier CTO to build a scalable platform to deliver virtual care. The trend follows right down those functional “stacks,” to include VPs of Sales, Engineering and Product. As hiring ramped on the heels of big funding in Q3 of 2020, it set the stage for a run on these functions in 2021. As we look back across the industry and our network, the number of executives in these roles who changed jobs in 2021 is staggering. Much like the housing market, companies that have raised (relatively) smaller amounts of capital have gotten squeezed when it comes to hiring for these roles. With it being quite common to hear VP of Engineering candidates expect to see $300K base salaries, what’s a Founder with $5M raised to do?
This has created one of the most lopsided hiring markets I’ve seen in 10+ years. Counteroffers are being made – and believe it or not, accepted – at a rate we’re just not used to seeing. Compensation is being driven up. Companies that have raised massive amounts of capital are throwing it at employee retention. Every finalist candidate is considering multiple offers simultaneously, and we’re seeing folks negotiate offers like they’re trying to teach that car salesman a lesson, forgetting that they will need to go work with this person afterward.
It’s not all doom and gloom though. We’re already seeing some signs of the fervor in these functions peak, and it will likely plateau this year. Since late last year, we’ve been predicting a shifted focus toward finance and operations to create to structural rigor required to scale what all those growth and tech folks have sold and built. I’m not sure we’ll see things quite as intense for these functions as we did for the aforementioned last year, but it should make for a competitive market in those areas. If the trend of big A rounds continues, that should drive increased demand for marketing leadership, a common investment at roughly that time in a company’s life. I’d also be on the lookout for a spike in hiring for something we don’t see as often in venture – Corporate Development. We’re in an age of M&A, and with the dry powder some of these “venture stage” organizations have amassed, it’s likely we’ll see more accretive growth strategies with a need for someone to lead them.
Hiring and funding are inextricably linked, and we view the latter as a leading indicator for the former. We’d expect to see funding plateau and perhaps even show a downward trend before we see a drop in hiring. There’s just too much capital in the market right now, and healthcare is a labor-intensive industry that will continue to require massive amounts of talent to scale. Sooner or later, the supply/demand imbalance will correct, but in the interim, leaders need to get creative about how they hire senior executives.
General Market Sentiment
At this point, there’s little doubt that Covid has been a catalyst for Digital Health. Not too unlike when gas prices forced grown-ups to carpool to work in minivans, leading to more widespread adoption of electric vehicles, necessity drove rapid telehealth adoption over the last 2 years, and solidified the role that technology will play in healthcare going forward. Value based care is here to stay, and the looming mental health crisis in our country – and globally – is being addressed by a broad range of both established and upstart ventures. Lastly, while the pandemic raged, another epidemic faded from the public discourse – the opioid epidemic. Covid only poured fuel on that fire, so we expect to see more conversation about it in 2022, as well as substantial growth in the platforms that have been built to address it. 2021 was a wild ride, and I doubt 2022 will be much more tame, but the momentum is intense, and I think we’re in for another boundary-pushing year in Digital Health.