A top investor at Alphabet's growth fund says the soaring cost of chronic care is fueling a new crop of startups like Livongo and shares where he wants to place his bets in 2021

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Sumi Das Sumi Das, CapitalG

There are more companies like Livongo on the way, Sumi Das, a partner at CapitalG, told Business Insider

Livongo, a healthcare company bought by Teladoc last year, manages care for people with diabetes, hypertension, and other chronic conditions through a mobile app. The company is often given credit for showing the industry that this kind of business model – tech-forward, consumer-focused – can go public and do well.

Now two trends are boosting companies like Livongo: the pressure the coronavirus pandemic is putting on health plans and employers to offer healthcare remotely, and the fact that chronic conditions still make up the vast majority of healthcare costs, Das said. 

Read more: The 26 billion-dollar startups to watch that are revolutionizing healthcare in 2021

“I think you’re going to see a massive growth curve for digital health tools that are focused on chronic conditions,” he said. “And the success of Livongo this year has only accelerated that.” 

Finding remote ways to manage expensive chronic conditions

CapitalG for its part is focused on the areas that are particularly expensive to pay for, so cardiovascular, oncology, mental health, and musculoskeletal conditions as well as chronic kidney disease, he said.

Hinge Health, which isn’t backed by CapitalG, is an early leader in the musculoskeletal market, he said. Back surgeries alone can cost tens of thousands of dollars, which doesn’t include the requisite rehabilitation and prescription drugs. 

Employers in particular, which insure about half of Americans, are figuring out that they can save a ton of money and help employees through early intervention like physical therapy.

Read more: A group backed by huge employers like Walmart, Lowe’s, and Microsoft is working on a new initiative to lower healthcare costs

“We believe that there’s a huge opportunity there for digital tools to make a meaningful impact,” Das said.

The next wave of Livongos won’t necessarily be M&A targets

But instead of going the mergers and acquisitions route, as Livongo did with Teladoc earlier this year, Das predicts that we’ll actually see startups get bigger on their own. The startups will building solutions for conditions that have high rates of comorbidities with their original offering.

Like how Livongo moved into hypertension after diabetes, he said, Omada, which offers programs for diabetes and behavioral health, might tackle weight loss. People, including benefits managers, like simplicity, which isn’t achieved when they have to route several populations to several different companies and apps, many of which don’t offer appointments with specialists. 

Read more: Meet the 35 healthcare startups VCs say will take off in 2021

“Our kind of rough mental model is that both employers and payers want to buy best of breed solutions for the top three to five conditions, because they want to be sure that they will drive high engagement and cost reductions,” Das said.

Bastion Balance Seoul, Korea.