February 21, 2021
Unfortunately, the COVID-19 pandemic has shone a harsh light on the challenges that many senior living communities are facing, from social isolation to inaccessible quality of care. The industry’s historical lack of innovation and technology adoption has left many facilities ill-equipped to manage the pandemic’s many curveballs.
That said, with vaccine distribution in full force, we are looking towards a brighter future for residents of senior living facilities and believe that these communities are the next great frontier of digital transformation. We trust that facility owners and caregivers will invest in technologies that bring the living back into senior living — from social platforms and virtual reality travel experiences to online fitness classes and gamified retirement savings software — to reshape the narrative for aging.
Over the past three months, we scoured the senior living landscape to better understand how technology can play a role in improving the quality of life and outcomes for our nation’s seniors. Our summary findings and report are below.
Our Identified Secular Themes
We believe that there are four macroeconomic drivers that will have significant downstream implications on technology innovation and adoption in senior living:
The Industry’s Value Drivers
The senior living ecosystem is comprised of a unique combination of diverse stakeholders, from real estate developers deploying capital for their next senior care facility to registered nurses administering care to residents. In our conversations with various industry participants, we identified four core value drivers for the senior care industry:
We believe that startups and technologies that directly or indirectly address these value levers will have the greatest chance at adoption.
Analyzing the Startup Ecosystem
We identified over 180 startups operating in the SeniorTech ecosystem that have raised over $4 billion in capital. These companies are addressing challenges across the entire senior living value chain, from communication to care. The mental model that we employed to segment SeniorTech startups is as follows:
From a funding perspective, our research suggests that the venture-backed SeniorTech landscape is fairly nascent and that there are not yet any ‘breakout winners’ in the Independence, Wellness, and Social segments, in particular.
Alpaca VC’s Summary and Outlook
Thesis: The pandemic has shown the world that technology innovation and adoption in senior living is long overdue. Founders are flocking to SeniorTech as they acknowledge the opportunity in the aging population. Families and caregivers alike are continuing to seek out technology solutions that enable cheaper, more effective medical care and increasingly comprehensive psychological, social, and emotional care.
Research: Our analysis of 180+ startups led us to classify the technologies that help seniors maintain their independence, improve the physical healthcare they receive, improve their general well-being, and better connect them with the world. The most mature solutions by far are those technologies that work to improve physical healthcare outcomes.
Conclusion/Outlook: In the near term, Senior living facilities will unsurprisingly continue to emphasize and invest in safety measures to reduce the spread and risk of COVID-19. However, we believe there is an appetite to use this time for piloting new technologies that solve communication and care challenges, which will likely persist well after the pandemic.
In the medium term, we believe that post-pandemic fears will drive families (and investors) towards home care and away from in-facility care. As occupancy falls, facility operators will need to find ways to leverage technology to reduce variable costs.
In the long term, facility operators will put as much, if not more, emphasis on the social determinants of health as they do medical care. The labor market for caregivers will tighten and operators will need to find ways to augment their workforce with technology. A “shakeout” of startups will occur, but those that can take advantage of the value levers previously discussed will win.
Our Summarized Slide Deck:
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Alpaca VC Investment Management LLC is a U.S. Securities and Exchange Commission-registered investment adviser. Alpaca VC Investment Management LLC is committed to diversity and inclusion in the workplace. We prohibit discrimination and harassment of any kind based on race, color, sex, religion, sexual orientation, national origin, disability, genetic information, pregnancy, or any other protected characteristic as outlined by federal, state, or local laws.