Steve Brotman was around for the early days of the digital media industry when he started a company out of Columbia Business School called AdOne Classified Network. AdOne was one of the first companies to put classified ads on the internet back in the mid-1990s. The endeavor was such a success that he was profiled by sister publication Crain’s New York Business as a 40 under 40 honoree in 1996.

Nearly 30 years later, Brotman is navigating another emerging industry, digital health, as the co-founder and managing partner of Alpha Partners. Alpha is a growth equity firm that invests in and works with digital health companies like Brave Health, Included Health, Ro, Bright Insight, and Thirty Madison. Brotman spoke about why he thinks the United Arab Emirates is an exciting market for healthcare innovation, what sets this economic reset apart from the dot-com bust of the early 2000s and more.

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1You recently traveled to the United Arab Emirates. What does the market for digital health look like there?

Steve Brotman: The UAE is moving away from oil dependency as a concentrated driver of the economy.  I think it’s gone from approximately 80% oil business down to 50% over a 20- to 30-year period. And, they want to go much further. They’re attracting a lot of entertainment. They’re attracting a lot of tourism. They’re trying to attract other types of businesses.

Healthcare is an obvious area. It’s 20% of gross domestic product in the U.S. Government leaders in the UAE definitely have an interest in healthcare. It’s Shariah-compliant with Islamic law. They are attracting top scientists and doctors, and they’ve built new universities, hospitals and care systems without a legacy. The region has the most diverse gene pool, which is a huge plus for  precision medicine and drug discovery. Because the region has these advantages, healthcare and biotech are obvious places to invest. If you’re looking to grow assets, that’s where innovation is going to surge.

Read more: Digital health’s newest funding hub is in the United Arab Emirates


2How would you characterize the current investment market in digital health? 

I would say healthcare is the beneficiary of disruptions in the market. Alpha invested in Brave Health last August. They provide telemedicine for mental health patients on Medicaid and Medicare, which together represent almost 40% of the US population.  We know that in 2023 through 2025, the number of covered patients will increase. And the payer, the government, isn’t going away. In fact, the payer is allocating more and more to mental healthcare.

The reality is that hospitals are under more pressure to treat people who really need to be treated. People who have mental health issues often go to the emergency room for non-acute issues.  If we can care for this population in ways that keep them out of, or keep them from returning to, acute-care emergency rooms – that will be a big economic and social win. 

Healthcare investing got a little crazy during the boom. A lot of dollars flew into the sector at very high multiples. We’re experiencing a step down in valuations for sure. All these things follow a hype cycle. You’ve got a big boom up, and a fall, and then slowly it comes back up on a normal level, with the winners emerging ahead of the laggards.


3What should portfolio companies know about the economy?

During the 2017 to 2021 cycle, companies were just rewarded through top-line revenue growth. And it didn’t matter at what price, cost or margins. It was just good to have revenue growth. Companies and investors were saying, “We’ll worry about profitability later.” Today, growth is still important, but profitability and margins matter much more than before.  It’s interesting to watch our own portfolio companies that we believe have a path to profitability within, say, 12 to 24 months. We believe that even in a worst-case scenario, they can get back to profitability. But now the ability to select companies that can get to profitability rapidly is being tested, especially at the growth stage. We’ll find out very soon if the emperor still has clothes or not. So far, our portfolio companies are coming through this value-adjustment period with flying colors. That is largely because our last five investments grew top line revenue by 108% year over year. They did this cost efficiently and they have two-year cash runways.


4One of the companies you work with is weight loss startup Noom, which has recently undergone layoffs. What can you say about its recent challenges?

Well, I can’t say what’s going on there. You’ll have to ask them. But if you think about it, it’s become the next-generation Weight Watchers. Noom is going through the same thing that all companies are going through. I wouldn’t say it’s unique. It’s just maturing as a corporation. I’m pretty confident that things will end well for Noom. It has the right product and it’s the right segment. Obesity is a huge market. There are a lot of snake oil salesmen out there, but if you can be true to helping people get results for their dollars … you’re going to be successful. I can’t tell you how many people I know that have tried Noom and have been really successful with it.

What’s happening is the supply of capital for money-losing operations is over. But this is very different from the dot-com bust, which I invested through. With the dot-com bust, there was no salvaging companies with no revenue;they had no business existing in the first place. When you have zero revenue and you’re burning $10 million to $30 million a year, there’s only one thing to do: Go out of business.

This time around, most of the companies in question are in real businesses. The primary difference is that the issues they’re facing are around hiring: “We over-hired in one division and we under-hired in another. Or, we mis-priced our product. We can fix that.”


5Do you worry about consumer-based health businesses during inflationary periods?

Inflation is basically another word for a shrinking economy. This type of environment pushes consumers and enterprises to be more capital efficient. If you’re going to a hospital system or a doctor’s office, they have bricks and mortar facilities contributing to their overhead, making up over half of the cost of the service. Historically, the consumer might prefer to go visit their therapist or doctor in person. But what if you didn’t need that brick and mortar facility– and you can do it for half the cost online? Or, like Brave Health, what if, through tele-medicine, you can triage patients better, prevent $70,000 behavioral health intake in ERs? Those telemedicine solutions become much more interesting to both consumers and providers.. What I worry about within the healthcare system is that, by and large, the systems are often not subject to the marketplace or capitalistic competition. So many solutions and services are subsidized, written off, or tied up in insurance plans and regulations. This creates challenges, trade-offs and unintended consequences that continue to make the sector ripe for improvement and investment.  Technology is a disruptor in this mix that can positively impact the delivery of healthcare both on a qualitative and quantitative level.  With almost 20% of GDP going to healthcare in the U.S. this is too big of an opportunity to not pursue.