German medical practice software startup Doctorly has raised a €7.2m Series A extension — and has leant heavily on family offices to do so.
The round comes just eight months after the startup’s €10m Series A, and roughly half the funds came directly from family offices.
Its lead investor, VC Simon Capital, is backed by the family office of the Bitburger Group, among others, and was formerly known as Bitburger Ventures. It also raised from Geschwister Oetker KG, the family office of some of the members of the Oetker family, UNIQA Ventures and a number of other family offices.
Doctorly founder Samir El-Alami says it’s been a struggle to raise from VCs over the years as a healthtech company — and that this round was no different.
“If you’re a regulated healthtech startup, the [Series A stage] is just the beginning for you — but it’s the middle for VCs,” he tells Sifted.
It can take years for a medical product to get approved by healthcare regulators, and the folk startups are trying to sell to — healthcare providers and doctors — are infamously conservative and slow to digitise. That means it typically takes longer for healthtechs to scale — and create returns for investors — than other tech verticals.
Family offices tend to work to a more relaxed time frame, El-Alami says. “Family offices have created billion-dollar businesses, but over three generations, so they’re naturally patient. Most VCs expect returns yesterday.”
Modernising German healthcare
Doctorly provides cloud-based software which manages medical records, prescriptions, billing and appointments for medical practices — like GPs, urologists, gynaecologists and paediatricians.
Most medical practices in Germany still store medical records on paper or disk, and the management software they use is the “single biggest blocker for digitisation within German healthcare,” says El-Alami.
Doctorly is the first in Germany to get regulatory approval for practice software. Doctolib — which is regulated to provide practice software in France — said it wanted to launch the software in Germany after raising a €500m round in 2022, but hasn’t managed to get approval from the regulator so far.
Doctorly, which was founded in 2018 and launched in 2022, has raised from VCs — including Seedcamp, Target Global, Speedinvest, Calm/Storm Ventures and UNIQA Ventures — over three previous rounds of publicly announced funding and several unannounced internal rounds.
But it’s gone out to raise more times than would be ideal, says El-Alami, after underestimating the amount of time it would take to build a regulated product and launch on the German market.
“What that led to was drip funding — where we didn’t raise enough money at the start to deliver what we wanted.” It meant that Doctorly had to raise once a year to top up funds, he adds.
The startup’s initial Series A was smaller than El-Alami hoped for, he says, which is why he’s gone out to raise again so soon afterwards.
VCs have drawn back from the digital health sector in recent years; investment into digital health startups has dropped to $1.4bn in 2023 so far — from a high of $4.2bn in 2021. It’s fallen further than European tech funding as a whole.
According to Dealroom, only seven startups — Docplanner, Flo, Alan, Dental Monitoring, Kry, Doctolib and Babylon — have hit unicorn status in the sector. That’s just a fraction of the 460 startups that have achieved a billion-dollar valuation across European tech.
“It can take a regulated healthcare company four years to go live with a product, and [VCs] compare you to another four-year-old SaaS company [which can go live with a product far sooner],” he adds. “Most VCs don’t really understand healthcare.”
“[Family offices] were like ‘yeah it will be hard but it’s doable — it just won’t be done in two years’.”
“I don’t blame VCs — it’s just the nature of the beast,” says El-Alami. “With all the extra deal flow coming in right now, why are they going to give extra time to something they don’t understand?”
The future for Doctorly
Doctorly hopes to raise again next year; El-Alami says he’d like to raise a €20-30m Series B sometime towards the end of 2024.
But for now, Doctorly is focused on proving it can sell to doctors in Germany at scale. It will use its new funding to build out its commercial team.
El-Alami tells Sifted Doctorly sells to 20% of the doctors it approaches — up from 10% a year ago.