What you should know:
– Digital health funding in the U.S. it reached $ 29.1 billion in 729 bids, according to the latest research from Rock health, a full service risk fund dedicated to digital health. The total nearly doubles the record $ 14.9 million in 2020 with an average bid size of $ 39.9 million.
– The findings point to both the cause and the effect of trends in the healthcare landscape, as the digital health sector is facing significant changes in its infrastructure, business models and talent funds that will make the effects inevitable. downstream in 2022.
Key forces shaping the digital health sector
In the report, Rock Health finds three key market forces that are reshaping the digital health sector from the group:
1. Construction of infrastructures
In 2021, emerging digital health and interoperability infrastructure companies reached $ 2.2 million in 40 bids in 2021, nearly triple the 2020 dollars invested in the category ($ 736 million). The current infrastructure landscape includes companies such as Innovaccer ($ 105 million), Redox ($ 45 million) and Ribbon Health ($ 43.5 million) that integrate data streams into unified API ecosystems, while TripleBlind ($ 8.2 million and $ 24 million) and Truveta ($ 95 million and $ 100 million). M) allow the analysis of data between companies. ScienceIO ($ 8 million) and Centaur Labs ($ 15.9 million) optimize data structure and labeling, while Commure, Truepill ($ 142 million), Wheel ($ 50 million) and Zus Health ($ 34 million) offers “LEGO kits” or building blocks for other people. to Implement Digital Health Solutions
2. Agile business models
As the worst parts of the pandemic slowed in 2021, healthcare sales cycles returned to pre-pandemic deadlines, and one-off solutions had more trouble demonstrating differentiated value to overwhelmed shoppers. 2021 also saw healthcare startups expand into product categories and enter into the provision of complex care. A leading cohort of digital healthcare companies that are abandoning pay-per-service models and moving toward value-based care. Value-based care models encourage providers to use any range of physical and digital approaches to deliver quality care at a low cost.
3. Wars of talent
The Great Resignation has had a huge impact on healthcare, leading to a total talent war for strong software and product engineering teams, as well as the strategic direction of healthcare leaders who have been around the block. Not to mention, healthcare-providing digital healthcare actors have to compete with the wider healthcare industry for clinical talent and caregivers, a cohort of employees who are simply exhausted.
Occupational stress, exacerbated by the COVID-19 pandemic, pushed a larger number of doctors to consider quitting medicine as non-traditional health workers began to hire doctors and increase clinical functions. For digital healthcare companies in service delivery (calling all virtual clinics), clinical talent can be a limiting factor for growth.
Digital health adoption stabilizes in “new normal”
The adoption of digital health seems to be stabilizing in a “new normal” after the onset of the COVID-19 pandemic. Rock Health discovers that the investor community is moving into a long-term financing step for digital health, as there is still a good mix between new investors (45%) and repeat investors (55%). ) of the sector, balancing the new staff with the consistent behavior of experts in the sector. Completing the diverse mix, the big tech players are investing and acquiring in space, coupled with a growing number of average kids – smaller but still major retail and tech companies like Best Buy that are increasing their forays into digital health.
Another key signal in the maturity of the digital health market is the growing pace of digital health outputs (M&A activity). Over the past decade, about one in four (23%) dollars invested in digital health has gone to companies that eventually came out; 13% of these funds went to companies that merged or were acquired, while 10% went to companies that went public. Compared to that 2019, only 15% of the digital health investment dollars had come out.
Rock Health experts expect the pace of digital health output to stay active. Substantial increases in the D21 Series in 2021 (1.8 times the growth in the average size of the D + Series check between 2020 and 2021) provide a rough estimate of the companies that may be preparing for exits. to the stock exchange and fundraising of SPAC pipes in the near future. For new entrants, this “senior class” of digital healthcare companies offers a real-time game book for market strategy and market share creation.
Other key findings from the Rock Health report include:
Competitive VC landscape
– The 2021 VC landscape is heating up with the participation of we background i growing companies—Including Global Tiger, which participated in 25 digital health offers in 2021 (only behind General Catalyst’s 37).
– Digital health startups saw an opportunity in these market conditions and raised several rounds together, with 60 companies raising twice in 2021 and two companies increasing three rounds during the calendar year.
– From 2020 to 2021, the average round of Series A grew 38% to $ 18 million, while the average Series B grew 23% to $ 43 million, just $ 3 million less than the average C series of 2019. The year also saw a record number of mega ($ 100 million) bids in the initial phase, including ten mega ($ 100 million +) Series B increases and a mega round of the Series A (EasyHealth).
Most funded categories
– Digital health companies that catalyze R&D in biopharmacy and medical technology topped the chart with $ 5.8 million in funding, spurred by the accelerated adoption of COVID-19 real world testing i decentralized trials.
– Investments in digital products that support the treatment of diseases grew 2.6 times between 2020 and 2021, as coverage routes for extended prescription digital therapy. Healthcare markets also experienced 3.2 times year-on-year funding growth, driven by increases in D2C (Mindbody) markets, Caregiver (Honor) markets. $ 370 million) 2, and clinical job boards (Trusted Health $ 149 million in two rounds).
Mental health raised $ 5.1 million, $ 3.3 million more than any other clinical indication in 2021, and nearly double the total funding for 2020 ($ 2.7 million). Trends driving investment in this category include integrating mental health services into broader virtual care platforms (think K Health Acquires Trust) and increasing virtual options for intensive mental and behavioral health needs , led by companies such as Lyra Health ($ 200 million). NOCD ($ 33 million) and Equip Health ($ 13 million).
– Diabetes care and musculoskeletal care (MSK) startups, conditions that can be managed virtually more and more, also increased in 2021. MSK funding increased sixfold by 2020 ($ 236 million) and in 2021 ($ 1.4 million) as MSK Hinge Health’s virtual clinics ($ 300 million M and $ 400 million) and Sword Health ($ 25 million, $ 85 million and $ 163 million) they completed multiple increases throughout the year.
OPI and M&A activity
– In 2021 it had an average of almost 23 digital health outputs through mergers or acquisitions each month, almost double the 2020 monthly average of 12.
– 23 digital healthcare companies went public through SPAC or IPO in 2021, almost three times the previous peak of eight in 2020.