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Digital health funding soars to $ 14.7 billion, accelerating 2020 investment

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Investors have invested $ 14.7 billion in digital health companies so far in 2021, already surpassing all record funding from 2020.

The first half of the year closed with 372 deals and an average deal size of $ 39.6 million, investment firm Rock Health reported Tuesday. More than half of those deals (59%) in the first half of 2021 came from 48 mega deals of $ 100 million or more.

Funding reached $ 14.6 billion in 2020 with 460 transactions.

Public release activity has exploded with 11 initial public offerings gated and special purpose acquisition companies, with 11 more PSPCs expected to close in 2021. In 2020, seven digital health companies released to public markets.

2021 is set to more than double 2020 in terms of the number of transactions (372) and companies financed (359).

And the industry shows no signs of slowing down: the last week of June saw more than $ 1 billion in funding.

RELATED: 2020 Breaks Record of Digital Health Investment with $ 9.4 Billion Funding

Digital health companies raised $ 3.1 billion in June, nearly triple that of June 2020, when they raised $ 1.1 billion, when digital health funding figures began to accelerate after the first shutdowns of COVID-19.

“We are seeing an increase in cycle sizes, new investors and the pace at which funding is occurring in digital health. There is an acceleration of exits, as well as the emergence of combined societies that can deal more broadly with health care. It’s exciting to see how fast everything is going this year, ”said Michael Pimental, partner and co-founder of CVS Health Ventures, in the report.

Looking at where investors placed their bets, biopharmaceutical / device R&D raked in the most dollars with $ 2.7 billion raised, and companies providing on-demand health services brought in $ 2.6 billion.

Digital health startups dealing with mental health, cardiovascular disease and diabetes racked up the biggest investments from investors, with $ 1.5 billion, $ 1.1 billion and $ 957 million, respectively.

“We have seen continued investor interest in on-demand models, comprehensive primary care, behavioral health, fitness and prevention. But what is most refreshing for us is the sheer number of transactions that are happening. This is a good sign for the industry as a whole, ”said William Greineisen, Ph.D., director of strategy and corporate development at Cox Enterprises.

Among active investors, Tiger Global continues its fundraising blitz, participating in 14 fundraising rounds for American digital health startups. Those rounds amounted to $ 1.8 billion, or 12% of digital health funding so far this year. While information on Tiger’s share in these deals is not public, given their role as lead investor in many of them, it is safe to assume that Tiger is betting big on the digital health business market. , reported Rock Health.

With plenty of dry powder on hand, direct-to-consumer digital health companies are attracting more and more fundraising dollars and accounting for 25% of all fundraising transactions. This is the highest percentage in Rock Health’s 10-year tracking history. H1 2021 mega-deals included Noom ($ 540 million), Ro ($ 500 million) and Capsule ($ 300 million).

So far, 2021 has also seen an acceleration in mergers and acquisitions, as healthcare customers push digital healthcare companies to bundle services, integrate complementary offerings, and create one-stop shops that reflect all of this. that the market can offer better.

RELATED: COVID-19 Supercharged Digital Health Funding In 2020 To Hit All-Time Highs: Report

The first half of 2021 saw 131 digital health M&A deals, averaging 22 deals per month, compared to a monthly average of 12 last year. Overall, 2021 is set to record a 1.8-fold increase in the number of M&A deals compared to 2020.

Big tech companies like Amazon, Microsoft and Google are also jumping into the acquisition action, striving to integrate digital health features into their software solutions for businesses. In April, Microsoft acquired medical transcription technology company AI Nuance to build capacity for healthcare customers.

“For us, acquisitions like these hint at the strategic plans of traditional tech companies for digital health, using the relationships they have already established within corporate teams – from email servers to cloud storage ) as entry points for expanded service relationships, ”the Rock Health researchers wrote. .

The momentum in 2021 also introduces new risks for investors and entrepreneurs, Rock Health executives said. The speed and amount of investment will test the current and future ability of the market to design and deliver digital health solutions and then transform them into sustainable businesses.


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