2020 health technology investment trends driven by ‘the greatest need ever’
Rock Health and Startup Health have released 2020 mid-year reports on digital health investment trends in US and globally, respectively. According to both reports, digital health funding in 2020 is on pace for a record high. Despite the uncertainties introduced by COVID-19 — and in part because of them — the health innovation market remains robust and confident, the authors of the Startup Health report wrote. ‘In fact, with $4.2B raised in Q2 2020, we find ourselves closing out the most-funded six-month period on record.’
Both reports note that a slowdown in digital health funding was expected following the outbreak of COVID-19, and a consequent pause on closing all deals. Surprisingly, however, a strong bounceback in investment appeared in May and June, bringing digital health funding in Q2 to $2.4B in US - 33% higher than the $1.8B quarterly average for the prior three years, as reported by Rock Health. The authors speculate the temporary decrease in funding could have been due to three reasons.
1. First, to turn time and attention to the needs of their existing portfolio
2. Second, price uncertainty—particularly in later stage deals
3. Finally, the record rally and reduced volatility in public markets (for now) warded off concern over financial-system instability
Nevertheless, the great need for technology-enabled healthcare combined with the easening of several regulatory and reimbursement barriers has re-mobilised the investor community, which has led to 377 deals globally and $9.1B of funding, up nearly 19% compared to the same period in 2019 (Startup Health). According to Rock Health, the deal size was up 29% - the average of $25.1M, well above the previous record of $21.5M set in 2018. The authors suggest this is indicative of a maturing market where investors are looking to support late-stage digital health companies.
Virtual Care, Telemedicine and Remote Monitoring
The need to treat and monitor patients remotely has stimulated a spike in demand for virtual care options. It is, thus, no surprise that companies in US providing on-demand healthcare services raised $1.1B in the first half of the year, while monitoring of disease firms raised $831M, putting each category on pace to exceed 2019’s totals by 100% (Rock Health).
At the same time, both reports strongly embrace the significant surge in telemedicine investment, driven by an explosive usage due to COVID19. For example, a telemedicine company Amwell reports a 158% in usage, whilst DOXY.me, a free SAAS telemedicine platform claims an increase from 100 daily new signups to 20,000 new users daily in mid-March, which then leveled out at 5,000 new users daily in April. According to Startup Health data, Q1 telemedicine funding was up by 1818% compared with Q1 of 2019 and remote patient monitoring platforms are up by 168% over the same period.
Digital behavioral health continues to attract investors’ interest
Behavioral health companies have received an influx of capital in recent years. In H1 2020, digital behavioral health companies received $588M, roughly the annual funding for this segment in any previous year (total behavioral health funding in prior three years was 2019: $539M, 2018: $658M, 2017: $273M)’ conclude the authors of Rock Health. They add that whilst the funding covers a range of product features, the majority has gone to digital behavioral health companies that provide one of two services:
Solutions that enable providers to provide remote treatment for acute and chronic conditions
Digital therapeutics that are themselves a clinical treatment (like Lyra Health) or a non-clinical service (like Headspace)
The largest rounds were raised by three companies, Headspace, Mindstrong and Lyra Health, encompassing 54% of the entire behavioral health funding segment.
The first half of the year creates an optimistc outlook for digital health market for the rest of 2020. Yet, in these uncertain times, predictions are difficult to make. However, one thing is for certain - while some of these changes may not be permanent, the position for the adoption of digital health has never been greater. Thus, it’s with great excitement that we’ll watch out for the second half of 2020.