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It hardly comes as a surprise for digital health to be making waves nowadays with the increase of digital health venture capital firm companies. In fact, digital health has grown so much that the first financial quarter of 2021, saw more $100 million-plus “mega deals” for digital health ventures compared to that of 2018 and 2019 combined. All in all, a total of $6.7 billion was invested in digital companies in the first quarter of 2021, representing the biggest quarter ever, beating the third and fourth quarters of 2020 (with $4.1 billion and $4.0 billion raised, respectively).
Similar data from other sources only prove one thing: investors, entrepreneurs, venture capitalists, and others now understand the potential in digital health. Every week you hear about substantial digital health venture capital financing deals. According to Rock Health, digital health funding accounted for 2% of all deals in 2011. In 2020, the number increased to 9%. There’s a huge chance that this number is higher in 2021. Regardless of whether it’s through SPACs (Special Purpose Acquisition Companies) or traditional avenues, more and more digital health companies are ready to go public than ever before.
But what should healthcare frontrunners make of this financing free-for-all? What trends have been prevalent in the last few years?
New Digital Health Trends
There has been a surge in digital health venture capital firm funding over the last decade, that has intensified over the last couple of years. Certain areas appear to be getting more funding and attention, especially mental health. There has been a surge of activity and widespread recognition of the need for the de-stigmatization of mental health, the interdependency of mental health and physical health outcomes and costs, and also the power and efficiency of digital models in addressing underserved mental health needs. Other areas that has been gaining attention include the movement towards lifestyle medicine applications. These are aimed towards helping improve chronic conditions like diabetes through behavior modification.
Several digital health models now aiming to address said factors by means of social support communities, sophisticated analytics, coaching, and precision medicine upgrades and remote sensor equipment. More and more people are also starting to recognize the fatigue around too many niche solutions that do not provide quality experiences and continue to have suboptimal adoption rates. As a result, there is a growing need to position companies as the “integrated platform”, integration into the health insurance benefit stack and hybrid models that merge with physician locations.
Digital health venture capital firm funding is growing in the past decade but there’s a significant surge in the last few years. 2020 was a good year and this year things are expected to do even better. The space in digital health funding is currently maturing resulting to some really remarkable moments in the market.
Impact of Digital Health Funding Surge
There are two things that significantly impact the growing trend in digital health funding. One is that the companies and everyone in the ecosystem have changed dramatically from 2011 to 2012. The level of understanding among investors and entrepreneurs has also shifted. Companies are able to do so much more, and effectively, compared to ten years ago. There is simply a lot of innovation going on at a higher level of performance for the biggest market of the economy.
The second is that more money is coming into private equity and venture unlike before. Digital health venture capital firms are experiencing large capital inflows and is significantly affected by the bigger trends concerning investment. These two factors have created this huge surge in digital health funding.
The past six months have seen really rapid surges in variations, particularly the later-stage companies that have setup businesses. Companies are also working on doing better and improving deal flows. In the past, there was a much smaller group of entrepreneurs doing health technology for many years. With the recent turnover there’s just a lot more sophistication, which is very encouraging especially for those who’ve been in the business for long.
What’s happening in the digital health space is considered a huge moment for innovation in the USA.
How Has Covid-19 Affected Digital Health Funding?
In 2019, there was approximately $9 billion in venture funding for digital health companies. In 2020, the amount went up to $15 billion. This is what they call the COVID effect. Most of the money went to telemedicine and mobile health and tools directly related to COVID. Money was also funded to determine the cause of Covid-19. There has been a huge increase in funding into technologies that help with finding a solution for Covid-19. This has worked to the benefit of digital health companies, but we have yet to see how this will fare this year and for the next year, as vaccines are now being rolled out. We will be able to determine by the end of the year how this trend will look moving forward.
With a pandemic in our midst, the need for urgency for digital health innovation has never been greater. Covid-19 has really motivated investors and other health care stakeholders to act now and do something. We’re living at a time where digital health is mature enough to be helpful but young enough to be exciting. The biggest impact Covid-19 has done for the healthcare space is how it changed the dynamic around digital from something that’s discretionary to something that’s essential and necessary.
A lot of people have viewed Covid-19 as a critical point where what was once considered unconventional in terms of digital activity is now being pushed to the forefront and attracting a lot of attention on the global market. The best and most cited example of this would be the use of telehealth. Last spring saw a 70% increase of telehealth visits. Although this figure has decreased considerably now, there remains a huge number of visits taking place remotely. This has resulted to a completely different level of familiarity and comfort with remote models from the perspective of patients, clinicians, and hospital administrations. From a digital health venture capital firm point of view, this has prompted entrepreneurs to speed up their plans and expectations for going public and gauging their commercial success in the market.
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