Digital healthcare companies have had a big year in investing — carried out in about six months’ time. All in all, digital health firms have raised $14.7 billion in the first half of this year, surpassing the entirety of the segment’s 2020 total.
The first half of the year closed with 372 deals and an average size of $39.6M, according to figures released by Rock Health — spearheaded by 48 megadeals in the segment worth $100 million or more that accounted for 58 percent of the funds raised.
Pushed by the pandemic, healthcare funding has exploded over the last year and half to become a mainstream market where interest has suddenly exploded. Monthly funding in June 2021 came in at $3.1 billion, almost triple that of June 2020’s $1.1 billion. June of last year is notable because it is when digital health funding first started to rapidly accelerate in the face of COVID-19, according to the Rock Health report.
“We’re seeing an increase in round sizes, new investors, and the pace at which funding is happening in digital health. There’s an acceleration of exits, as well as the emergence of combined companies that can address health care more broadly. It is exciting to see how quickly everything is happening this year,” Michael Pimental, partner and cofounder at CVS Health Ventures, said in the study.
The Big Dollars Bounce
The boom is notable in two ways. How much investors are dropping on the healthcare segment investment is growing — and fast. According to Rock Health, investors didn’t change their overall strategies going into — or emerging from — the pandemic. Rather, they’re doubling down on their bets. The top-funded value propositions of 2020 and the first half of 2021 are consistent, with companies pushing biopharma/device R&D ($2.7B) and those delivering on-demand healthcare services ($2.6B) bringing in the most dollars. Fitness and Wellness and Consumer Health Information firms also saw big investments — at ~$2 billion and ~$1 billion taken in respectively.
These funding rounds aren’t only getting larger, they’re also happening more often. Fifty companies raised multiple rounds in the past 12 months, double the 25 companies that did so in the 12 months prior.
But more than getting bigger and more frequent, taking a closer look at the firms that closed them also demonstrates a shift in the types of players drawing the most outside funding.
The D2C Shift
While in the past the big funding players in the healthcare space have been nearly entirely enterprise-facing firms selling into large health systems, the market in 2021 is showing early signs of a shift. Enterprise players are still dominant, according to the data, but over one quarter of all digital health companies funded in the first half of 2021 were direct-to-consumer (D2C)-only startups. This is the largest percentage in Rock Health’s ten-year tracking history, almost two-fold higher than the mid-decade baseline, and five percentage points higher than in 2020.
Among the segment’s biggest deals in the first half of 20201 were Noom ($540M), Ro ($500M), and Capsule ($300M) — all D2C firms, all a sign of mounting investor confidence in the segment.
Because, as PYMNTS’ recent Healthcare Payments Innovation Playbook done in collaboration with Rectangle Health demonstrates, the market is changing — and appealing directly to the consumers themselves is making an ever-increasing amount of sense as the patient is increasingly the payor when it comes to their healthcare services. PYMNTS consumer survey data found that nearly 21 percent of respondents paid the entire cost of their most recent medical visit out-of-pocket.
Consumers want, the data demonstrates, more efficient service, better ways to pay and control their costs and a more transparent system within which to transact. And as the first half of the year investment data is rolling in, the entrepreneurs are rising to meet that mounting demand — and investors are flocking to fund it.
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