Investors Pouring Billions into Digital Health Ventures

As COVID-19 has caused a sea change in healthcare, with the rapid expansion of virtual healthcare and telemedicine, investors have been busy pouring their dollars into the digital health space.

In fact, between January and June of 2021, almost $15 billion in funding went to the digital health sector, according to a report by Rock Health. That was more than the already record-breaking numbers from the entire year of 2020. “I don’t think a lot of investors expected to double the pace of last year,” Rock Health CEO and Managing Director Bill Evans told Managed Healthcare Executive.

The first six months of 2021 saw 372 deals that averaged $39.6 million. In all of 2020, there were 460 deals whose average size was $31.7 million.

Where are all these investment dollars coming from? Pretty much from every direction: the private market, the public market, companies seeking acquisition targets, and special purpose acquisition company (SPAC) trusts, according to the Rock Health report. The categories that are seeing the most funding this year are research and development ($2.7 billion for the first half of the year), on-demand healthcare ($2.6 billion), and fitness and wellness ($2 billion).

When it came to the clinical conditions attracting investment, mental health was at the top of the list, drawing in $1.5 billion over the first half of the year, followed by companies dealing with cardiovascular disease, which attracted $1.1 billion in funding. Startups that are trying to help people manage substance use disorders have also received investors’ attention.

Rock Health found that funding was increasingly flowing to direct-to-consumer digital health companies. Some of the largest deals of the year were Noom, a weight-loss platform ($540 million); Ro, a telehealth company that provides pharmacy services ($500 million); and Capsule, a digital pharmacy ($300 million).

According to the Rock Health report, the many mergers and acquisitions that took place in the digital health sector indicate that sector’s viability. The first half of the year saw 131 mergers and acquisitions, while there were 145 in the entire year of 2020.

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