Health-tech funding breaks another record in 2020

Healthcare technology companies raised a record of $15.3 billion in 2020, according to a report from Silicon Valley Bank. For the first time, digital health companies surpassed biopharma for the number of deals.

In a year that pushed many startups to the brink, healthcare technology companies brought in record levels of funding for 2020. Health-tech startups raised a total of $15.3 billion in 2020, up from $10.6 billion in 2019, according to Silicon Valley Bank’s latest Healthcare Investments and Exits report.

And with a total of 614 deals, for the first time, healthcare technology surpassed biopharma for deal volume.

With the Covid-19 pandemic, healthcare investment across the board reached record levels. For 2020, investors poured $51 billion into healthcare companies, up 47% from 2019.

But digital health companies in particular were thrust into the spotlight, as practices needed support communicating with patients, pharmaceutical companies launched virtual clinical trials and many people tried out telehealth visits for the first time.

Alternative care companies raised a total of $5.9 billion, including 66 primary care deals, 42 mental health deals, and 15 platform care deals. Mental health startups in particular are having a moment, as insurers and employers scramble to address access as more people grapple with anxiety, depression, substance use and other struggles.

More companies are also turning toward hybrid care models, pairing virtual services with in-person clinics. Concierge primary care startup One Medical and Oak Street Health, which operates primary care centers for Medicare patients, both went public in 2020.

Digital heath companies supporting provider operations raised a total of $3.7 billion, as clinics sought ways to communicate with patients at scale about the Covid-19 pandemic. And clinical trial enablement startups saw a big boost from 2019, raising a total of $2 billion in 2020.

“This may have been driven by the Covid-19 pandemic, which challenged players in the drug discovery and clinical trial spaces to adopt products from emerging CTE companies,” the report noted.

The number of “mega-rounds,” or raises of more than $100 million, tripled from 2019. Some of the most active health-tech investors in 2020 included:

• BlueCross BlueShield: 17 deals
• Optum Ventures: 14 deals
• 8VC: 13 deals
• Oak HC/FT: 11 deals
• Define Ventures; 11 deals
• Alphabet: 10 deals
• UnityPoint Health Ventures: 9 deals
• General Catalyst: 8 deals
• Greycroft: 8 deals
• Khosla Ventures: 8 deals
• Philips:8 deals
• Memorial Care Innovation Fund: 8 deals

Fewer mergers but bigger IPOs

Despite Teladoc’s $18.5 billion acquisition of Livongo, health tech M&A actually declined slightly from 2019. Alternative care acquisitions, in particular, fell sharply by 50%.

Part of this decline may have been because potential acquirers, such as healthcare providers, needed to focus first on handling changes to their own businesses during the pandemic, the report noted.

But it could also be because going public was a more lucrative option for many alternative care startups.

In 2020, seven health-tech startups went public, roughly on par with 2019’s record numbers. But the startups were valued for nearly twice as much as last year, with a combined market cap of $9.8 billion at IPO.

Going into 2021, investments in health-tech companies are expected to remain strong, though overall healthcare investment is expected to decrease.

“Following the record highs seen in 2020, we don’t expect healthcare fundraising to have the same momentum in the year ahead,” Jonathan Norris, managing director of Silicon Valley Bank’s Life Science and Healthcare Practice, said in a statement. “However, with fresh capital to invest and a continued open IPO window, the flow of investments into venture-backed companies should continue at a healthy pace.”

Digital health IPOs are expected to continue at a rapid pace, if not increase. Silicon Valley Bank expects 10 to 15 IPOs in the next 18 months. Telehealth platform MDLive has been vocal about its plans to go public this year, and insurance startup Oscar recently confidentially filed for an IPO.

Here’s a list of private health-tech companies currently valued above $1 billion:

• Bright Health: $4 billion
• Calm: $2 billion
• Doctolib: $1.8 billion
• Olive: $1.5 billion
• Ro: $1.5  billion
• Grand Rounds: $1.3 billion
• Whoop: $1.2 billion
• Virta: $1.1 billion
• Sema4: $1.1 billion
• Lyra: $1.1 billion
• CityBlock: $1 billion
• MDLive: $1 billion

The original article can be found at: MedCity News