Digital health companies globally raised nearly $15 billion in the first half of the year, more than double the amount raised during the same period in 2020, according to a new report from market research firm Mercom Capital Group.
Here are five funding trends to take away from this year's funding so far:
1. Digital health finance in the first half of 2021 has already surpassed full-year 2020 funding. The $14.9 billion in funding that digital health companies raised during the first half of the year marked a new funding record for the sector. Last year, companies raised $6.3 billion in the first half of 2020 and $14.8 billion for the full year—a record for full-year funding.
Digital health companies collectively raised $7.7 billion in 2021's second quarter, up from $2.8 billion raised during the same period last year.
Venture-capital firm General Catalyst participated in the most investment deals—11—in 2021's second quarter, followed by Optum's venture-capital arm and firm Oak HC/FT, which each made six investments. One hundred other investors made at least two investments into digital health companies during the quarter.
2. Telehealth continues to dominate digital health funding. Investments into telehealth companies accounted for nearly one-third of all funding raised in the second quarter at $2.5 billion. While telehealth use has continued to fall since the height of the COVID-19 crisis, many experts still expect telehealth use to plateau at a higher level than the low levels seen before the pandemic.
3. Investors primarily poured money into consumer-facing companies. Digital health companies that focus on providing services to consumers accounted for nearly 70% of investment dollars in the second quarter, raising $5.3 billion of the quarter's total $7.7 billion in funding.
4. It's no longer rare for digital health companies to go public. When Livongo, Health Catalyst and Phreesia went public in 2019, they made waves for breaking a three-year drought since the last initial public offering of a digital health company. Now, it's the new norm. 12 digital health companies have already gone public this year.
That includes 10 companies—like Doximity, Privia Health and Bright Health—that pursued IPOs and two—23andMe and Hims & Hers—that merged with special purpose acquisition companies, better known as SPACs or blank check companies.
5. But M&A, not IPOs, still remains the most common exit strategy. One-hundred thirty-six companies were acquired through June of this year, the most transactions recorded during the same period since Mercom started tracking digital health in 2010. It's a sizeable rise from the 83 companies acquired during the first half of last year and 91 companies bought during the same period in 2019.
Microsoft Corp.'s $19.7 billion purchase of Nuance Communications represents the priciest acquisition so far this year, followed by Optum's $13 billion purchase of Change Healthcare, which is being reviewed by the Justice Department.
