Digital health remains red hot as investments top $6 billion in Q1

The year is already approaching half of the $15.3 billion raised in all of 2020

It might be hard to remember now, but digital health is a recent phenomenon; even as recently as five years ago nobody really knew what the space was or how to define it. The expectation was that the space would eventually see widespread adoption, but it might take a decade or so to fully get there. After all, healthcare is so big that it often moves very slowly.

Now, thanks to the pandemic, that timeline has accelerated beyond anyone's expectations, with widespread adoption and acceptance of taking healthcare and expanding it beyond a yearly visit with a doctor.

In fact, the space has grown so much, and so quickly, that we're only just barely past the end of the first quarter of the year and it is already on track to pass the record breaking amount of capital raised in 2020, according to a new report out from Rock Health. 

In all, there was $6.7 billion invested across 147 deals in Q1, approaching nearly half of the $15.3 billion raised through all of last year. That number represents a 67.5 percent increase from the $4 billion raised in Q4 2020, and it more than doubles the $3.1 billion raised in the same quarter the year prior.

Part of that is due to larger deals than ever before: the average deal size in the first quarter reached $45.9 million, compared to $31.7 million in 2020 and $19.7 million in 2019. In all, there were 25 deals of over $100 million during the quarter, compared to 40 in all of 2020. Some of those include $500 million raised by Ro, $400 million raised by Insitro, $300 million raised by Hinge Health, $250 million raised by Tonal, and $220 million raised by Komodo Health. 

March was a particularly good month for the digital health space, as it included two weeks with over $1 billion raised; for comparison's sake, back in 2011 there was $1.1 billion raised in total for the entire year. That's how far it's come in 10 years. 

When broken down by sector, on-demand health services led with $1.2 billion in 17 deals, followed by research and development catalysts, with $1.1 billion across 13 deals. The third largest was population health management, with $874 million across 12 deals.

The report also breaks funding down by clinical condition, with mental health leading the way, thanks to Lyra Health's $187 million round, Better Up's $125 million, and Ginger's $100 million raised. Mental health has been the most funded condition since 2017, and that's because those services are "often paired alongside broader product offerings," such as with telemedicine companies like Doctor on Demand and Amwell, Rock Health explained.  

The second largest clinical condition was primary care, which included the aforementioned round raised by Ro, as well as $200 million for Dispatch Health, and $60 million for Eden Health. Two spaces that saw a big rise were musculoskeletal and gastrointestinal care, which went from 12th place and 10th place respectively in 2020, to 5th place and 6th place in Q1. 

In addition to the funding raised by the space this quarter, Rock Health also noted the rise of digital health companies going public, particularly those choosing a special purpose acquisition company (SPAC) route, in companies get acquired by an already publicly traded company and, essentially, take over that stock. Clover Health and HIMS are two major healthcare companies have already taken this route this year.  

A recent report from Silicon Valley Bank, predicted that there could be as many as 15 to 20 companies entering the public market this year, while Rock Health identified 43 companies for its public exit watchlist, including Pear Therapeutics, Color, Everlywell, 98point6, ZocDoc, Omada Health, Collective Health, K Health, Calm, Virta Health, and Capsule.

(Come join Vator our May 19 Future of Mental and Behavioral virtual event. We'll have top-level VCs and C-level executives from the leading mental and behavioral companies, such as Teladoc's BetterHelp, Amwell, Doctor on Demand, Kaiser Permanente, Bessemer Ventures and more. Get your tickets here!)

(Image source: timeshighereducation.com)