From the COVID-19 pandemic to a historic U.S. presidential election, 2020 will be remembered as the year the world turned upside down. It has also been an unprecedented year for digital health investors and companies in the sector, which have risen to meet the surge in demand for virtual care.
2020 was declared the largest funding year on record before the fourth quarter even began. It has also been a banner year for megadeals, mega mergers and IPOs, as well as a time of healthy deal flow for early-stage companies. This was also the year that investors learned to trust company founders they could not meet in person, as shelter-at-home orders moved many important pitch meetings to Zoom or Microsoft Teams.
Many of the investment and other trends we have seen accelerate this year will continue to have an impact as we approach 2021.
In the first video of our series, “Digital Health Trends Shaping 2021,” I sat down (virtually, of course) with my good friend Megan Zweig, Rock Health’s chief operating officer, to discuss 2020 investment trends and the investment outlook for 2021. In the video, Megan noted that Rock Health analysts and investors are still bullish on digital health, as Q4 continues the robust dealmaking trend that made headlines at the end of Q3.
View the video here and read key takeaways from my talk with Megan further down.
Key Digital Health Highlights
In my last post, I touched on some of the most remarkable aspects of digital health, including the large funding rounds, high valuations and increased appetite for healthcare innovations from investors in both the public and private markets.
Here is a quick overview of takeaways from my first video with Megan about the state of venture financings, capital markets and M&A within digital health:
- Rock Health, which has tracked digital health investing for the past 10 years, reports that about $50 billion has been invested over that time. Of that total, 20% was invested in 2020 alone—and the year is not yet over. In other words, approximately $10 billion was invested in digital health companies as of Q3 2020.
- Investments have not only centered on mature, late-stage digital health companies: about 50% of recent financings have gone into digital health companies at the seed or Series A stages.
- More than 10 digital health companies went public within the last two years.
- Megadeals are on the rise: So far this year, 24 digital health companies have raised megadeals worth $100 million or more through Q3 (compared to the previous annual record of 12 megadeals in 2018).
As capital continues to flow in for companies at all stages, the stream is a sign that digital health is solving real problems for millions of people. The need doesn’t seem to be abating—so the innovation and the funding will not be slowing down anytime soon.
It’s impressive to see investors making bets on teams they don’t know that well—and may have met for the first time over a Zoom call instead of a conference table. And that’s just another sign that 2020 won’t be an anomaly for digital health, but rather a sign of what the future might look like.
Stay tuned for our upcoming videos where Megan and I will discuss:
- Prioritizing Diversity & Striving for Greater Representation
- Virtual Care 2.0: The Future of Digital Health
- Traditional Retail, Tech & Telecom Giants Making Big Moves