With three months left in 2021, digital health funding has reached a staggering total of $21.3b across 541 deals.
To put that number into perspective, last year was the first year that total digital health funding surpassed $10b, and 2019’s total was a small-by-comparison $7.9b.
These figures are from Rock Health’s Q3 2021 Digital Health Funding Report, which analyzed how 2021’s financing boom is shifting market expectations and creating a landscape that’s ripe for consolidation.
Funding themes remained similar to prior years, with investors focusing on value propositions such as R&D software and clinical indications like mental health. R&D funding was lifted by mega rounds from XtalPi ($400m) and Reify Health ($220m), while mental health services saw an influx of capital at Spring Health ($190m) and SonderMind ($150m).
Most funded value propositions:
- R&D catalysts ($4.7b)
- On-demand healthcare ($3.4b)
- Treatment of disease ($3.1b)
- Fitness & wellness ($2.9b)
- Non-clinical workflow ($2.1b)
- Consumer health information ($2.0b)
Most funded clinical indications:
- Mental health ($3.1b)
- Cardiovascular disease ($1.4b)
- Diabetes ($1.4b)
- Primary care ($1.4b)
- Oncology ($1.2b)
- Substance use disorder ($793m)
This year’s unprecedented funding signals that investors are betting on a continued surge in healthcare innovation, but the wave of new entrants is creating a clutter of digital health options for patients and providers. As the market begins to call for more unified offerings, companies are turning to M&A for the answer.
The 216 digital health M&A deals through the first three quarters of the year have already eclipsed the 146 deals in 2020. Companies like Headspace and Ginger have combined to vertically integrate their solutions to provide their user base with a deeper well of resources. Other deals, like K Health’s recent Trusst acquisition, are focusing on horizontal integration to serve multiple channels with a single tech interface.
Regardless of the strategy, the rate of the dealmaking is causing many to wonder if company valuations can continue rising at the same pace for much longer, but for now it seems like we could be in the early innings of another record breaking Q4.