Regular Digital Health Wire readers could probably guess that 2021 was a spectacular year for digital health funding, and Rock Health’s latest full-year report confirms that investment in the space topped even the most bullish expectations.
- Total funding for US digital health startups climbed to $29.1B across 729 investments, nearly doubling 2020’s former record of $14.9B. The growth was shaped by 88 different $100M+ rounds combining for $16.6B, including four of the largest digital health raises of the decade: Noom ($540M), Ro ($500M), Mindbody ($500M), and Commure ($500M). [Chart 1]
- M&A activity grew at a similarly breakneck pace, with 272 M&A moves easily eclipsing 2020’s total of 146. Last year also saw a record 23 companies go public through either SPAC mergers (15) or IPOs (8), shattering the previous record of 8 exits set in 2020. [Chart 2]
- The most funded value propositions of the year included R&D catalysts such as decentralized trials ($5.8B) and on-demand healthcare ($4.5B). Healthcare marketplaces were among the fastest growing segments, with 3.2x funding growth driven by D2C marketplaces like Mindbody and caregiver marketplaces like Honor. [Chart 3]
- Mental healthcare was the most popular clinical indication among investors ($5.1B), raising $3.3B more than any other clinical focus. Outside of the pandemic’s less-than-stellar impact on many people’s mental health, this area has seen a funding frenzy due to the rise of virtual behavioral health platforms such as Lyra Health and NOCD. [Chart 4]
Bubble Watch
Despite last year’s record breaking digital health funding, Rock Health’s view on the market was that it “wasn’t an across-the-board bubble, but it wasn’t placid water either.” Many companies are exceeding pre-pandemic projections by wide margins, and it’s possible that historical digital health benchmarks are too low, as opposed to today’s valuations being too high. If these companies can find a way to sustain their momentum beyond the pandemic, there’s a chance we could see a repeat performance in 2022.
