- Global healthcare investment hit a record high last year, with $80.6 billion in equity funding across more than 5,500 deals, according to a new report from market intelligence firm CB Insights.
- The acceleration was especially acute in the digital health sector, an arena that's seen unprecedented investor interest during the coronavirus pandemic. Equity funding in digital health globally hit an all-time high of $26.5 billion in 2020.
- Funding trended up each quarter last year, before peaking in the third. Deal activity slumped in the fourth quarter by 13% on a quarter-over-quarter basis, a trend that carried over into the red-hot digital health industry. Both the funding and deal count for digital health companies declined in the fourth quarter, by 2% and 21% respectively, compared to the third.
The coronavirus pandemic spotlighted inefficiencies in U.S. healthcare. Payers, providers and patients increasingly turned to technology to access care amid friendly regulations from Washington, creating exponential market interest worldwide. At the same time, the aging U.S. population and ongoing consumerization drove new market opportunities for savvy players.
The global increase in healthcare investments was seen in North America, Asia and Europe, with all seeing year-over-year boosts in funding, according to the CB Insights report.
Along with digital health, previously niche sectors like mental and women's health also recorded notable deal boosts.
Mental health saw a record high of $2 billion in equity funding last year, with dollars in the fourth quarter alone up 30% — mostly from early stage deals. However, deal count fell from the third quarter.
Similarly, companies addressing women's health needs saw a record number of deals last year at 239. About 62% of those were early-stage companies, suggesting the fledgling industry is poisted for further snowballing even after the coronavirus pandemic comes under control, experts say.
However, the proportion of healthcare deals overall going to early-stage companies has steadily declined since the third quarter in 2019. That continued in the fourth quarter, which saw a larger comparable share of mid- and late-stage deals.
Overall funding to women's health companies reached $521 million in the fourth quarter, slightly down from the third.
Across many health sectors in the fourth quarter, funding dollars reached record highs, though the number of deals plummeted. Artificial intelligence companies, for example, saw a new funding record of almost $2.3 billion in the quarter, mostly due to a handful of megarounds for software streamlining genomics and provider workflows, though deals dropped by 19% from the third quarter.
In the telehealth sector, companies raised a record $3.3 billion in funding in the fourth quarter, though deals declined 32% from the third quarter.
Additionally, funding in the fourth quarter hit a record high for genomics companies at $2.2 billion, though deals also declined.
In the cybersecurity sector, the fourth quarter was the second-biggest quarter for funding over the past three years. Similarly, medical device startups raised almost $6 billion in the fourth quarter even as deals declined by 25%.
Part of this can be explained by a recent rise in megarounds of $100 million or more. CB Insights counted 187 megarounds in 2020 — also a record — with more than a third taking place in the fourth quarter.
The biggest single round in the fourth quarter was an $800 million boost in November for Resilience, a company that develops manufacturing technology products for biopharmaceuticals, from a group of investors that included Google. The amount was trailed by a $700 million funding round in December for Alphabet life sciences subsidiary Verily.
There were also a flurry of digital health exits in the fourth quarter, along with a notable amount of M&A. In the medical device field, for example, exit activity reached its highest point in more than three years, with a total of 64 exits.
And special purpose acquisition companies played a stronger role in the fourth quarter, especially for digital health exits. Merging with SPACs is an increasingly popular route for companies looking to enter the public markets. Examples include telemedicine player Hims & Hers, devicemaker Butterfly Network and medical documentation company AugMedix, which all went public in the fourth quarter via SPACs as opposed to traditional IPOs.