Global venture capital funding for digital health companies hit a $15 billion high in the first half of 2021, driven in large part by telehealth investment.
Funding activity was up by 138% during the first half of 2021, compared to $6.3 billion raised in the first half of 2020, according to a report from Mercom Capital Group, a global communications and research firm.
Corporate funding into digital health companies, including venture capital, public market financing, and debt, totaled $19 billion so far in 2021.
“The digital health sector had a spectacular first half of 2021. Venture investments in digital health during the first half of 2021 have already surpassed funding raised in all of 2020 and is the largest amount raised in a single year since 2010,” said Raj Prabhu, CEO of Mercom Capital Group.
Telehealth again led funding activity, accounting for almost 30% of the funding raised in the first half of 2021.
The record-shattering investment in telehealth comes even as utilization drops steadily. Americans are slowly returning to medical facilities to receive care and are using fewer telehealth services after last year’s pandemic high, according to new data.
Telehealth utilization fell nationally for the third straight month, according to FAIR Health’s Monthly Telehealth Regional Tracker.
But investors continue to pour cash into the sector. Telehealth companies raised the funds over 105 deals, a 147% increase in year-over-year compared to $1.7 billion raised in 79 deals. Other key digital health sectors that drove sky high funding include wellness with $1.7 billion in funding, mHealth apps with $1.6 billion, analytics with $1.5 billion and clinical decision support with $1.1 billion.
“An even more impressive data point in the first half of the year was the record M&A activity, which has been flat in previous quarters despite the funding surge,” he said, noting that a record 12 companies went public during the first six months of the year.
In the second quarter of 2021, digital health companies raised a record $7.7 billion in 195 deals, a 7% increase quarter-over-quarter compared to $7.2 billion raised in 179 deals in Q1 2021. Year-over-year funding was up by 175% compared to $2.8 billion in 161 deals in Q2 2020.
Fifty digital health companies raised $100 million or more in 2021.
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Digital health consumer-centric companies accounted for 69% of the funding in the second quarter of 2021, raising $5.3 billion in 129 deals, while practice-centric companies accounted for 31%, raising $2.4 billion in 66 deals.
Early round venture capital funding, such as seed and series A rounds, came to $1.6 billion in the first half of 2021, with most of this funding going into telemedicine, mHealth apps, and data analytics companies.
A record 1,254 investors participated in 2021, compared to 921 investors in the first half of 2020. In the second quarter, General Catalyst led digital health financing deals with 11 funding rounds. Oak HC/FT and Optum Ventures each made six investments, and another 100 investors made two or more investments during Q2 2021.
Top VC deals included $540 million raised by Noom, $500 million raised by Roman, $360 million raised by Keep, and $300 million each raised by Capsule, KRY, and Hinge Health.
This year also has seen a record number of M&A deals with 136 digital health transactions compared to 83 during the same time last year.
Notable M&A transactions in 2020 so far were: Microsoft’s acquisition of Nuance for $19.7 billion, Optum’s acquisition of Change Healthcare for $13 billion, Datavant’s acquisition of Ciox Health for $7 billion, KKR’s acquisition of Therapy Brands for $1.5 billion, and Boston Scientific’s acquisition of Preventice Solutions for $925 million.