The first three months of 2020 shattered all previous Q1 digital-health-funding records – amounting to a $3.1 billion in new investments – according to a new Rock Health report. Set against the backdrop of a global pandemic, this early funding success may not be indicative of a trend for the entire year.
“Of course, this is not a post about historic funding levels – it is a story of healthy funding momentum cut off at the knees by a global pandemic,” authors of the Rock Health report wrote. “Though some of the economic blow will be tempered by demand for connected healthcare, we do not anticipate investment activity to keep pace with Q1 levels in the coming months.”
As alluded to in the quote, researchers at Rock Health don’t see this funding growth lasting. According to the organization’s research, 67% of health tech investors said that startups will have a harder time raising capital in 2020.
The coronavirus pandemic has led to market volatility and has sent the U.S. down the trajectory for a recession. Rock Health predicts that access to capital as a whole will begin to tighten. However, access to private capital won’t contract as much as public capital. It notes that many private companies are sitting on dry powder – or funds that need to be invested, according to the report.
However, some startups in the digital health space are innovating around the coronavirus.
“Telemedicine, in particular, is deployed at the front lines of the pandemic. Although there have been some reports of growing pains as telemedicine providers adjust to a rapid uptick in demand, telemedicine startups are rapidly responding to the escalating health crisis."
WHY IT MATTERS
As the coronavirus spreads across the world, there are still a lot of unknowns for the digital health world. With many working with private venture funds, the fall may not be as drastic from the onset.
“Today, VCs are investing from a pool of money they raised yesterday,” Halle Tecco, founder of Rock Health and CEO of Natalist, wrote in an email to MobiHealthNews back in early March. “They may be more cautious about the business ideas they back (and if those companies can likely withstand a downturn), but I don't think we'll see any drastic decrease in funding this year.”
But there are still many unknowns after the dry powder is used.
THE LARGER TREND
Last year Rock Health reported a whopping $7.4 billion in digital health funding. While this was down slightly from 2018 (at $8.2 billion), it still marked a thriving industry.
Rock Health has been reporting on digital health funding since 2011, when it recorded $1.1 billion in funding deals. Since then, the industry has seen deals grow exponentially. The size of the deals has also grown significantly from $12 million in 2011 to $19.8 million in 2019.