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Even digital health investors are surprised by the uptick in digital health since the start of the pandemic. According to a survey conducted by Catalyst @ Health 2.0, 100% of investors reported that the use of digital health tools increased beyond expectations.
Sixty-five percent of digital health companies surveyed said the usage of their products or service increased since the start of coronavirus, compared to what they were expecting.
"COVID was very good for digital health companies – on average. Most are very optimistic but, despite the massive increase in funding since the brief – but real – post-lockdown crash, most digital health companies are small and struggling for funding, revenue, and customers," Matthew Holt, chairman of Catalyst @Health 2.0 and Elizabeth Brown, program manager at Catalyst @Health 2.0, wrote in a statement.
The pandemic has impacted digital health companies' revenue, as well as their usage. According to the survey results, 41% of startups said that their revenue was significantly above expectations, and another 29% said it was slightly above expectations. Mid-stage companies, in particular, benefitted from this shift in healthcare delivery, the results show.
These wins are also playing out in the staffing process. Twenty-nine percent of survey-takers said their organization planned on hiring more staff, and 46% intended to continue hiring as they had before the pandemic.
New services were also a hot topic. In fact, 66% of survey takers reported adding a new product or service offering, and 3% reported completely pivoting.
As for post-pandemic, 0% of investors believed customers will go back to pre-COVID-19 usage rates. Users and digital health companies were a little less optimistic. Thirty-three percent of users and 27% of companies said that usage rates will go back to pre-pandemic numbers.
The research also demonstrated that the bulk of companies are selling software (86%), followed by services (55%) and digital therapeutics (14%).
HOW IT WAS DONE
The survey included 335 respondents and was conducted between Thanksgiving 2020 and mid-March 2021. Independent private digital health companies accounted for 60% of respondents. Folks from consulting companies made up 14%, and investors accounted for 4%.
Additionally, individuals from subsidiary divisions of payer/provider/life science companies made up 4%. Subsidiaries of tech companies accounted for 2%. Some 3% were from publically-traded digital health companies, and 13% reported being from another group.
Nearly half of responders were from companies with 19 or fewer full-time employees.
The coronavirus pandemic forced the rapid adoption of digital tools during 2020 and continuing through 2021. According to a survey from Sykes in March of 2020, fewer than 20% of patients had experienced a telehealth appointment. However, by March of 2021, more than 61% had participated in a telehealth visit.
The venture space has taken notice. In 2020, investors poured $13.8 billion into digital startups.
That trend has maintained in 2021. According to Rock Health, the industry raked in $6.7 billion during the first three months of 2021.
While mid-stage and large companies are often closing the large rounds, Holt and Brown, point out that there are many smaller companies hoping to make it in the space.
"Most digital health companies are small startups," Holt and Brown said. "Given the ease of starting a company and the difficulty in selling to larger incumbents, or getting a large number of consumers as users, that’s not a surprise. In our sample, 49% had fewer than 20 employees, and 20% fewer than 5."