With digital health steadily maturing as a sector, the trend is expected to continue in the near-future despite minor fluctuations in economic conditions.
FREMONT, CA: Investors are spending heavily on digital health, with investment totaling $4.2 billion in the first half of 2019. At this pace, the sector is set to raise $8.4 billion in 2019 and can surpass the 2018’s record-breaking annual funding of around $8.2 billion as per Rock Health’s midyear report.
Even in the first six months of 2019, the digital health sector is close to the $4.6 billion figure raised in 2016. In 2018, a few $100-million-plus deals were leading the investments, accounting for 30 percent of venture amount.
The trend depicts that the experienced investors are returning to cause with 69 percent of the investors in the first half of the year being the repeat investors. With digital health steadily maturing as a sector, the trend is expected to continue in the near-future despite minor fluctuations in economic conditions.
Digital Health Market Ahead
According to Rock Health, companies raised an average of $199 million through the past 10 and five projected digital health IPO between 2011 and 2019. In line with these 15 companies, 19 other digital health startups have raised almost the group’s average of $199 million.
With the entrance of organizations in the healthcare industry, they are relying on external innovation in addition to honing it internally. Further, the $3.5 trillion healthcare has a huge potential for various large non-healthcare companies such as Google, Amazon, and Best Buy. Such industry giants can be premium acquirers who may be willing to pay higher premiums to secure companies that meet financial objectives and fill a strategic need.
According to estimation by Rock Health, there is $29.4 billion of active venture capital that it refers as digital health’s “net liquidity overhang,” expecting a liquidity event somewhere in the future. Though merger and acquisition is a common practice within digital health, acquisition by mega healthcare and non-healthcare companies will be a primary source of liquidity and returns for digital health investors.