Digital health investment firm Rock Health is the latest market spectator to tally up and break down what's widely being considered an exceptional year in activity and fundraising.
Per the firm's 2020 Market Insights Report, released yesterday, the space claimed $14.1 billion of investments spread across 440 deals. By their reckoning, this represents a respective 72% and 15% increase over 2018, the previous high performer.
Exits and public market activity were also on the rise this year. Seven new digital health IPOs comprised a combined market cap of $37 billion by the end of the year, while a growing number looked to SPACs as their path to market. At the same time, annual M&A activity increased from 113 deals in 2019 to 145 in 2020.
WHY IT MATTERS
While the Rock Health report's topline numbers reaffirm last year's flurry of activity, the report also paints a clearer picture of how these investor deals both shifted and stayed the course amidst pandemic upheaval.
The average size of a funding deal ticked upward to $31.9 million, and according to the report this movement was fueled by 40 deals of $100 million or more that claimed over half of the year's total raise. Despite this shift, the firm described the spread of investment deals as "relatively stable," and "a healthy mix" of early, mid- and late-stage deals that has only slightly shifted toward more established startups over the last few years.
The firm also took note of who was making these investments.
"Today, nearly two out of three investors are veterans of the industry who understand the opportunities and risks," the report's authors wrote. "Our data show that growth in venture investment in 2020 was largely driven by these veterans 'doubling down' – rather than new entrants chasing a trend."
These seasoned investors largely appear to have doubled down on known quantities during the year. Rock Health noted that many of the leading investment categories remained in their top spot, but enjoyed even stronger commitments from backers.
Investments in on-demand healthcare, for instance, more than doubled since 2019, while R&D catalyst companies tripled their capital. Similarly, established market categories such as virtual mental healthcare and at-home fitness/wellness care attracted new investments that matched COVID-related spikes in demand.
"Though priorities may have sharpened during this time, it appears that the pandemic heightened the urgency for existing areas of investment – rather than requiring a pivot to an entirely new vision," they wrote.
Other investment trends outlined in the report include a growing number of startups specializing in plug-in tech and infrastructure tools designed for use by other digital health companies, as well as continued participation from corporate VCs and other large enterprise buyers in later-stage funding rounds.
On the exits front, the report also stressed the escalating share values of public digital health companies and a handful of big-ticket M&As likely to define segments of the market going forward.
THE LARGER TREND
Rock Health's latest report is a punctuation mark on some of the activity it has been signaling throughout the year, and one that largely falls in line with the numbers coming out of other digital health market observers.
While the numbers might shift a little from source to source, for example Mercom ($14.8B), Startup Health ($21.5B for "health innovation") and MobiHealthNews ($13.8), each landed on 2020 fundraising totals far outstripping those of years past.
