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Investors turn to digital health startups with $10bn funding in 2020

by LLB Tech Reporter
3rd Nov 20 10:32 am

The digital healthcare sector has witnessed unprecedented growth in 2020 mainly due to the pandemic that crippled normal operations for care providers. With a focus on digital health, investors have continued to show more interest in the sector.

Data presented by Buy Shares shows that digital health startups funding has hit $9.9 billion in 2020. Between Q1 and Q3, the funding grew by 58.62%. During Q1, the funding stood at $2.9 billion while at the end of Q3, the figure stood at $4.6 billion.

The Buy Shares research also overviewed some of the largest digital health funding deals as of Q3 2020. Bright Health was the biggest deal at $500 million with funding from Blackstone, Tiger Global Management among others. Ground Rounds registered the fifth-highest deal at $175 million.

Pandemic spurs investor interest in digital healthcare

The digital health sector entails companies that offer digital care programs. In a nutshell, it is the convergence of digital technologies for the health sector. The sector seeks to prevent disease, help patients monitor and manage chronic conditions, lowering the cost of healthcare provision, and making medicine more tailored to individual needs. The sector gathers patient data from activity level to blood pressure. In this case, the goal of digital healthcare usually benefits both patients, as well as their healthcare providers.

The 2020 surge in digital healthcare funding correlates with the period when the coronavirus pandemic ravaged most parts of the globe. During the pandemic, health services offered limited care due to the risk of infection.  Face to face to appointments were limited only to critical conditions. The situation led to a spike in digital innovation and technological adoption of practices like telehealth and remote monitoring. The adoption was meant to provide vital care during the pandemic.

Therefore, the global health crisis accelerated investments in the digital care sector especially in companies that deal with on-demand healthcare services. The acceleration in funding cements the fact that the digital health sector is among the main beneficiaries of the pandemic. The digital health investments represent a new effort in which the health sector is seeking to shape the future of healthcare provision.

At the start of the pandemic, the global economy was crumbled with many countries staring at a recession. At this point, investors slowed down funding as they were uncertain about prospects. Most investors had to update their financial and strategic plans, and reallocating funding reserves based on a rapidly-changing environment. Additionally, price uncertainty was also another factor. Some deals that were in motion had to be slowed as the future remained uncertain. Therefore, deals in their later stages were the ones that witnessed a majority of investments. Notably, with markets showing some recovery led by technology stocks, investors got some confidence as fears of a financial-system instability were lowered.

The future of the digital healthcare sector

Investors have different motivations while joining the digital healthcare sector. For example, most investors are guided by institutional priorities, generating non-clinical revenue, commercializing internally developed intellectual property, and having an insight into upcoming and disruptive innovations in the industry.

To investors, the digital health sector offers a promise of both good financial returns and key positioning by supporting companies that build solutions to address clinical and operational hurdles. The sector offers a unique value to companies as they hold integral direct access to both providers and patients.

As the sector grows, investors should be wary of new threats, especially security. Factors like ransomware, data breaches, and privacy concerns but will play a key role in shaping the future of the digital health sector. In medical circles, patient data security and privacy remain a major but delicate subject. More effort should be placed on ensuring that patient data remains safe to avoid compromising the patient’s physical and emotional health state.

As highlighted, investors initially showed concerns that the pandemic would lower access to capital in the sector 2020 is expected to set new records for the sector. The number of deals, deal size and overall funding is expected to spike. Additionally, most jurisdictions are set to loosen regulatory constraints for the sector.

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