The data: Digital health companies nabbed a record $14.7 billion in funding in the first half of 2021—already smashing 2020’s full-year total of $14.6 billion (though that’s not completely surprising considering the impacts of the pandemic) and nearly doubling 2019’s $7.7 billion total, according to Rock Health’s latest report.
Digging into the data:
On top of stellar funding hauls, there were a ton of digital health M&As and public exits in H1:
Where are investors placing their bets? Most are funneling cash into tried-and-true digital health value propositions in research and development, on-demand healthcare, mental health, and chronic conditions.
But we’re also seeing a strong appetite to support direct-to-consumer digital health players:
The catch 22 of D2C healthcare: D2C healthcare could be a less complicated space for investors to pour money into, and it offers a promising alternative to consumers as healthcare costs skyrocket.
But D2C has its drawbacks: The onus of payment is primarily placed on the consumer, and the business model may not be sustainable for large-scale growth considering high customer acquisition costs.
To combat this, we’ve seen larger D2C players consolidate to grow their footprints and lure in more consumers with a diversified suite of healthcare services. For example, Ro’s acquisitions of women’s health startup Modern Fertility and diagnostics startup Kit in the last two months could foreshadow more D2C-focused digital health companies following a similar path.
One big question: Now that digital health companies are flush with funds, how will they use the cash strategically, and what will ROI look like?
Digital health quickly went from a niche to mainstream market during the pandemic—but how fast it’s raking in funding dollars could raise some flags. Some of the biggest questions that remain are: Can companies develop, test, and scale digital health solutions at pace with competition? And how often/effectively are these companies proving their ROI after being flooded with funding?