Digital health investment around the world hit an all-time high of $57.2 billion in funding in 2021, fueled by the growing need to provide digital solutions and delivery models to patients during the pandemic.
The record-breaking funding marks a 79% jump from the $32 billion raised globally in 2020, according to a year-end report by market intelligence firm CB Insights.
That record amount was raised in 2,930 deals, compared to 2,518 deals in 2020.
In the U.S., digital health startups raked in a record $37.9 billion in 2021, up 75% from $21.7 billion in 2020. Digital health funding hit $10.8 billion in the fourth quarter alone. That's more than the second-largest global market, Asia, recorded in all of 2021 with $10.7 billion, according to the report's findings.
U.S. deal count dropped to 303 in Q4—the lowest on record for 2021. This comes as smaller financings were overtaken by mega-rounds, which accounted for 63% of total U.S. funding in the fourth quarter.
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In fact, the global number of mega-rounds, which are financing rounds of $100 million or more, for digital health startups nearly doubled from 78 in 2020 to 154. Eighty percent of the top 10 mega-rounds were to companies based in the U.S.
Digital therapeutics and mental health startups both had banner years in 2021, raking in sky-high funding.
Digital therapeutics (DTx) startups secured a record-breaking $3.4 billion across 122 deals in 2021, up 133% from the prior year. DTx enables the treatment of chronic conditions at scale and is demonstrating improved patient outcomes in clinical trials, according to CB Insights analysts. This is driving investor interest in the technology's future.
The digital mental health space was growing rapidly even before the COVID-19 pandemic but stress and anxiety brought on by the health crisis have accelerated demand for virtual behavioral health services, including mobile mental health apps.
Global funding to mental health tech startups reached $5.5 billion in 2021, jumping 139% from $2.3 billion in 2020. The majority of 2021 deals (68%) were early-stage –indicating room for further growth in the mental health tech space.
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Telehealth funding hit a new high in 2020, pulling in $17.6 billion, up 68% from $10.5 billion the prior year.
Here are five additional findings from CB Insights' report:
- Late-stage digital health startups are closing much larger deals at much higher valuations. The median late-stage deal size increased 87% from 2020 levels to $73 million in 2021. At the same time, median late-stage deal valuation jumped to $1.5 billion, nearly 3x 2020 levels.
- 2021 saw record M&A activity—with 574 total deals, up 44% from 2020.
- Digital health startups are taking less time than ever to progress from mid-to late-stage financing. Moving from Series C to D, which took 22 months in 2017, has taken only 15 months (at the median) in 2021.
- The number of global digital health "unicorns," or startups that reach a valuation of $1 billion, totaling 85 in 2021, up 49% year-over-year
- Consolidation in the digital health sector took off in 2021. 2021 saw record M&A activity –with 574 total deals, up 44% from 2020. As dominant players emerge in this highly fragmented market, CB Insights analysts expect to see this consolidation trend continue.
A few of the top M&A exits in the fourth quarter of 2021 were Best Buy's $400 million deal to buy Current Health, 23andMe's $400 bet on Lemonaid and cybersecurity vendor Claroty's $400 million purchase of healthcare IoT security startup Medigate. Also in the fourth quarter, Walgreens made a $5.2 billion investment in VillageMD, boosting its stake to become a majority owner,