Global healthcare funding hit a record in Q3. Here's how much digital health companies raised

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Investor interest in digital health companies shows no signs of letting up as the COVID-19 pandemic has driven demand for virtual care and digital health tools. (SmartPhotoLab/Shutterstock)

​​​​​​Global healthcare funding soared in the third quarter, hitting a new record of $21.8 billion across 1,539 deals.

Healthcare investments were up 18% from $18.4 billion in the second quarter of 2020.

Funding for healthcare sectors including digital health, telehealth, artificial intelligence and women's health all set new highs during the third quarter, according to a report from CB Insights.

North America-based healthcare companies raised nearly $13 billion in the third quarter of 2020, the highest quarterly level on record and a 21% increase from the second quarter. Asia-based companies saw a 20% uptick quarter over quarter, raising over $6 billion. This was driven by a record-high number of mega-rounds in the U.S. and China, with 48 total rounds, according to the report.

Investor interest in digital health companies shows no signs of letting up as the COVID-19 pandemic has driven demand for virtual care and digital health tools.

Global digital health funding reached new heights in the third quarter, jumping 73% to hit a record $8.4 billion across 502 deals. This was fueled by an all-time high of 23 mega-rounds, CB Insights reported.

Top deals for digital health companies in the third quarter include online insurance marketplace Bright Health scoring a $500 million series E funding round, biotech company Freenome banking $270 million from investors including Google and Kaiser Permanente, and telehealth startup Ro snapping up $200 million in a series C funding round led by General Catalyst.

Thrive Earlier Detection drew a substantial $257 million in its second venture capital round to help push its multi-cancer blood test through clinical trials toward FDA approval.

VillageMD, a national provider of primary care, nabbed $275 million in equity funding with retail pharmacy giant Walgreens bankrolling $250 million of the initial equity funding as part of a $1 billion investment in the company.

RELATED: Mental health startups saw record funding in Q1. Here are other sectors attracting investment amid COVID-19

Here are healthcare funding trends during the third quarter:

Telehealth: As no surprise, deals and dollars for telehealth skyrocketed in the past quarter. Globally, telehealth reached a new funding record of $2.8 billion, a 73% jump from the second quarter, across 162 deals.

This activity was driven by the top five telehealth deals, which accounted for nearly $900 million of quarterly funding, according to CB Insights. Those five deals include funding rounds for VillageMD ($275 million) and Ro ($200 million), personal healthcare assistant company Grand Rounds' $175 million funding round and Preventice Health, which provides remote cardiac monitoring services, scoring $137 million.

Employer-focused tele-therapy startup Lyra Health raised $100 million in series D funding, gaining unicorn status.

The CB Insights report notes that retail companies continue to lean into telehealth. During the third quarter, Instacart announced a partnership with Doctor in Demand, Sam's Club publicized a collaboration with 98point6 to offer customers telehealth services and Walgreens invested $1 billion in VillageMD to open more than 500 medical clinics and expand virtual care.

RELATED: Softbank bets big on digital therapeutics startup Biofourmis in $100M funding round

Healthcare AI: Companies that use AI to tackle healthcare challenges, such as Olive and Biofourmis, collectively raised more than $2 billion in equity funding across 121 deals, setting a new high for the sector.

Digital therapeutics startup Biofourmis, which combines AI-based data analytics and biosensors to monitor the progress of medical treatment, closed a $100 million funding round led by high-profile investor Softbank's Vision Fund 2. 

The adoption of AI-based solutions has grown as organizations look to use technology to help combat the COVID-19 pandemic. 

The National Institutes of Health (NIH) is using AI to improve medical imaging to fight COVID-19. The NIH is working to create new tools that physicians can use for early detection and personalized therapies for COVID-19 patients. In addition, the U.S. Defense Threat Reduction Agency, the Defense Innovation Unit and Philips are collaborating to expand their AI-based early warning system to monitor and contain COVID-19.

RELATED: Lyra Health gains unicorn status as demand for teletherapy soars

Women’s health: Funding for companies tackling women's health more than doubled in the third quarter, marking its second-strongest quarter since the first quarter of 2019. Deal volume saw a new record with 68 deals, a 17% increase.

Investors poured $544 million in these companies in the third quarter, a 139% increase quarter over quarter.

Fertility benefits are gaining more attention in the market. Startups Kindbody and Carrot Fertility, which are both focused on employee fertility benefits, scored funding rounds, raising $32 million and $24 million, respectively.

Women’s health also gained more corporate interest in the third quarter of 2020, according to the report. There were 27 mentions of “women’s health” on earnings calls during the quarter, compared to only two mentions in second-quarter and first-quarter earnings calls, the report said.

Health plans and benefits management: Investors bankrolled nearly $1.5 billion in funding deals for companies focused on employer benefits. Funding skyrocketed by 241% compared to $429 million raised in the third quarter of 2019.

Big deals in this sector include Bright Health's $500 million round, Waterdrop, a health insurance crowdfunding platform, raising $230 million, benefits administration platform Rippling banking $145 million and major funding rounds for Ro and Grand Rounds.

Payments and benefits companies also formed strategic partnerships during the quarter, CB Insights noted. Cedar partnered with ApolloMD to to enable improved online billing experiences for patients, and VisitPay teamed up with Teladoc, NTT Data and Enliand R1 RCM to create a digital front door for healthcare.

RELATED: Ro banks $200M funding round to expand into remote patient monitoring

Medical devices: Globally, companies raised $5 billion in funding—a new quarterly high—across 478 deals.

Robotic surgery companies raised significant capital amid an elective procedure drought during the COVID-19 pandemic. Procept BioRobotics landed a $77 million series F round, bringing total funding to $264 million, and Vicarious Surgical closed a $13 million series B round, bringing total funding to $44 million.Its virtual reality-enhanced robotic surgical system was granted breakthrough designation by the FDA in 2019, according to CB Insights.

Singapore-based NDR Medical Technology also raised $6 million in a series A round to support development of its computer vision-enabled robotic needle positioning system.

Medical device maker Medtronic was an active investor and acquirer in the third quarter, making strategic moves in diabetes and neurosurgery technology. It acquired Medicrea and its spinal surgery tech and also bought insulin pen startup Companion Medical to broaden its diabetes management technology.

The company also invested in Beijing neurosurgical robots maker Sinovation and Israeli insulin pump startup Triple Jump.