Across all industries, startups and scale ups are seeing an unprecedented inundation of funding from Venture Capital. The Digital Health space is no exception, with primary HealthTechs across the globe all looking towards their next funding round in 2022.
Rock Health recently noted that HealthTech companies netted $14.7 billion of entire VC funding in the first half of 2021. Looking ahead, many market watchers and investors are cautious to make firm predictions that 2022 will break 2021’s funding record. Ravi Kumar, a partner at professional services firm The Conor Group, remains warily hopeful that such records will be broken:
“I expect this positive momentum in deal flow to continue in 2022.”
So, which sectors of the HealthTech market are particularly ripe for such continued investments, and who are the primary HealthTech companies on the verge of landing more funding in 2022? Let’s find out below.
Primary HealthTech Subsectors Looking For Funding
Digital Therapeutics delivers evidence-based, therapeutic interventions via software, such as mobile health and wellness apps, that either replace or accompany the existing treatment of a disease. Where they differ from Digital Health offerings like wellness apps, is in the fact that they require thorough clinical evidence to justify the intended use and impact on diseases.
The Digital Therapeutics (DTx) sector saw huge funding growth in 2021, with startups treating a broad spectrum of diseases reporting an upsurge in investments. Over the past seven years, investments into US DTx companies have increased an average of 40%, and looking ahead, the market is estimated to hit $13.1 billion by 2026, according to a report by Markets and Markets. Even though investments into the space were a huge highlight in 2021, healthcare intelligence analyst at CB Insights, Amanda DiTrolio, comments:
“When we think about the space, I think we’re still in the early innings here.”
As well as increased funding, coverage pathways for prescription digital therapeutics increased in 2021 which allowed regulatory approvals to escalate and resulted in startups being able to grow their body of clinical evidence to substantiate their technologies. There is also an increased buy-in from healthcare stakeholders around integrating DTx and developing payment models around them.
AppliedVR, a virtual reality therapeutic for pain management, is one salient example of this. Early in 2021, the primary HealthTech received breakthrough designation from the FDA for its flagship product that treats fibromyalgia and chronic intractable lower back pain. This was the first FDA designation for a VR prescription therapeutic ever, and for many market watchers, signaled the increasing regulatory acceptance of the sector.
Pear Therapeutics is another DTx company that received breakthrough designation from the FDA, for its DTx candidate focused on treating alcohol use disorder. DTx companies such as Pear Therapeutics are even pursuing regulatory approval for their therapeutics to be prescribed along with or instead of traditional pharmacological interventions to treat a diverse range of conditions such as insomnia, pain, and gastrointestinal conditions.
As Digital Therapeutics expand beyond chronic care, into indications such as women’s Health, mental health and substance abuse, IBS, gastroenterology and neurodegenerative diseases, we should expect to see larger sums of capital being injected into the sector in the coming years.
HealthTech startups offering mental healthcare raised a total of $5.1 billion in 2021, almost doubling what they raised the year prior, and investors are looking to continue funding tools that enable the delivery of digital mental healthcare at scale.
The digital mental health space was growing at rapid speed even before the pandemic, but the impact of Covid-19 on people’s mental health is unfortunately unlikely to decline anytime soon. The pandemic’s heightening of conditions such as depression and anxiety combined with the increased shortage of healthcare professionals has created historic levels of demand for virtual care options for mental and behavioral health treatments. Well-funded primary HealthTechs in the space, such as Lyra Health, which raised $387 million in the past year alone, regularly combine traditional therapy treatments with targeted therapeutics, wearables, chatbots and other features to provide mental health coaching, preventative care, therapy and medication.
One early-stage startup in the space is Mightier, a company that has developed a gaming platform and family program that is scientifically proven to help children regulate their emotions. At the end of 2021, the primary HealthTech led a $17 million Series B round and to date, it has raised a total of $29.3 million in funding. As HealthTechs in the space continue to compete in an increasingly crowded space, many are choosing to differentiate themselves by focusing on complex mental and behavioral health support, including severe mental illnesses and substance use disorders, according to researchers at Rock Health.
Moving forward, more funding is expected to flow into startups targeting specific underserved demographics, including Equip Health, which treat helps people recover from eating disorders; Folx Health, which provides digital health services for the LGBTQIA+ community; and Eleanor Health, a virtual clinic targeting opioid abuse.
Chronic Condition Management
New digital technologies are presenting many solutions to chronic condition management. Chronic diseases such as heart failure and diabetes are significant burdens on healthcare systems globally and affect a substantial and growing number of people around the world (around 60% of the US adult population). In fact, in 2020 Covid-19 shone a spotlight on these conditions with the revelation that over 90% of Covid mortalities are linked to people with underlying health conditions – many of which are chronic. Consequently, investors in 2022 are likely to continue increasing funding for chronic condition management startups that’re looking to prevent declining health complications.
Digital musculoskeletal (MSK) funding, for example, grew sixfold between 2020 and 2021, reaching a total valuation of $1.4 billion. Virtual MSK clinics such as Sword Health and Hinge Health completed multiple fundraises throughout 2021, and this pace isn’t expected to slow. Hinge Health alone saw its valuation double in the past year, making it the top-valued, Venture Capital-backed primary HealthTech startup – and a likely IPO company for 2022.
These industry trends are capable of fueling both long-term innovation and incredible investments into the HealthTech space. If you’re a HealthTech startup or scale up looking to grow, Storm3 can help you with your Health Executive search. From Directors, to Heads of and Senior Leads, our network is filled with skilled professionals that have specific HealthTech experience. Contact our team of consultants today, or learn more about the roles we work with here.