2020’s stress test to our healthcare system created what felt like a fast forward button for digital health, with unprecedented growth in funding, adoption, policymaking, and national attention. Venture capital dollars flowed to US digital health companies at a new all-time high, with over $14B invested across 440 deals. 2020 also represented a thematic shift in liquidity for digital health venture investors, with upswings in both IPO and M&A activity.
February 21, 2021
As the pandemic laid bare many of the healthcare industry’s vulnerabilities, it also accelerated adoption of digital health—from virtual care models to data-driven drug discovery. In response, both incumbent healthcare institutions and entrepreneurs demonstrated tremendous leadership and innovation. The pandemic also spurred widespread change in provider and consumer behavior and led to an unprecedented influx of investment in digital health.
Digital health entrepreneurs, investors, enterprise healthcare leaders, and even non-healthcare companies took advantage of this moment to sprint towards digital health innovation at an unprecedented pace.
Across 2020, US digital health companies raised $14.1B in venture funding, the largest amount of capital deployed in a single year since Rock Health began tracking funding in 2011. This amount represents a 72% increase from the previous high water mark set in 2018. $5.9B was raised in the first half of 2020, with H2 delivering the most funding in a half-year ever with $8.2B. Investors also closed more deals than ever before, with 440 deals in 2020 compared to 378 in 2019 and 383 in 2018—15% growth in investment activity over the past 36 months.
In addition to closing more deals, digital health companies also raised more per deal. Over the past 36 months, average deal size increased from $21.5M in 2018 to $31.9M in 2020. Average deal size was largely bolstered by 40 mega deals, rounds of $100M or more, which accounted for more than half (57%) of total 2020 funding.