Report 2022's total funding among US-based digital health startups amounted to $15.3B across 572 deals, with an average deal size of $27M. Teladoc Health is a pure-play tech-enabled disruptive healthcare peer that was recently trading north of 20x forward revenue. interest rate hikes that cozied us up to the possibility of recession. Last year we predicted that the commoditization of telemedicine would unlock holistic virtual care. The great resignation poses a breaking point for the supply of clinicians, 5. Spain: The Bellevue Funds (Lux) SICAV is registered with the CNMV under the number 938. Investing in early stage mental health and addiction solutions. In short, we do not have the answers. Legal entities or natural persons to which such prohibitions apply must not access or use these sites. Some studies even estimate that 30% of the remaining healthcare workforce are considering leaving their full-time hospital jobs in the next two years. However, we are certainly preparing for any outcome. All things considered, we believe the outlook for the 2022 investment year is extremely attractive. Pascal Winkler Expandir pesquisa. The best healthcare entry points exist where teams already hold expertise (fertile ground remains in these familiar pastures). If I just raised a huge round at a massive valuation, I would certainly be trying to grow, but I would have one eye on pure survival as well. As the digital health field becomes more crowded, clinical outcomes will become a key competitive differentiator, 4. Provider venture capital funds remained the top corporate investors by deal volume, and provider organizations increased their acquisitions by 5x, from three deals in 2021 to 15 in 2022 (acquisition targets included specialty care coordinators and telemedicine startups). The management company may decide to cancel the arrangements it has made for the distribution of the units of its collective investment undertakings in accordance with Article 93a of Directive 2009/65/EC and Article 32a of Directive 2011/61/EU. 10 paragraph 3 and 3ter CISA in conjunction with Art. We have seen first-hand how this has led to a real battle for clinical talent among companies in this subsector. The answer is valuation. Use the PitchBook Platform to explore the full profile. Volatile active user numbers and declining profitability due to weakened advertising revenue deeply depressed Big Tech stock prices, and we expect that these pressures will further push the MAMAA crowd toward new revenue opportunities outside of tried-and-true social media advertising. By competing in earlier rounds, investors are more likely to pay more on a risk-adjusted basis for a startup than its later-stage funders, twisting the risk-adjusted valuation upside down. Digital health companies must rethink incentives to recruit and retain the best clinician talent. 4 paragraph 3-5 and Art. However, we are certainly preparing for any outcome. Adoption of B2B models doesnt necessarily change a D2C companys customer-centricity. As an investor, Im starting to anticipate that great deals will once again be available, at better prices. Through the largest virtual network of LGBTQ+-specialized clinicians, FOLX offers end-to-end virtual primary care, gender-affirming services (e.g., hormone therapy, counseling), sexual and reproductive health (e.g, PrEP), community (e.g. For example, Amazon now has built an omnichannel experience between online, prime delivery, and wholefoods shopping experiences. The S&P Healthcare Services Index decreased by 13.4% in January compared to the S&P 500 Index, which decreased 5.3%. For those that choose to pursue investment instead of M&A, grounded approaches will be the most successful. As Chief Clinical Officer of Healthspace Health Dana Udall said, The system has mounting costs associated with untreated or poorly managed conditions, and ongoing siloed nature of care. Investors and . Its too early to say whether weve reached the end of this macro funding cycle, or if more low funding quarters are on the horizon. In part because of hospital-at-home excitement, on-demand healthcare landed the top-funded digital health value proposition spot of 2022 ($2.4B), led by urgent-care-at-home service DispatchHealth ($330M) and startups like Homeward Health, which raised twice in 2022. The EV/Sales multiple of the Bellevue Digital Health fund portfolio is currently under the long-term range of 6-10x, and about 40% lower than it was 12 month ago. Launched two years ago, the startup netted $300 million in a Series C round in December, increasing its valuation to $4.8 billion. Many Digital Health companies are now at a much more advanced stage of business maturity, their business models have been firmly established, and their path to profitability has gained visibility. 3. Pular para contedo principal LinkedIn. 3. We expect future M&A activity in the data center industry to be largely driven by the shrinking supply of available, high-quality data center real estate, which will continue to push valuation multiples higher. I suspect that as long as investors are seeking yield, then moving further down that risk spectrum into the private markets, valuations in the startup world will not come in. Despite CMS announcing their intent to maintain reimbursement for select video-and-audio-only services through 2023, we saw a drop in the number of visits and declining satisfaction across consumers with telemedicine in 2021. Digital-health startups banked $10.3 billion in the first half of 2022, trailing the $14.7 billion the industry raised in the first half of 2021. Clinical outcomes will support patient adoption.. USA February 28 2023. An increasing number of venture funds are entering the space. The list below shows some common equity multiples used in valuation analyses. Digital health cant cut its way to impact, and the smart decisions of today will fertilize the next investment upswing. The answer is valuation. According to the Digital Health Funding and M&A 2021 First Half Report released by Mercom Capital, the first half of 2021 closed with $14.7 billion invested across 372 US digital health deals with a $39.6 million average deal size. Widely known examples are Apollo Hospitals in India; Pulse by Prudential in Asia; Ping An in China; and the global Vitality program by Discovery in South Africa. We would love to hear from you. Within digital health and in capital markets more broadly, well likely look back on the past several quarters as a macro funding cycle. In our 10 laws of healthcare, we talked about the importance for healthcare companies to demonstrate strong clinical and financial ROI. Germany: information agent: Zeidler Legal Process Outsourcing Ltd., SouthPoint, Herbert House, Harmony Row, Grand Canal Dock, Dublin 2, Ireland. cerebral.com; Hinge Health: The digital musculoskeletal clinic, which partners with employers and health plans, is valued at $6.2 billion and announced a $400 million Series E funding round in October. Deal count rose from 48 in 2020 to 75 in 2021, a record. The answer is valuation. registered) but not authorised in the UK, the UK Financial Services Authority's financial services compensation scheme does not apply to investments in the fund but the Financial Services Authority regulated firm approving this document for the purposes of UK regulation has taken reasonable steps to satisfy itself that Bellevue will deal in an honest and reliable way and is so satisfied. The unprecedented number of M&A deals, as well as consistently goodand growingrevenue multiples shows that the HealthTech sector is approaching its maturity, and its keeping its momentum in the crucial stages of the post-pandemic era. 2022 edition of Corporate Valuation: Techniques & Applications will be held at Jakarta starting on 13th October. As a cherry on top, 2021 saw the Fed underestimate percolating inflationary concerns and extend monetary easing measures, inflating asset prices and valuations. Now we must discount the exit value to obtain the post-money valuation as shown below: Post-money valuation = Exit value / (1 + IRR)^5. The most successful companies in this infrastructure category will enable virtual care companies to go to market quickly, be flexible to evolve as companies grow, and integrate seamlessly with other tools and API platforms. More on the Digital Health funding landscape can be found from Rock Health and Startup Health. Moreover, pure-play telehealth and mental health companies have underperformed not just the market, but also the peer group (see the chart below). For that reason, I created a Next Twelve Months (NTM) revenue forecast index for each of the companies in our peer group. What is occurring in the public markets, and how do these developments impact startups and VCs in the digital health and mental health markets? 2021 will likely go down as one of the biggest years ever for digital health-tech investments and revenue growth. Health systems strategizing for the years ahead are coming to realize that their beyond-the-hospital care offerings must stand up to a growing pool of competitors. Strong growth momentum and non-cyclical demand put Digital Health stocks in an excellent position to deliver a pleasing performance in 2022. Fifty-nine percent of that funding came from 48 "mega deals" that involved over $100 million each, including . Interestingly, the average round size in 3Q20 was $41.2 million, greater than the year-to-date . In the current VC climate, strong horses will beat out unicornsthough investors run the risk of betting on the wrong equine. 2022s total funding among US-based digital health startups amounted to $15.3B across 572 deals, with an average deal size of $27M. 4 Abs. If I were the CFO of a startup today, I would be preparing to extend my fume date as long as possible and survive what feels like a pending capital access contraction. We need to find ways to help health systems reduce admin burden and free up clinician time. In addition to taking traditional expense reduction efforts and charging new fees, hospital systems evaluated nonclinical and clinical workflow improvements to unlock efficiency gains and reduce provider pain points at work. We expect that the market will place . We expect to see a record number of acquisitions as large digital health companies, both public and private, recognize the need to add mental health to their offerings to deliver comprehensive care., There has been much debate about the tension between DTC companies doing good by expanding access or doing harm by scaling irresponsibly. The multiple has been sliced over the last year. Let's do the math with a real . However, if capital flows begin to tighten as capital access tightens, we could be in store for a sharp pullback in startup valuations as well. Though a source of some internal controversy, it is nonetheless Rock Healths official position that both unicorns and horses share the genus. We therefore recommend that you check this statement regularly. The increased acceptance of digital solutions in the wake of the pandemic has pushed up the potential growth trajectory of the Digital Health investment case. And clinical workflow software, which earned eighth place in 2022 ($1.5B), moved up from eleventh in 2021. The EV/Sales multiple of the Bellevue Digital Health fund portfolio is currently under the long-term range of 6-10x, and about 40% lower than it was 12 month ago. Rock Healths databases are continuously assessed and updated as new information becomes available. If I were the CFO of a startup today, I would be preparing to extend my fume date as long as possible and survive what feels like a pending capital access contraction. In January: The sectors that experienced the highest growth were Consumer Directed Health/Wellness (up 8.5%), Assisted/Independent Living (up 2.6%) and Distribution (up 1.0%). Rarely do we find a pure-play public comp that we can compare to a startup. Now, startups with strong financials and balanced valuations are attracting investor and acquirer interest. We believe that companies with deep clinical services alongside therapeutic regimes will become enduring care models for patients and establish market leadership in the long term. Funding for Digital Health Companies has continued to grow year on year. The information provided is accurate at the time of publishing. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. May 9, 2022 2. In particular tax treatment depends on individual circumstances and may be subject to change. Tech, Trends and Valuation. In Q4 2022, FinTech companies in the SEG Index recorded a median EV/Revenue multiple of 5.4x, less than half compared to pre-pandemic levels. For example, the short supply for full-time clinicians has increased wages for per-diem and travel nursing and Allied Health 3x in 12 months, furthering a negative spiral of nurses quitting full-time jobs to access more flexible hours and higher wages. At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. Health systems also established partnerships as first steps into new revenue or equity pathways, shaking hands with venture capital teams like General Catalyst and a16z to establish digital health startup pilot sites on hospital campuses. You can also find us on twitter and LinkedIn. Funding for this value proposition earned third place in 2022 ($2.2B), jumping from seventh place in 2021. Health systems 2022 innovation grace under pressure is noteworthy and sets a precedent for other major healthcare companies facing less difficult, but nonetheless challenging situations. You transform that PE ratio into a "multiple" you can use in valuation analyses by multiplying both sides of that simple equation by the business metric to get this new equation: Business Value = Business Metric x the Multiple. Staffing crises and wage inflation hiked up operating costs faster than CMS-influenced rate adjustments, squeezing health system margins rather than allowing hospitals to pass costs through to payers. By submitting this form I give permission for Finerva to contact me. If I just raised a huge round at a massive valuation, I would certainly be trying to grow, but I would have one eye on pure survival as well. These new companies are great examples of the new breed of digital MSOs serving the independent practitioner. Startups vary in profit margins. Of course, I am not hoping this happens, but when it does, I will not be surprised. This tells me that analysts believe the operating environment for companies in our space will continue to be at least good, if not improving. Health tech grabbed a serious share of the attention. Deeper clinical services translate into lower margins and more extensive and expensive clinical apparatus. Coming out of 2021's breakthrough year, digital health funding slowed in the first quarter, signaling potentially choppy waters ahead for investors in 2022. Adopting a more conservative mindset, Q4 2022 saw Big Tech players recenter digital health strategies within their tried-and-true operational fields. About What If Ventures What If Ventures exists to invest in mental health and digital health focused startups. These can be obtained free of charge in German from Bellevue Asset Management (Deutschland) GmbH, your advisor or intermediary, the paying agents, the responsible depositary (UBS Europe SE, Bockenheimer Landstrasse 2-4, D-60306 Frankfurt am Main) or from the management company Donner & Reuschel AG, Ballindamm 27, 20095 Hamburg, https://www.donner-reuschel.de. The management company may decide to cancel the arrangements it has made for the distribution of the units of its collective investment undertakings in accordance with Article 93a of Directive 2009/65/EC and Article 32a of Directive 2011/61/EU. Report In the second half of 2021, the trailing 12-month median EV/S multiple was 5.6x up from from a 3.6x the previous period and 3x the year prior. The multiple has been sliced over the last year. That reflects a 70% decrease in the value of revenue within our peer group in an environment in which revenue estimates are rising. Disclosed value also surged from $15.1 billion to $38.1 billion. By accessing this website you state that you agree with the data protection statement. Particularly for health systems, 2022 may be remembered as the year things went upside down. In 2022, HR Benefits leaders will feel heightened pressure from their finance departments to demonstrate the value of these point solutions. Later Stage . Due to the historically low rating, 2022 presents itself with enormous growth potential. Be sure to check out Rock Health's Digital Health Funding Report. For growth-stage startups that didnt raise in 2022, limited cash reserves may push once-crowned digital health unicorns back to the fundraising table (possibly at lower valuations) or toward M&A territory. Fund documents Bellevue Option Premium fund. Growth and crossover funds that are new to digital health have been particularly active in digital health (e.g., Tiger Global made 25 digital health investments in 2021) On the other hand, 55% of digital health investors in 2021 were repeat investorssimilar to the average 58% repeat investors across the prior three years 2018-2020 The information and services provided on the sites are not intended for offer to or use by legal entities or natural persons in legal jurisdictions or countries in which the offer or use thereof would violate local legislation or legal provisions, or in which business units forming part of Bellevue Group would be subject to registration requirements in such jurisdictions or countries. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. 1. Past performance is not an indication or guarantee of the future performance of the investment. Where will the market settle? Equity capital investors have already invested about USD 84 bn in 3800 privately held digital health firms since 2011, so we expect a steady stream of attractive IPOs in the coming years. 2022 Spending Benchmarks for Private B2B SaaS Companies. Rather than aiming to disrupt the entire healthcare system, focus is best placed on applying practiced skill sets to top healthcare and research problems.