US/EU 2021 healthcare VC funding soared 65%, but health tech performance slumped 28%–and 2022 surprises

This isn’t the usual Rock Health report of puppies and unicorns. Silicon Valley Bank is a source new to this Editor, but even in topline, the report is pretty bracing. Their coverage is broad and detailed–biopharma, health tech, dx (diagnostic)/tools, and device–on US and European venture capital (VC) funding from 2019 to 2021. There are some warning flags for the health tech sector through their report (summary page; report available for free download here).

What you’d expect: total health care soared in 2021 to over $86 billion–a 65% increase over 2020 (not 30%!). This was led by biopharma at $36.3 billion, then health tech at $28.2 billion. Dx/tools and devices had far more modest funding gains. 

For health tech: 

  • Funding was up 157% versus 2020–42 new ‘unicorns’, four times 2020
  • Provider operations companies comprised a record 35% of total seed/series A funding, up from 20% in 2020. The other hot areas were clinical trial enablement and alternative care. Surprisingly, healthcare navigation was next to last, perhaps indicating that these companies are further along in maturity.
  • Investors were numerous, but high frequency investors were Tiger Global, Andreesen Horowitz, General Catalyst, Casdin, and Gaingels.
  • SPACs slowed in 2021, trying to find the right match before their two-year window to complete a merger and reflecting greater SEC scrutiny of blank checks. Of those who ‘de-SPAC’ed in 2021, Talkspace and Owlet led in market losses, 80% and 73% respectively.
  • Post-IPO performance dropped 28%, led by insurtechs Oscar, Bright Health, and Alignment Health
  • There were 122 M&A deals. The $63 million median value was down 25% from 2020. marking a shift to vertical integrations in care continuums or horizontal to capture consumer bases.

2022 The Year of M&A and Acquire-to-Hire? The end of the report sounds a cautionary note to health tech ‘bulls’. Expect “massive” consolidation. Healthy investment will continue, but the opportunities will be for companies seeking expand product offerings, expand to other markets, or acquire to hire talent (!)–the latter something quite new.

Also FierceHealthcare

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