While healthcare companies may have seen fewer dollars last year, after a record-breaking 2018, according to a report released by Silicon Valley Bank, 2020 is poised for growth.
Companies across the U.S. and Europe raised a total of $32.49 billion last year, primarily driven by increased investments into healthcare technology. That amount was just shy of the $33.17 billion companies raised in 2018. Investments in health tech have considerably increased over the last three years, making it the fastest-growing healthcare sector.
Health tech spans technology-enabled healthcare products and services delivered to patients outside of the hospital or physician's office. The sector has a wide-ranging suite of direct-to-consumer and B2B offerings, such as preventative and monitoring tools for consumers, as well as analytic and administrative tools for healthcare administrators and commercial healthcare organizations.
“Health tech venture-backed investments continued strong in 2019, hitting a record,” reads the SVB report. “Total health tech investments have doubled from 2017 to $8.8B.” The report suggested that this “growth is largely attributed to alternative care and provider operations, each of which has received $2B+ in investments.”
SVB predicts that investments in health tech will steadily rise in 2020, as provider operations and alternative care companies grow. While provider operations had the most investment activity in 2019, alternative care led in total dollars invested. Two deals mainly drove this; Chicago-based VillageMD, which raised $175 million, and UK-based digital chatbot and provider aggregator Babylon Health, which raised a $550 million round.
Other top venture capital deals included $250 million raised by Beijing-based company, Tencent Trusted Doctors and $205 million raised by health insurance startup Collective Health. Digital pharmacy Capsule landed $200 million in funding in 2019 and precision medicine company Tempus scored $200 million in total funding.
Alternative care leads big rounds, with 39 financings that exceeded $50 million in the past three years, almost doubling provider operations. The majority of alternative care companies focused on primary care and mental health, such as Click Therapeutics and Pear Therapeutics.
"We can expect to see companies build on the momentum of 2019's IPO surge in the first half of 2020, but U.S. fundraising will likely slow in the second half of the year," the report's author and managing director of SVB's life science and healthcare practice, Jon Norris explained.