The first quarter of 2020 saw venture capital-backed healthtech investments jump by a phenomenal 76% from Q1 2019. The total global valuation of these types of investments topped $8.2 billion, by far the highest on record for the sector. ClassPass Inc. led the trend, closing a $285 million Series E deal in Q1. The uptick appears to be continuing strong into Q2, with $3.2 billion worth of investments made since the beginning of April. If this action continues, 2020 will be by and far a record year for venture-backed healthtech investments.
A total of 56% of the deals have taken place in North America, with Europe seeing 21% and Asia a close third with 17%. According to Private Equity Spokesperson Christopher Beales, much of this has to do with the COVID-19 pandemic. "Healthtech was already an area of some interest to venture capital investors, as Preqin discussed at the start of the year. But the COVID-19 pandemic has thrown the potential of the sector into sharp relief. Remote consultations, prescription delivery, digital therapeutic and wellness classes - demand for next-generation healthcare solutions has boomed. As such, startups and investors are jumping to try and meet that need, and a sector that was already expanding has been given a real shot of adrenaline."
The need for social distancing has lit a fire under healthtech companies to come up with novel approaches to everything from doctor’s visits to medical records and billing. Digitally accessible healthcare is no longer a luxury or convenience, but has become a necessity, equally in rural areas with limited public transportation and overpopulated cities, where riding a bus or subway could be seen as a dangerous activity.
HIPAA laws and worries over hacking have impeded healthtech’s progress in the past. Beales goes on to explain that “With entire populations sheltering in place at home, governments across the globe are lowering regulatory barriers that have long impeded the provision of digital healthcare services such as virtual medical appointments.” With regulations being slightly relaxed to adapt to a global pandemic, healthtech holds a myriad opportunities for investors to get in on the next big thing. The need for virtual problem solving has paved the way for the consumerization of healthcare to become the new normal.