VC explains why funding could decelerate in 2022

The yr 2021 has been one other groundbreaking one for digital well being. We’ve seen extra corporations emerge onto the general public market, traders proceed to pour funding into the house and customers anticipate extra out of care. 

We sat down with Lee Shapiro, cofounder and managing companion at 7wireVentures, in addition to a Livongo vet, to speak in regards to the largest traits of this yr and what’s subsequent for 2022 in digital well being funding. 

The COVID-19 pandemic kicked off two years of unprecedented funding within the digital well being house. 

“There was over $35 billion funded in digital well being in 2021, and that is greater than the prior two years mixed. So, vital funding, vital enhance within the measurement of rounds that corporations had been capable of increase. So, the deal sizes had been getting bigger,” Shapiro stated. 

He famous that the businesses getting enterprise {dollars} have gotten extra various, each by way of founders and focus areas. 

“I might additionally say that there have been some encouraging traits. We noticed extra ladies and minority-backed corporations get funded. We noticed a lot of corporations within the psychological well being house additionally get funded, and that is a really sturdy want, particularly for those who’ve been studying a few of the current press across the challenges regarding psychological well being.

“[A] variety of corporations that we’re invested in are addressing a few of the challenges that we face by way of offering entry to healthcare.”

Whereas the final two years had been scorching for funding, we could also be seeing a calm down sooner or later. 

“My private view is that 2022 will decelerate for a few causes. The primary is extra of a macro situation. We’re more likely to see elevated rates of interest in 2022. Rumor is that the Fed will begin elevating charges — may very well be three or 4 instances in 2022 — and that may have some influence on the quantity of capital that is flowing into investments, particularly for early-stage investments. 

“It is an election yr, and that additionally will have an effect. And lastly, we predict that a few of the traders that got here into this sector could also be new […] in 2021, and can start to comprehend that issues in healthcare simply take somewhat bit longer than in different industries.

“And due to that, it’s important to have a greater understanding of the healthcare setting, and likewise relationships with a lot of the strategic events which can be essential by way of serving to corporations scale. So for all these causes, I feel that it is going to be a little bit of a down yr by way of the quantity invested in digital well being total.”

Final yr, we noticed 79 digital well being M&As, in addition to an uptick in particular goal acquisition mergers by digital well being corporations, in accordance with a Rock Well being report. Lee stated that he foresees many various exit alternatives coming down the pipeline for digital well being startups, together with SPACs and M&As, and likewise provides IPOs to the listing.

“I feel this yr was terrific, and a watershed yr by way of the variety of IPOs that basically began with a few of the work that we had finished with Livongo again in 2019. And you then noticed extra in 2020, however much more in 2021. I feel that corporations are attending to scale. And with that, you may see a need for them to entry public markets for added capital.”

As for what’s subsequent with tech traits, Shapiro stated he’s wanting ahead to tech that meets the affected person the place they’re. 

“We’re actually enthusiastic about this convergence of what we name ‘shift final,’ having the ability to ship care nearer and nearer to the buyer. So, fairly than constructing new amenities and having new instruments which can be going to have the ability to present therapies at increased and better prices, we predict that there needs to be a strategy to make healthcare extra accessible.

“And corporations we invested on this yr: MedArrive, that is working with emergency medical technicians to ship care within the dwelling. Corporations like Brightline, that is delivering providers which can be actually serving to to handle challenges of fogeys with kids who’ve particular wants. …

“We noticed Amazon simply introduced an attention-grabbing resolution that may enable seniors to have the safety of having the ability to ask for assist with their good speaker. These are issues which can be going to make extra providers accessible within the dwelling. And we predict that is factor for supply of care total.”