VC explains why funding could decelerate in 2022

The 12 months 2021 has been one other groundbreaking one for digital well being. We’ve seen extra firms emerge onto the general public market, traders proceed to pour funding into the house and shoppers 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 greatest tendencies of this 12 months 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 dimension of rounds that firms have been in a position to elevate. So, the deal sizes have been getting bigger,” Shapiro stated. 

He famous that the businesses getting enterprise {dollars} have gotten extra numerous, each when it comes to founders and focus areas. 

“I would additionally say that there have been some encouraging tendencies. We noticed extra girls and minority-backed firms get funded. We noticed various firms within the psychological well being house additionally get funded, and that is a really robust want, particularly for those who’ve been studying a number of the current press across the challenges regarding psychological well being.

“[A] variety of firms that we’re invested in are addressing a number of the challenges that we face when it comes to offering entry to healthcare.”

Whereas the final two years have been sizzling for funding, we could also be seeing a quiet 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 — might be three or 4 occasions 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 12 months, and that additionally will have an effect. And lastly, we expect that a number 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 a bit bit longer than in different industries.

“And due to that, it’s a must to have a greater understanding of the healthcare setting, and in addition relationships with various the strategic events which are essential when it comes to serving to firms scale. So for all these causes, I believe that it will likely be a little bit of a down 12 months when it comes to the quantity invested in digital well being general.”

Final 12 months, we noticed 79 digital well being M&As, in addition to an uptick in particular objective acquisition mergers by digital well being firms, in response to a Rock Well being report. Lee stated that he foresees many alternative exit alternatives coming down the pipeline for digital well being startups, together with SPACs and M&As, and in addition provides IPOs to the listing.

“I believe this 12 months was terrific, and a watershed 12 months when it comes to the variety of IPOs that basically began with a number of the work that we had executed with Livongo again in 2019. And then you definately noticed extra in 2020, however much more in 2021. I believe that firms are attending to scale. And with that, you will see a need for them to entry public markets for extra capital.”

As for what’s subsequent with tech tendencies, 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,’ with the ability to ship care nearer and nearer to the buyer. So, reasonably than constructing new services and having new instruments which are going to have the ability to present therapies at greater and better prices, we expect that there must be a strategy to make healthcare extra accessible.

“And firms we invested on this 12 months: MedArrive, that is working with emergency medical technicians to ship care within the house. Firms like Brightline, that is delivering companies which are actually serving to to handle challenges of fogeys with youngsters who’ve particular wants. …

“We noticed Amazon simply introduced an fascinating answer that may permit seniors to have the safety of with the ability to ask for assist with their sensible speaker. These are issues which are going to make extra companies out there within the house. And we expect that is factor for supply of care general.”