VC explains why funding might decelerate in 2022

The yr 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 area and shoppers count on extra out of care. 

We sat down with Lee Shapiro, cofounder and managing companion at 7wireVentures, in addition to a Livongo vet, to speak concerning the greatest developments 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 area. 

“There was over $35 billion funded in digital well being in 2021, and that is greater than the prior two years mixed. So, important funding, important improve within the measurement of rounds that firms have been in a position to elevate. So, the deal sizes have been getting bigger,” Shapiro mentioned. 

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

“I would additionally say that there have been some encouraging developments. We noticed extra girls and minority-backed firms get funded. We noticed numerous firms within the psychological well being area additionally get funded, and that is a really robust want, particularly when you’ve been studying among the latest press across the challenges referring to psychological well being.

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

Whereas the final two years have been sizzling for funding, we could also be seeing a settle 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 prone 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 can 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 expect that among the traders that got here into this sector could also be new […] in 2021, and can start to appreciate that issues in healthcare simply take a little bit bit longer than in different industries.

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

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

“I believe this yr was terrific, and a watershed yr by way of the variety of IPOs that basically began with among the work that we had performed 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 may see a want for them to entry public markets for extra capital.”

As for what’s subsequent with tech developments, Shapiro mentioned 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, slightly than constructing new services and having new instruments which might be going to have the ability to present remedies at larger and better prices, we expect that there must 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 house. Firms like Brightline, that is delivering companies which might be actually serving to to handle challenges of oldsters with kids who’ve particular wants. …

“We noticed Amazon simply introduced an attention-grabbing answer that can enable seniors to have the safety of with the ability to ask for assist with their sensible speaker. These are issues which might be going to make extra companies out there within the house. And we expect that is a superb factor for supply of care general.”