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 corporations emerge onto the general public market, buyers 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 concerning the largest developments 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, we noticed important funding general, and a major improve within the measurement of rounds that corporations have been capable of increase,” Shapiro mentioned. 

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

“I would additionally say that there have been some encouraging developments. 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 there is a really robust want there, particularly if you happen to’ve been studying a few of the current press across the challenges referring to psychological well being.

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

Whereas the final two years have been scorching 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 difficulty. 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 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 12 months, and that additionally will have an effect. And lastly, we expect that a few of the buyers 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 a must to have a greater understanding of the healthcare atmosphere, and likewise relationships with a lot of the strategic events which are necessary when it comes to serving to corporations scale. So for all these causes, I feel 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 corporations, in accordance with 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 listing.

“I feel this 12 months was terrific, and a watershed 12 months when it comes to the variety of IPOs that basically began with a few of the work that we had finished with Livongo again in 2019. And then you definately 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 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 left,’ having the ability to ship care nearer and nearer to the buyer. So, somewhat than constructing new services and having new instruments which are going to have the ability to present remedies at larger and better prices, we expect that there needs to be a method to make healthcare extra accessible.

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

“We noticed Amazon simply introduced an attention-grabbing answer that may permit seniors to have the safety of having the ability to ask for assist with their sensible speaker. These are issues which are going to make extra providers accessible within the dwelling. And we expect that is a very good factor for the supply of care general.” 

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