Early stage funding takes spotlight, France dethrones UK, SEA shines: Digital Health Funding in H1 2022 packs many surprises
Global Digital Health funding in H1 2022 Reveals Unusual Suspects
H1 2022 was an unpleasant time for anyone watching the global markets. A tense geopolitical environment, post-pandemic rising inflation and shaky regimes made a potent combination to keep most numbers in the red. Investors are tightening purse strings and cautioning portfolio companies to brace for impact, while mega corporations announce hiring freezes. Against this picture of doom, where does Digital Health — the 2021 VC’s golden child — stand? Our team of experts — armed with decades of experience and an unmatched pool of global Digital Health private venture data — crunched the numbers and tracked the trends to reveal the Digital Health funding performance in 2022’s bearish first half.
Get detailed results, rounded insights and in-depth analysis in our Mid-Year Reports for North America, Europe, Asia Pacific, the Middle East and South America — now available to download.
If you have little appetite for suspense, let us break it to you — no, the Digital Health ecosystem did not nosedive despite H1 2022’s horrors. Sure, overall total Digital Health funding slowed by 26% to settle at US$18.4B in 782 deals (excluding M&A, IPO and SPAC deals), with the largest ecosystems — North America, APAC and Europe — recording drops of 25%, 45% and 16%, respectively. Thrilling mega deals were absent too. But, these surface results aren’t an accurate representation of Digital Health’s status. Instead, it’s been an interesting H1 for Digital Health — made more compelling against 2021’s exceptional backdrop. The results are anything but boring, packing in unexpected outcomes and revealing exciting unusual suspects.
Here are some key highlights and takeaways:
Share shuffles in the global Digital Health funding pie
The regions jostled for share in the global funding pie. While North America retained the largest chunk with 68%, it lost a per cent, returning to its 2020 status. Meanwhile, APAC, which was at 23% in 2020 and 17% in 2021, came further down to 13% in H1 2022. Europe also takes 13% of the share but comes up from its 10% in 2021 and 7% in 2020. The Middle East finally made a dent and climbed to 4% after being static at 2% in 2021 and 2020.
North America: Young ventures get their day in the sun
Early stage, Series A and Series B funding rounds took the lead in North America to exceed H1 2021 values. Canada saw funding increase by over 100%, with Series C rounds dominating almost 50% of the share. Large-ticket Series D & Beyond deals stayed under the radar in the region, with their value share in the US dropping to 30% from 43% in 2021.
APAC: China makes way for Southeast Asia
While the tense investment climate put China on the backburner in APAC, Southeast Asia took the opportunity to shine — with H1 2022 funding reaching 78% of 2021’s total funding. Ventures in Singapore, Vietnam, Taiwan and New Zealand saw funding increase by over 100%. In the previous 24 months, mega deals hogged the limelight. But weak funding in China, strong global economic headwinds and low investor appetite are now enabling Early Stage investments to gain momentum again. Of the ventures founded in 2021, 7% have already sealed their second funding round.
Europe: the UK loses its crown to France
Dramatic strides crowned France the new Digital Health monarch in Europe, ousting the UK by no narrow margin. Sitting at US$ 1.13B, French ventures saw funding increase 3.1x, grabbing 46.5% of Europe’s funding pie. At US$ 628M, UK’s funding dropped 53%, shrinking its pie share to 25.8%. Iceland, Belgium and Italy celebrated funding rises north of 100%. Early stage, Series A and Series B rounds took the lead in Europe too, exceeding H1 2021 values. France dominated Series C, Series D & Beyond rounds.
Middle East & South America: Growth momentum continues
Both regions — modest components of the global Digital Health ecosystem — experienced a favourable H1 2022. Despite deal volume down by 25% in the Middle East and 27% in South America, the regions saw total funding value rise 4% and 5% respectively.
Series D & Beyond rounds were abuzz in the Middle East raking in a 15% funding rise. Israel’s investment environment — which seemed unscathed by the global economic conditions — drove the region’s growth, while the UAE enjoyed an over 100% increase in funding.
Following a solid 2021, South America retained the momentum in H1 2022 — reiterating the surging interest in the region’s Digital Health ventures. They enjoyed increased deal values for Early stage and Series A ventures, and large-ticket size deals for Growth stage ventures — indicating a promising pipeline in an ecosystem yet to mature.
Filtering the mettle from the hype
Sure, funding is the Holy Grail in the startup world and a typical gauge of a venture’s potential. However, the nature of Digital Health necessitates filtering out the truly worthy ventures from the hype. We measure a venture’s Clinical Strength (CS) by computing its cumulative regulatory filings, registered clinical trials and peer-reviewed journal publications. Despite its modest size, the Middle East leads with the most ventures (15%) that have a significant CS; followed by North America with 14% ventures, Europe with 11% and APAC with 10%.
Ventures easing healthcare delivery grabbed max funding
Solutions that make life easier for healthcare providers and patients were the most funded clusters in H1 2022. Increased deal volumes in Early Stage and Series B rounds took Health Management Solutions to the top spot in North America, where it’s also the largest cluster. In the Middle East — where it’s the second-largest cluster — funding increased a staggering 580%, taking it from 2021’s seventh rank to fourth in H1 2022.
In Europe, Health Services Search — representing only 4% of the region’s ecosystem — saw funding grow a whopping 216%, racing the cluster to the top from last year’s sixth position. Significant deals — by value and volume — in Growth and Late Stage ventures made the charts glow.
While Patient Solutions was the worst-hit cluster in North America, it was the highest funded in APAC and the Middle East. In APAC, a 157% increase in funding promoted the cluster from 2021’s sixth position. In the Middle East, a 40% increase moved it up from 2021’s second rank. Many ventures working on Patient Solutions also boast an impressive CS, with 28% in Europe, 25% in North America, 21% in the Middle East and 16% in APAC.
Top funded therapeutic areas remained essentially unchanged
Ventures working with oncology and cardiovascular diseases-related solutions continued to be the poster children across regions, with slight ranking reshuffles. In North America, oncology moved from last year’s third position to the top funded therapeutic area in H1 2022. However, it was demoted from the top slot to the second position in Europe, APAC and the Middle East. In Europe, oncology was the second-worst-hit therapeutic area.
Cardiovascular diseases was the top-funded therapeutic area in APAC, Middle East and South America. In APAC, it dethroned oncology from its five-year run at the top. Mental Health — the largest in Europe by venture volume — rose from 2021’s third rank to the region’s highest funded therapeutic area in H1 2022. In North America and South America, mental health dropped from first to second rank. It was North America’s second-worst-hit therapeutic area. In the Middle East, while mental health didn’t feature in the top funded therapeutic areas, its funding increased by 286%.
Diabetes remained in the top 5 funded in North America, Europe, APAC and the Middle East. Gastroenterology witnessed a 674% increase in funding in APAC — racing up from rank 14 in 2021 to the third position in H1 2022.
A cursory glance at the reds may paint a deceiving picture of the Digital Health ecosystem. But a closer look reveals that, after Digital Health’s unicorn 2021, H1 2022 saw the numbers stabilise to a more realistic normal, retaining the pre-pandemic momentum. Meanwhile, the Middle East and South America could be on track to another record-breaking year.
While these were just the major highlights, each of our 70+ page reports for the five regions pack in many more details and revelations. Download your complimentary copy now!