A new report from Silicon Valley Bank has identified key insights within the global healthtech landscape from 2021.
According to Silicon Valley Bank’s report, healthtech companies across the United States, China, and Europe are projected to raise over $42 billion in funding in 2021, driven largely by the pandemic and mounting pressure for the healthcare industry to innovate rapidly.
“We expect to see increased deal activity and volume in 2022 as healthtech companies seek growth equity partners to expand their platforms.”
– Silicon Valley Bank
The story is not too different in Canada, whose healthtech sector has just closed out a frenzied year for investment. According to the most recent data from the Canadian Venture Capital and Private Equity Association (CVCA), Canadian healthtech startups are on track to match 2020’s record in terms of deal volume, and have already exceeded total dollars invested.
Per the CVCA, investment in Canada’s life sciences sector (which includes healthtech startups) has accounted for 13 percent of total investment in 2021, with $1.5 billion raised across 77 deals.
Though Canada is not included in the Silicon Valley Bank’s dataset, the report’s findings mirror several important trends seen across the Canadian healthtech ecosystem last year.
Virtual care ‘here to stay’
According to Silicon Valley Bank’s report, venture investment into virtual care solutions has more than tripled from 2020 to 2021 in the United States and Europe. The report notes that the pandemic improved consumer and provider attitudes toward telehealth and drove several regulatory changes to facilitate the wider use of virtual care services.
“While valuations have risen, we are seeing no rush from private companies to test the public equity markets (although these markets remain wide open),” Silicon Valley Bank’s report said, regarding virtual care startups. “Instead, companies are continuing to build enterprise value ahead of a higher-valued IPO.”
In Canada, studies reveal that virtual care is also no passing fancy. According to a 2021 report from ICES, virtual health visits in Canada have grown by 5,600 percent. Startups like Maple and Dialogue have sought to expand deeper into the virtual care segment with new offerings, and investors have taken notice.
In March, The Globe and Mail reported that Toronto-based virtual care startup Maple had tapped several investment banks to lead an expected initial public offering (IPO) on the Toronto Stock Exchange (TSX). Later in the year, BetaKit reported that Maple had opted to turn its attention away from the public markets and instead focus on increasing the scale and breadth of its platform.
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One company, Toronto-based MindBeacon, had a short stint as a public company before taking itself off the market. The mental health tech firm went public in late 2020, but following sharp declines in its year-over-year growth in 2021, the firm sold to Vancouver-based CloudMD for $116 million in November.
One virtual company that did opt to take itself public was Dialogue, which completed a $100 million IPO on the Toronto Stock Exchange. That followed the company, which offers a virtual care platform that targets employers, tracking significant growth in the pandemic’s first year. Dialogue’s most recent quarterly report shows that growth has not slowed down following the go-public transaction.
The ever-changing tides of public markets notwithstanding, many investors are eager to back the long-term vision of virtual care, amid or perhaps because of the pandemic. Felix Health, ORO Health, and Vetsie are a few Canadian virtual care startups that have managed to secure funding rounds in 2021.
Consumers shift focus to wellness
The pandemic has also placed a renewed focus on holistic healthcare for the general population, Silicon Valley Bank’s report notes, which has made “health and wellness” a topic of increased investor attention. At Series A, the median post-money valuation for health and wellness companies in the US and Europe jumped to $17 million after three years of stagnancy at roughly $12 million.
LifeSpeak is one Canadian company in the health and wellness space to have a fruitful 2021. The company, which raised $42 million in its first round of institutional funding, also IPO’d on the Toronto Stock Exchange, and acquired online wellness firm Lift Digital in October.
Silicon Valley Bank’s report also predicts that mental health will continue to grow as a magnet of investor interest in 2022. In the United States and Europe, mental health funding is expected to surpass $3 billion in 2021, and the average late-stage deal size increased from $30 million in 2020 to $50 million in 2021.
In Canada, mental health represents a key area of verticalization for healthtech startups. Felix Health, which raised a $10 million Series A funding round in February, has made mental health a major focus this year. The startup launched a mental health service in May and later included an end-to-end mental health service focused on diagnosis and treatment.
Although the mental health trend was seen chiefly in the virtual care space last year, it is affecting other players in Canada’s healthtech ecosystem, including biotech companies. In November, life sciences startup Cyclica partnered with ATAI Life Sciences to develop drugs for mental health illnesses using artificial intelligence.
Healthtech drives heavy M&A activity
The pandemic’s favourable impact on healthech valuations has also led to a surge in M&A activity globally. According to Silicon Valley Bank’s report, healthcare acquirers accounted for 85 percent of M&A activity in the US and Europe during 2021.
In Canada, experts have also observed that higher valuations for digital health companies have created a favourable environment for M&A activity. Vancouver-based WELL Health is one of the most notable of Canada’s healthtech consolidators, decidedly taking an acquisitive approach to its growth. In the last year alone, WELL has acquired numerous healthtech startups across Canada and elsewhere, with MyHealth, Intrahealth, CRH Medical, and ExecHealth representing only a handful.
RELATED: Here’s why M&A activity is surging in Canada’s tech sector
Other notable M&A deals in Canada’s healthtech sector included a $300 million minority stake in Ottawa-based Fullscript and two acquisitions made by LifeSpeak around the time of its IPO.
“The uptick in M&As this year is further evidence of companies shifting to either a more vertical integrated strategy to capture more of a patient’s continuum of care or a horizontal strategy to provide platform solutions to increased consumer audiences,” Silicon Valley Bank’s report said.
“We expect to see increased deal activity and volume in 2022 as healthtech companies seek growth equity partners to expand their platforms,” the report also noted.
can download the report here.
BetaKit is an SVB Future of Healthtech media partner. Feature image courtesy Unsplash.