Healthcare investment flowed freely in Q2, reaching $18B

By | July 28, 2020

Dive Brief:

  • Despite the COVID-19 pandemic and ongoing financial fallout, investments in healthcare firms remain robust, according to a new report from CB Insights. Worldwide funding to healthcare entities hit a new record in the second quarter of $ 18.1 billion. The number of investments also rose 6.6% compared to the first quarter of 2020, the New York-based consulting firm said.
  • However, there have been some changes in the way such funding is being distributed. In the United States, more money is going to firms in the New York City area. That appears to be mostly at the cost of firms in California and Silicon Valley, despite the fact that digital health firms are catching the eye of venture capitalists, drawing $ 5.8 billion in funding during the quarter, up 22% from the first quarter.
  • Moreover, early stage funding deals appear to be in a significant decline. They made up 46% of all deals in the second quarter. That’s down from 48% in the first quarter, 51% in the fourth quarter of 2019 and 53% in the third quarter of last year.

Dive Insight:

The pandemic has all but crippled the economies in the United States and elsewhere. Numerous retailers have filed for bankruptcy, countless small business have gone under and it’s anybody’s guess as to when a recovery will occur. Mergers and acquisitions among healthcare companies fell to a five-year low last quarter.

Yet for startup and intermediate-stage healthcare companies, the situation in brighter.

According to the CB Insights survey, there were nearly 1,300 equity investments in healthcare companies during the second quarter of 2020. The numbers tend to reinforce a prior survey concluding that digital health had a record first-half raising funds.

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Tech-intensive startups are drawing more capital than others. Telehealth deals exploded, with 154 deals taking place in the second quarter — a 23% increase compared to the first quarter and a record number, according to CB Insights. However, funding dropped 18% quarter over quarter, and there were 22 mergers and acquisitions, which also set a record high.

Investments in firms specializing in artificial intelligence grew by 14% during the quarter, to $ 1.1 billion, although the volume of deals was relatively flat compared to the first quarter.

Investments in women’s health ventures declined precipitously, down 47% in dollar volume compared to the first quarter. But the number of deals increased 20%, to 52 in total.

Meanwhile, the focus of many venture capital firms is shifting overseas. Asia, for example, saw nearly $ 5 billion invested during the quarter — a 98% increase from the first quarter of 2020. Funding in Europe also grew, to $ 2.3 billion from $ 1.5 billion. In North America, the number was flat, declining to $ 10.5 billion compared to $ 10.6 billion.

And while California remains the center of healthcare equity investments in the United States with 66 deals taking place during the second quarter, that number declined 14% compared to the first quarter. Meanwhile, deals in the New York City area were stable at 47 for the quarter.

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