The spread of COVID-19 has created a defining moment for the digital health sector, as many products and services once considered “nice-to-haves” have transformed into necessities. Venture investors and company founders may be operating remotely but they are still hard at work, and the deal flow in the second quarter of 2020 reflects that.
The first quarter of 2020 was a record-breaker, with billions of dollars raised by digital health startups across hundreds of deals. But with social distancing efforts keeping people homebound, more than two out of three digital health investors surveyed by Rock Health at the end of the first quarter said they expected a slowdown ahead. Analysts at CB Insights echoed that prediction in early June, saying U.S.-based digital health startups would likely see a financing drop in the second quarter even as the numbers tick upward for startups based in other countries.
And yet, there has been no shortage of notable deals in the second quarter, especially for companies that, as Bond Capital’s Mary Meeker says in her special COVID-19 trends report, “decentralize medicine away from hospitals and empower patients as consumers.”
Here’s a look at just a few of them:
- Amwell, a leading telehealth provider that has seen a massive spike in usage since the beginning of the pandemic, raised a $194 million Series C round from investors, including Takeda Ventures and Allianz X.
- Mindstrong, a Mountain View-based company that provides virtual mental healthcare services and remote patient monitoring, raised a $100 million Series C round from General Catalyst, ARCH Venture Partners, Foresite Capital, 8VC, Optum Ventures and What If Ventures, among other investors.
- LetsGetChecked, an at-home health testing company based in both New York and Dublin, Ireland, raised a $71 million Series C round from Illumina Ventures, HLM Venture Partners, Deerfield, CommonFund Capital, Angeles Investments, Transformation Capital, Optum Ventures and Qiming Venture Partners USA.
- Abacus Insights, a Boston startup with a cloud-based platform to help health insurers analyze and share their member data, raised a $35 million Series B round from Blue Venture Fund, CRV, .406 Ventures, Horizon Healthcare Services and Echo Health Ventures, with a debt facility provided by J.P. Morgan.
- Kaia Health, a digital therapeutics company with a focus on chronic obstructive pulmonary disease (COPD) and musculoskeletal conditions, raised a $26 million Series B round from Optum Ventures, Idinvest, capital300, Balderton Capital, Heartcore Capital and Symphony Ventures.
- PlushCare, which offers virtual primary care, raised a $23 million Series B round from Transformation Capital, GGV Capital, WTI and individual investors. The San Francisco-based startup is planning to double its staff in the next year.
- Alpha Health, a unified automation company for healthcare, raised a $20 million Series A round from Andreessen Horowitz, Costanoa Ventures and private investors, including Jim Momtazee, former head of healthcare investing at KKR. The funding will support the company’s ability to accelerate sales and marketing activities while scaling product deployment and development.
High-Momentum Digital Health Startups and Notable Acquisitions in Q2
Beyond funding, the digital health sector showed other encouraging signs in the second quarter. Analysts at CB Insights included four digital health companies in its annual roundup of 50 companies expected to soon become unicorns (or reach a valuation of $1 billion or higher). The companies expected to reach unicorn status were prescription medication delivery service Capsule, telemedicine provider Doctor On Demand, chronic condition management company Omada Health and mental health benefits startup Lyra.
And in a sign of the staying power of digital health products and services, Walmart will further fuse its brick-and-mortar presence with a digital presence after acquiring CareZone, the developer of an app to help consumers manage their medication schedules.
OptumHealth—the healthcare services and delivery business of UnitedHealth Group’s Optum—has acquired naviHealth, a post-acute care management platform for health plans and providers.
Telemedicine as a Post-Pandemic New Normal
Our healthcare system has changed dramatically since COVID-19 began spreading nationwide. More care is taking place outside of hospitals and doctors’ offices, and more medications are being delivered to the home instead of over the pharmacy counter.
Federal and state government agencies have removed many of the barriers that previously prevented large numbers of people—including Medicare and Medicaid beneficiaries—from accessing care via telemedicine and other digital health services. This means these technologies are not just helping us weather the pandemic; they’re broadening access to quality healthcare for millions of people.
These and other developments are prompting some industry watchers to speculate on whether some of the changes we’ve seen in recent months will outlast the pandemic and become permanent.
What do you think? Will the spread of COVID-19 fundamentally shift the way consumers access healthcare? What will the changes be, and what technologies will facilitate these changes? Leave a comment, drop me a line or reach out on Twitter.
Originally published July 1, 2020, on Fenwick's Life Sciences Legal Insights blog.