As the pandemic subsides, VCs are investing less in health-focused startups – Marketingwithanoy

Worldwide this year Venture capital market slowdown is broad and impacts most startup ecosystems, sectors and stages. If you’re building a business in 2022, don’t expect to see the same frenetic interest in your project as you did last year. Things have changed.

One element of the market evolution in the startup world this year has been a notable inversion. Companies experiencing a surge in demand due to COVID-19 and its associated economic impacts often see a growth flag, while companies that fell out of favor in the past pandemic periods see the opposite. Given this general trend, The Exchange wanted to dig deeper into Q1 data from the perspective of several sectors that were popular last year and earlier in the COVID era to see how they hold up today.


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As we rummaged through several hundred charts of data from CB Insights on global venture capital investment in health technology, we came upon the word refuge† Not collapse – deals are still being made in the health tech market – but the market’s tenor seems to have shifted.

We’ll be exploring edtech shortly to see if that sector has seen a similar boom and drop in investment demand.

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Looking back at the Marketingwithanoy news archive and comparing it to CB Insights’ dataset, how far have deals like the recent $5 million round raised by Singapore-based telehealth startup Ordinary Folk fallen out of favor? Let’s find out.

refuge

To understand the declines in the health technology market, let’s start from a high-level perspective, dig into two key subsectors Marketingwithanoy covered most during the pandemic, then look at the geographic makeup of the startup scene. for health technology in 2022.

The big numbers

In the first quarter of 2022, CB Insights’ dataset shows that approximately $10.4 billion was invested in global health technology startups. That figure is 36% lower than in the fourth quarter of 2021, when about $16.2 billion was invested worldwide.

Within that top-line figure is a massive 52% drop in mega-rounds — deals worth $100 million or more — from $9.2 billion in Q4 2021 to just $4.4 billion in Q1. In simpler terms, huge health technology deals saw their value halve quarter-on-quarter. In fact, the mega-round of fundraising in the first quarter of 2022 for health technology was smaller than any quarter back until Q2 2020

Overall cash flows to health technology start-ups have declined, as have the big checks and the biggest exits. Those three factors add up to an industry in retreat, albeit from what was certainly a rather progressive position.

What about mental health and telecare?

When parsing the dataset, The Exchange was most curious about two subsectors: mental health and telehealth.

Why those two sectors? As many people’s mental health took a beating during COVID, which led to an increase in demand for apps like Calm and Headspace, which offer meditation services. And because of the general atmosphere of non-personal encounters the world had for years, seeing doctors and other health professionals from a distance became the norm.

We assumed that the two sectors – which saw big gains in 2020 and 2021 – were likely to experience a sharp decline in venture volume in the first quarter of the year, amid an overall decline in health technology business activity. Were we right? Yes.

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