The digital health market is on fire. We expect healthcare companies that provide an omnichannel patient experience, integrating online and offline care, will more likely succeed longer term compared to one-modality options. Employers have begun to acknowledge that increasing access to care requires both a refactoring of existing insurance policies, coupled with investments that quantify and deepen LGBTQ+ specialization in provider networks. These entities provide outsourced management functions, including not only administrative and financial but also care management services. The answer is valuation. Inflationary pressures burned consumers discretionary dollars. As we redesigned GI care into a patient-centered, value-based model, we recognized that our virtual care supports many important clinical needs, but we also needed to bridge our services with in-person care like colonoscopies and diagnostic tests. Health systems are looking for digital solutions that are easy to understand, can be deployed relatively quickly, and deliver tangible cost savings and efficiencies. 1. Health systems also established partnerships as first steps into new revenue or equity pathways, shaking hands with venture capital teams like General Catalyst and a16z to establish digital health startup pilot sites on hospital campuses. USA February 28 2023. Mobile privacy updates gave way to rising customer acquisition costs (CAC); for some D2C digital health startups, CAC is estimated to have rocketed from $150 in 2018 to $500-$1,000 in 2022. Of course, I am not hoping this happens, but when it does, I will not be surprised. The European market in particular saw investment levels skyrocket by a whopping 131% from $2.9bn in 2020 to $6.7bn in 2021. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. Provider venture capital funds remained the top corporate investors by deal volume, and provider organizations increased their acquisitions by 5x, from three deals in 2021 to 15 in 2022 (acquisition targets included specialty care coordinators and telemedicine startups). This holds true within the mental health space and largely within the digital health startup landscape. $230M / (1 + 50%)^5 < Post-money valuation < $230M / (1 + 40%)^5. This has resulted in an increase in valuation multiples for platform acquisitions from 7.6x EBITDA in late 2000s up to 14x EBITDA in 2021 (see Figure 9). While twelve months ago there was a relatively stronger emphasis on top-line growth or 'growth at all costs,' we now see a stronger focus on profitability. What does this mean for startups? Despite differences in patient population, specialty focus, or go-to-market strategy, these care delivery companies are digital-first: they have multidisciplinary expertise across business, engineering, and medicine, and iterate and build consumer-centered products in a fast and agile way. For that reason, I created a Next Twelve Months (NTM) revenue forecast index for each of the companies in our peer group. Be sure to check out Rock Health's Digital Health Funding Report. This tells me that analysts believe the operating environment for companies in our space will continue to be at least good, if not improving. We need better integration of clinical models to enable the treatment of comorbid conditions, such as Diabetes and Major Depressive Disorder. As we reflect on the previous year, we turned to our portfolio company founders and leadersthose who tirelessly work on the ground to transform our healthcare systemto get their predictions on what to expect over the coming year. Digital health cant cut its way to impact, and the smart decisions of today will fertilize the next investment upswing. Why does this matter? By using the website www.bellevue.ch, you confirm that you have read, understood and accepted the general information provided by the Bellevue Group AG as well as these legal provisions. In 2021, there were eight completed IPOs and 15 SPAC mergers in the digital health space, which was by far the . HealthTech the use of technology to deliver or improve clinical health services to patients was one of the most active and growing industries of 2020. By Steve Kraus, Sofia Guerra, Andrew Hedin, Morgan Cheatham, $14.6 billion across 464 companies in 2020, we saw a drop in the number of visits and declining satisfaction across consumers with telemedicine in 2021, has increased wages for per-diem and travel nursing and Allied Health 3x in 12 months, Roadmap: Enabling entrepreneurship in the creator economy. As risk shifts from health plans to providers, we will continue to see digital managed service organizations (MSO) serve as the chassis of digital health. The EBITDA multiple will depend on the size of the subject company . Lets dig in. Update your browser to view this website correctly. While the broader markets look to be in the midst of a correction, we are optimistic about the myriad of opportunities for innovation in the largest market in our economy that is still in just the teenage years of its own digital revolution. Retail clients: according to Art. Specifically, Teladoc Health(NYSE: TDOC) and Lifestance Health Group (NASDAQ: LFST) have underperformed the broader underperforming peer group. 1. Revenue is increasing, so why are stock prices going down? 10 paragraph 3 and 3ter CISA in conjunction with Art. As Chief Clinical Officer of Healthspace Health Dana Udall said, The system has mounting costs associated with untreated or poorly managed conditions, and ongoing siloed nature of care. But as the year unfolded and cash grew costly, several of these health experiments were scrutinized, discontinued, or divested. McDermott Will & Emery - Amanda Enyeart , Grayson I. DImick , Marshall E. Jackson, Jr. , Lisa Mazur , Dale C. Van . The median check size for Series A deals reached an all-time high of $15M in 2022, while median deal sizes shrunk across all other later deal stages.4. 3 to 3.4 times: 23 percent. Rated 4.3 by 3 people. cerebral.com; Hinge Health: The digital musculoskeletal clinic, which partners with employers and health plans, is valued at $6.2 billion and announced a $400 million Series E funding round in October. The sites are intended exclusively for use by legal entities and natural persons having their registered office or residing in countries in which the investment funds or the related subfunds or share classes of the Bellevue Group have been properly licensed or approved for publicoffer or sale in accordance with the applicable local legislation. Bellevue Asset Management (Deutschland) GmbH: You can obtain the sales prospectus, the annual reports and the german key investor information documents free of charge from Bellevue Asset Management (Deutschland) GmbH, and also from banks and financial advisers. WASHINGTON, Oct. 09, 2022 (GLOBE NEWSWIRE) -- Global Digital Health Market was valued at USD 145.57 Billion in 2021 and is projected to surpass the valuation of USD 430.52 Billion by 2028 at a . For high performing companies, the valuation premium is much higher. 2022 Public SaaS Valuation Multiples. As an investor, Im starting to anticipate that great deals will once again be available, at better prices. Further information on investor rights can be found on the Management Company's website (https://www.universal-investment.com). Growth stage of the business. Revenue is increasing, so why are stock prices going down? To be clear, we dont believe only hybrid-care companies will succeed, rather we believe digital-only companies will bridge the pre existing healthcare system to support a hybrid care delivery model. Lifestance Health Group is the only pure mental health comp that I can find. Stephen Hays, Founder of What If Ventures www.whatif.vc a mental health focused venture capital fund and host of the Stigma Podcast. However, 2022 didnt go as well for D2C digital health players, with only 37% of the digital health companies that raised in 2022 selling directly to consumers, compared to 43% in 2021.5 Not to mention, D2C stocks felt crushing pressure in the public marketsand not just in the healthcare industry. Funding for Digital Health Companies has continued to grow year on year. As of November 15, the average multiple across health services sub-sectors was 14.4x, down from 15.9x as of December 31, 2021 and 14.9x as of December 31, 2020. We recommend individuals and companies seek professional advice on their circumstances and matters. Investment decisions make use of equity multiples especially when investors look to acquire minor positions in companies. Healthcare workers can search for more flexibility, better pay, and motivation to change the legacy system. It is explicitly stated, that alternative fund products are not allowed for public distribution in any country and that they may only and exclusively be solicited to institutional and qualified private investors according to the applicable local laws of each country. Teladoc Health is a pure-play tech-enabled disruptive healthcare peer that was recently trading north of 20x forward revenue. Something went wrong while submitting the form. For information on opportunities and risks as well as tax information, please refer to the current detailed sales prospectus. This tells me that analysts believe the operating environment for companies in our space will continue to be at least good, if not improving. Let us know what you think of our 2022 predictions by emailing us. Similarly, we have seen a dramatic shift in market valuation multiples for digital health companies. Last years efforts to diversify revenue streams saw Big Tech players building up businesses in data infrastructure, analytics, and finance, not to mention taking on the challenge of healthcare innovation in earnest. In the second half of 2021, the trailing 12-month median EV/S multiple was 5.6x up from from a 3.6x the previous period and 3x the year prior. . Growth and crossover funds that are new to digital health have been particularly active in digital health (e.g., Tiger Global made 25 digital health investments in 2021) On the other hand, 55% of digital health investors in 2021 were repeat investorssimilar to the average 58% repeat investors across the prior three years 2018-2020 Investment Company/Closed Ended Equity Funds, European Equities - Entrepreneur Strategies, Bellevue Emerging Markets Healthcare (Lux), Specialized Regional & Multi Asset Strategies, Bellevue Sustainable Entrepreneur Europe (Lux), Bellevue Entrepreneur Swiss Small & Mid (Lux), Emerging Markets Healthcare sector comeback, We expect M&A activity to increase in the coming quarters., Healthcare Observer: Major breakthrough in Alzheimers treatment, Regional healthcare strategies: China in focus. In particular, you should not enter into any investment before you have read the corresponding fund agreement or legal prospectus, the annual and semi-annual reports, the articles of association (as far as they are applicable), as well as all other documents, as required in accordance with local legislation or the regulations applied in the legal jurisdictions or countries in which the corresponding investment fund has been licensed or approved for public offer or sale to the public. Many startups were benchmarking to that valuation when they raised money in our space at 20x and even 40x ARR (or higher). If the past two years have demonstrated anything its that healthcare innovation is driven and inspired by patient needs, clinicians, and builders who strive to better the frontlines of care. As the digital health field becomes more crowded, clinical outcomes will become a key competitive differentiator, 4. What does this mean for startups? Enterprise value = Market value of equity + Market value of debt - Cash . Others expanded their revenue potential by diversifying into B2B. Although we continue to see red-hot valuations in the mental health space, I have to wonder, when will the re-rating of earnings in the public market impact private markets? Revenue valuations have come in. Inspire Medicals sales expectation for 2021 is around USD 233 mn at a gross margin of 85-86%, impressive numbers compared to 2020. You transform that PE ratio into a "multiple" you can use in valuation analyses by multiplying both sides of that simple equation by the business metric to get this new equation: Business Value = Business Metric x the Multiple. More on the Digital Health funding landscape can be found from Rock Health and Startup Health. The sectors that experienced the largest decline were . The average revenue multiple for small tech companies increase slightly as their market cap increases, from 2.2x to 2.6x. The financial products mentioned on this site are not suitable for all investors. . In turn, doctors can perform electronic consultations as well as monitor their patients remotely for less threatening situations and illnesses. Several companies in this category have grown during 2021, including Truepill, which has become a best-of-breed API for pharmacy fulfillment and Wheel, which is a leading clinician matching marketplace. Ulili Onovakpuri, Managing Partner, Kapor Capital, Investors interested in strong horses spent 2022 scoping out earlier-stage opportunities. We would love to hear from you. Intertwined with the public health emergency, government stimulus measures contributed to an artificially depressed cost of capital in 2020-2021, encouraging investors to make bigger and riskier bets in emerging areas like digital health. Fund documents StarCapital Equity Value plus, StarCapital Multi Income, StarCapital Strategy 1 and StarCapital Dynamic Bonds. The heaviest hitters in Europe's digital health market have valuations at an all-time high: Babylon is valued at $4.2bn, Kry at $2bn and Alan at 1.4bn. The share of HCIT deals held steady at around 15% of overall . Adopting a more conservative mindset, Q4 2022 saw Big Tech players recenter digital health strategies within their tried-and-true operational fields. interest rate hikes that cozied us up to the possibility of recession. Finally, its important to draw boundaries between conflicting business unitsprobably best to steer clear of mixing healthcare and consumer marketing, and focus instead on cloud hosting and patient data interoperability. David Kopp, Executive Chair, Oar Health. It has been a rough year so far for digital health. They are beginning to place a premium on benefits that support diversity, equity and inclusion, as well as employee satisfaction and productivity. Whenever investment starts to pick up again, digital healths next growth trajectory will look more like 2011-2019 than 2019-2021a slower and more sustained path that better reflects startup risk and prioritizes companies taking measured paths to success. This exodus from traditional healthcare settings can be an opportunity for digital health. WANT TO SHARE THESE INSIGHTS WITH YOUR TEAM? The pandemic has led to an increase in workloads and burnout among clinicians. Investors can apply to join syndicate and invest in our deals here. More than private market valuations, this trend will pressure the amount of capital available, and even more so if the public markets continue to contract and investors can find yield in less-risky public securities. For some D2C players, differentiated tech and/or B2B sales will help to deflect bottom-line impact. Widely known examples are Apollo Hospitals in India; Pulse by Prudential in Asia; Ping An in China; and the global Vitality program by Discovery in South Africa. Other cookies to personalize content and analyze access to our website are only set with your consent. Revenue multiples for B2B SaaS companies declined rapidly throughout 2022, with median multiples for Q4 below pre-pandemic levels, at 5.8x. As an example, when we set out to build Clearing 1.5 years ago, we developed an EMR in-house because legacy systems were too inflexible to meet our needs. 1. Ambitious hospitalathome initiatives were launched to free up hospital beds, allow top of license practice, and reimagine care pathways. The information contained on this site does not constitute a financial, legal, fiscal or any other recommendation.
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