By Mateusz Frączek | 5th June 2020
The coronavirus pandemic pushed many industries all around the world into recession and sent the global stock market plummeting, with millions of people losing their jobs in the United States alone. However, despite these difficulties, the digital healthcare sector experienced its best Q1 in history, with 107 venture capital deals together valued at $3.1 billion (see graph below).
Is this a fleeting phenomenon? Or has the pandemic catalysed innovations that the market has been waiting for, spelling long term prosperity for this sector for years to come?
IT has been gradually increasing its presence and importance in the healthcare industry, and certainly in this time of crisis can we truly appreciate how much it has to offer in terms of both operational efficiency and safety of staff. KRY, a Swedish application designed to provide video consultation with doctors, recently raised an astonishing $155 million(m) in its financing bid, as investors began to warm to the improvements its innovations could bring. As doctors note, the video calling service not only economises the supply of protective equipment, but it also reduces the risk of virus transmission.
Contributing to the fight against COVID-19, researchers from Carnegie Mellon are refining an app which analyses cough sounds using a smartphone’s speakers, in attempts to determine whether someone is infected by the virus. Again, such powerful ingenuity brought by developers worldwide has sparked investor funding to further accelerate digital healthcare, resulting in a $29m average deal size for start-ups in the sector. The highest recorded to date.
The increasing size of digital healthcare is also derived from the developing world. With its general shortage of doctors and high medical costs, innovators are increasingly hellbent on raising healthcare standards within these regions. Past efforts to introduce digital healthcare in such regions were extremely successful. Mexico’s MedicallHome, offering access to professional assistance for a $5 fixed fee, already has one million subscribers. It’s not surprising that other developers and investors have realised this market’s potential and begun tapping into its unexploited revenue streams.
In India, Niramai company, which uses A.I. and thermal imaging to improve detection of tumours, has already received $6m in funding from investors to continue its research. At the same time, in the Democratic Republic of the Congo, Logistimo is beginning to provide steady supplies of pregnancy and HIV preventive medicines to women through a cloud-based system. When supplies are running low, text messages with warnings are sent to local distribution personnel, prompting orders for new “Prévention” kits. Collectively, such innovations contribute to the ever-increasing valuation of the digital healthcare market which is predicted to grow from today’s $100 billion to $511.06 billion by 2027, with a compounded annual growth rate (CAGR) of 13.8% from 2019.
Although digital healthcare kicked off 2020 with a promising start, experts believe that other healthcare IT developers are going to have tougher times collecting capital later in the year. As Michael T. Esquivel, Partner at Fenwick & West LLP, notes: “Supply chain disruptions, market upheaval, hiring slowdowns and reduced growth projections are roiling the healthcare sector”. Fenwick & West’s Silicon Valley Venture Capital Flash Report already evidences this, with a record high of 126 investments in privately held companies in January, followed by 60 in February and only 44 in March.
Regardless of whether or not Mr. Esquivel’s predictions become reality, we are certainly on the cusp of a new era for medicine. COVID-19 has quite harshly exposed the inefficiencies of global healthcare while the developing nations’ underperforming clinical systems provide investment opportunities worth exploring. As a result, key players in the capital markets are repurposing their investment strategy and so far, it seems that such direction is not only economical but very often lifesaving.