This year’s global deceleration of the venture capital market is broad, impacting most startup ecosystems, sectors, and stages. If you are building a company in 2022, you should not expect to see the same frenetic interest in your project that you might have enjoyed last year. Things have changed.
One element of market evolution in the startup world this year has been a notable inversion. Companies that had a strong bump in demand due to COVID-19 and its related economic impacts are often seeing growth flag, while companies that fell out of favor in the earlier pandemic periods are seeing the opposite. Given this general trend, The Exchange wanted to more deeply explore Q1 data from the perspective of several sectors that were hot last year and earlier in the COVID era to see how they are holding up today.
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Riffing through a few hundred charts of data from CB Insights regarding global venture capital investment into health tech, the word we came away with was retreat. Not collapse – deals are still getting done in the health tech market — but the tenor of the market appears to have shifted.
We’ll explore edtech soon to see if that sector has experienced a similar boom and bust in investment demand.
Looking back through the TC news archive and comparing it to the CB Insights dataset, how much have deals like the recent $5 million round raised by Singapore-based telehealth startup Ordinary Folk fallen out of favor? Let’s find out.
Retreat
To understand the declines in the health tech market, we’ll start from a high-level perspective, burrow down to two key subsectors that TC covered the most during the pandemic, and then look at the geographic makeup of the 2022 health technology startup scene.
The Big Numbers
In the first quarter of 2022, CB Insights’ dataset indicates that some $10.4 billion was invested into global health tech startups. That figure is off 36% from Q4 2021, when some $16.2 billion was invested around the world.
Inside that topline 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. Put in simpler English, huge health tech deals saw their value halved quarter on quarter. Even more, the Q1 2022 mega-round fundraising tally for health tech was smaller than any single quarter going back to Q2 2020.
Overall monetary flows into health tech startups are down, as are big checks and the biggest exits. Those three factors sum to a sector in retreat, albeit from what was certainly a rather forward position.
What about mental health and telehealth?
Parsing the dataset initially, The Exchange was most curious about two subsectors: mental health and telehealth.
Why those two sectors? Because many people’s mental health took a whacking during COVID, leading to a surge in demand for apps like Calm and Headspace, which offer meditation services. And because of the general no-in-person-meetings vibe the world had for several years, seeing doctors and other health professionals remotely became the norm.
We assumed the two sectors – which saw a big bump in 2020 and 2021 – likely endured a sharp drop in venture volume in the first quarter of the year amid overall declines in venture activity in the health tech space. Were we right? Yep.
