An increasing number of venture funds are entering the space. Fund documents Bellevue Entrepreneur Switzerland. As the digital health field becomes more crowded, clinical outcomes will become a key competitive differentiator, 4. 3. Despite COVID-19 becoming endemic, we will continue to see the lasting impact of this infection and how it structurally and holistically changes the industry indefinitely. This is what we finance types call a re-rating. In the last year alone, over 200 mental and behavioral health startups received over $4 billion in new capital to scale. Equity capital investors have already invested about USD 84 bn in 3800 privately held digital health firms since 2011, so we expect a steady stream of attractive IPOs in the coming years. Global healthcare funding grew 45% YOY in 2020, and then added a further 79% in 2021, reaching a record $57.2bn invested. Jennifer Bellin, VP of Marketing, Artemis Health: The market has seen an influx of healthcare point solutions over the past few years. Funding for Digital Health Companies has continued to grow year on year. We use a current run-rate (based off of the most recent quarterly revenue figures) in our valuation calculation because it's readily available, simple to compare across . 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. Health tech grabbed a serious share of the attention. We believe changes in consumer demand and reimbursement patterns will drive the adoption of this same business model across other medical specialties where companies can aggregate demand for services to negotiate better rates with insurers. Many startups were benchmarking to that valuation when they raised money in our space at 20x and even 40x ARR (or higher). In a market where late-stage transaction volume has plummeted, we anticipate that 2022s cohort of larger Series A deals may experience above average value attrition, risking down rounds at their Series B raises or later. With recession concerns looming, H2 2022s quarterly average of $2.4B may be a bellwether for the next several quarterswhich means that 2023 could be digital healths first $10B or lower year in venture funding since 2019. Rarely do we find a pure-play public comp that we can compare to a startup. 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.rlich sind. Sectors ranging from telemedicine to medical devices to AI healthcare all raised record-high funding. 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. 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). Amazon leveraged its experience creating and scaling two-sided marketplaces to launch Amazon Clinic, a virtual health storefront offering access to third-party telehealth providers. Our most recent investment, HouseRx, is helping independent physicians in a different way by enabling doctors to run medically integrated dispensing of specialty drugs and helping them connect therapeutics with care journeys, which will ultimately be better for patient adherence and outcomes. U.S.-based digital health startups brought in almost $30 billion in 2021, almost doubling the total investment the year prior. . Emerging new platforms and tools are helping clinicians become more independent and run successful businesses by enabling flexible hours, additional revenue streams, or owning their audience. Lets dig in. higher than Pre-COVID levels. The company . In 2022, HR Benefits leaders will feel heightened pressure from their finance departments to demonstrate the value of these point solutions. For high performing companies, the valuation premium is much higher. For growth-stage startups that didnt raise in 2022, limited cash reserves may push once-crowned digital health unicorns back to the fundraising table (possibly at lower valuations) or toward M&A territory. By clicking on "Accept", you confirm that you agree to the legal provisions. Of course, no one knows, but we take the Revenue is increasing, so why are stock prices going down? All but one company have rising revenue expectations on the whole across all analysts. You can also find us on twitter and LinkedIn. peer support groups, events), and care navigation, said Dana Clayton, COO of Folx. While this may sound like a hefty cohort, it pales in comparison to the volume of mega-rounds raised in 2021 (88) and even 2020 (43). Revenue is increasing, so why are stock prices going down? Equity Multiples. I was slightly curious regarding whether or not equity research analysts believed that the operating environment would deteriorate over the coming 12 months. All but one company have rising revenue expectations on the whole across all analysts. These investments in people, processes, and protocols are one of the reasons why best-in-class healthcare companies tend to have lower gross margins than their software counterparts. EBITDA is an acronym that stands for earnings before interest, tax, depreciation, and amortization. Fifty-nine percent of that funding came from 48 "mega deals" that involved over $100 million each, including . Overall, U.S. digital health funding scraped by with $15.3B, underperforming 2021s pot and just beating out 2020s total. . Given the current economic situation, its possible that consumers will spend even more conservatively in the months aheadwhich means that macro headwinds for D2C wont be relenting. Due to the historically low rating, 2022 presents itself with enormous growth potential. The sectors that experienced the largest decline were . Prospectus, the key investor information document ("KID"), the management regulations and the semi-annual and annual report are available free of charge in German from Bellevue Asset Management (Deutschland) GmbH, your advisor or intermediary, the paying agents, the relevant custodian bank or from the management company IPConcept (Luxembourg) S.A. (socit anonyme), 4, rue Thomas Edison, L-1445 Luxembourg, Luxembourg, https://www.ipconcept.com. For example, a Seed startup could be valued using 50-60% IRR, whilst a Series A startup would instead use 40-50%. Disruptive Healthcare Valuations Decline. This holds true within the mental health space and largely within the digital health startup landscape. HGP Releases its July 2021 Semi-Annual Digital Health Market Review July 22, 2021. Ahh, 2022: the year of inflation, stock drops, and a whopping seven (7!) Get in touch! An example was seen in early 2022 when Stryker issued a takeover bid for Vocera, a leading provider of communication software and hardware for hospitals. Past performance is not an indication or guarantee of the future performance of the investment. Changes in foreign-exchange rates may also cause the value of investments to go up or down. After initial successes in automating back-office operations, leaders are now extending automation to the area of care operations all operations involved in the delivery of acute care, including management of discharge planning, or access, system-wide patient flow, and more, as well as processes that connect patient care beyond the hospital., Jonathan Wang, Co-founder and CEO, and Mark Kalinich, Cofounder and CSO, Watershed Informatics: The progression of life sciences digital transformation will drive large investments in computational infrastructure., Joy Liu, Co-founder and CEO, and Joy Patel, Co-founder and CTO, Plenful: Automation and AI will play a growing role in specialty pharmacy operations in 2022, spurred by increases in limited distribution drugs, growing staffing challenges, pressure to differentiate on better patient experience, and novel purpose-built technology for pharmacy operations workflows. . In 2022, the rate of decline accelerated: H1 2022 averaged $5.2B in quarterly funding, and in H2 2022 average quarterly funding fell to $2.4B. I also believe that this valuation trend is just now beginning to pressure private market valuations. The information provided is accurate at the time of publishing. The value of revenue is being re-rated by the markets as the macro capital environment tightens. At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. But spring is on the horizon. 2. Investors aggressively fundraise into the downturn. The swiss agent is IPConcept (Schweiz) AG, In Gassen 6, PO Box, CH-8022 Zurich. Some macro factors such as rising input costs, supply chain challenges and labor shortages might even have a positive impact on the course of business at digital health companies in view of their efficiency-enhancing solutions. You can reach the Healthcare team via Steve Kraus (steve@bvp.com), Sofia Guerra (sguerra@bvp.com), Andrew Hedin (ahedin@bvp.com), and Morgan Cheatham (morgan@bvp.com). Restrains on movements forced most businesses to move their day-to-day operations online, including many health clinics and GPs. 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. Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. Here are 16 statistics on the valuation multiples most typically observed for various interests in predominantly in-network centers: Minority interest, single-specialty. In 2022, 35 digital health startups raised rounds of $100M or more. 2022 marks the 13th anniversary of the passage of the HITECH Act which ushered in the digital era in healthcare. In particular tax treatment depends on individual circumstances and may be subject to change. You can read more about his story here. May 9, 2022 2. 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. Some players differentiated through new features, product category expansions, and forged partnerships to enhance consumer value. However, these new virtual care clinicians now have multiple options. The list below shows some common equity multiples used in valuation analyses. This is reflected in the significantly better performance of large-cap healthcare companies as tracked by the Russell 1000 Healthcare Index (+23.3%) compared to the performance of the Russell 2000 Healthcare Index (-17.6%), which focuses on small and mid-cap companies. While the sector was expanding before COVID-19, the pandemic has caused a critical acceleration toward digitalising systems, with HealthTech solutions booming. The image above is an example of Comparable Company Valuation Multiples from CFI's Business Valuation Course. Legal entities or natural persons to which such prohibitions apply must not access or use these sites. 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). The next mental health startup to reach a billion dollar valuation was Calm in 2019. Paying and information agent: atl Capital, Calle de Montalbn 9, ES-28014 Madrid. MedCity News - Healthcare technology news, life science current events The financial products mentioned on this site are not suitable for all investors. This may involve platforms for career development, benefits, and inspiring company culture and values. Despite reaching higher levels in previous yearsup to 26.4x in the first half of 2020, HealthTech EBITDA multiples fell to 12.5x in the second half of 2021. The European market in particular saw investment levels skyrocket by a whopping 131% from $2.9bn in 2020 to $6.7bn in 2021. Interestingly, the average round size in 3Q20 was $41.2 million, greater than the year-to-date . That number is still much higher than pre-pandemic . The multiple has been sliced over the last year. This represents a 46% increase on 2021 numbers, and a whopping 70% increase on pre-pandemic (2019 . Ambitious hospitalathome initiatives were launched to free up hospital beds, allow top of license practice, and reimagine care pathways. Coming out of 2021's breakthrough year, digital health funding slowed in the first quarter, signaling potentially choppy waters ahead for investors in 2022. : But overall, the average revenue multiple of 2.3x to 2.6x is 50% to 60% lower than the revenue multiples of tech companies in 2022. Heres the invite link. We expect to see activity in areas of high expected future growth in 2023. In all other countries, the funds may, if any, via "Private Placement" according to the local applicable laws. When we broadly examine what we call the Disruptive Healthcare peer group to get a sense of what is happening in public markets, this may translate into insights about our market, which is at the intersection of digital health and mental health. Spain: The Bellevue Funds (Lux) SICAV is registered with the CNMV under the number 938. More on the Digital Health funding landscape can be found from Rock Health and Startup Health. In December, Oracle, a sector outsider, issued a USD 29 bn takeover bid for Cerner, one of the two major providers of hospital software in the US. In order to determine whether the investment in shares of a certain investment fund meets your specific requirements and matches your envisaged risks, we recommend that you contact an independent financial adviser. Weve all been reminded that you cant fight Mother Nature (aka macroeconomic forces), with D2C startups bearing the brunt of the reminder. The information and services provided on the sites are not intended for offer to or use by legal entities or natural persons in legal jurisdictions or countries in which the offer or use thereof would violate local legislation or legal provisions, or in which business units forming part of Bellevue Group would be subject to registration requirements in such jurisdictions or countries. Its worth calling out that competition is a powerful motivator for health system innovation, especially as retail giants battle their way into care delivery. Investors can apply to join syndicate and invest in our deals here. Its too early to say whether weve reached the end of this macro funding cycle, or if more low funding quarters are on the horizon. In this article, we provide an overview of the digital health . Instead, the developer teams at virtual care companies should rely on a series of API platforms and tools to build their technology stack. Fund documents Bellevue Funds and Bellevue Healthcare Strategy, Prospectus, Key Investor Information Document (KID), fund contract as well as the annual and semi - annual reports of the Bellevue Medtech and Services fund established under Swiss law in the category "Other Funds for Traditional Investments" are available free of charge from : Switzerland : Swisscanto Fondsleitung AG, Bahnhofstrasse 9 , CH - 8001 Zrich or Bellevue Asset Management AG, Seestrasse 16 , CH - 8700 Kusnacht. Furthermore, as virtual care companies ask their clinicians to take more license risk, the clinical workforce will exert more pressure on their employers to also abide by clinical protocols and do no harm.. We ended 2021 reflecting on the rise of digital health solutions selling direct-to-consumer (D2C), as increased out-of-pocket healthcare spend gave startups consumer dollars to aim for. By 2028, it's expected that this number will reach $720.44 billion, with a CAGR of 25.25% during the forecast period of 2022 - 2028. A few months ago, it was detrimental for a digital health startup to say it was profitableit implied the company wasnt growing fast enough. Digital Turbine's shares dropped by -9% from $55.61 as of February 15, 2022 to $50.39 as of February 16, 2022, and the company's last traded price as of February 23, 2022 was even lower at $42.83 . For the digital health sector, 2022 was a downhill rideone that we think signals the tail end of a macro funding cycle centered around the COVID-19-era investment boom. Health, Safety & Fire Protection Equipment: 10.52: Healthcare Facilities . Forty-five percent of provider organizations reported accelerating their software investments in 2022 to streamline operations. If I were the CFO of a startup today, I would be preparing to extend my fume date as long as possible and survive what feels like a pending capital access contraction. This website uses cookies, which are necessary for the technical operation of the website and which are always set. These can be obtained free of charge in German from Bellevue Asset Management (Deutschland) GmbH, your advisor or intermediary, the paying agents, the responsible depositary (UBS Europe SE, Bockenheimer Landstrasse 2-4, D-60306 Frankfurt am Main) or from the management company Donner & Reuschel AG, Ballindamm 27, 20095 Hamburg, https://www.donner-reuschel.de. Similarly, we have seen a dramatic shift in market valuation multiples for digital health companies. registered) but not authorised in the UK, the UK Financial Services Authority's financial services compensation scheme does not apply to investments in the fund but the Financial Services Authority regulated firm approving this document for the purposes of UK regulation has taken reasonable steps to satisfy itself that Bellevue will deal in an honest and reliable way and is so satisfied. Rarely do we find a pure-play public comp that we can compare to a startup. That reflects a 70% decrease in the value of revenue within our peer group in an environment in which revenue estimates are rising. This tells me that analysts believe the operating environment for companies in our space will continue to be at least good, if not improving. Financial or Operating Metric ( EBITDA, EBIT, Revenue, etc.) As the funds are recognised (ie. Specifically, Teladoc Health(NYSE: TDOC) and Lifestance Health Group (NASDAQ: LFST) have underperformed the broader underperforming peer group. Within digital health and in capital markets more broadly, well likely look back on the past several quarters as a macro funding cycle. We therefore recommend that you check this statement regularly. 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. Moreover, pure-play telehealth and mental health companies have underperformed not just the market, but also the peer group (see the chart below). Investors are wary of unicorns spells, but theyre on the lookout for strong horses: startups that dont rely on the promise of magical growth but are instead grounded in demonstrated cost savings, clinical workflow improvements, and interest from market buyers. Drivers toward this cycles crest in mid-2021 have been well documented. Furthermore, we recommend that you consult an independent tax adviser in order to obtain information on the tax regulations relating to a specific investment in your legal jurisdiction and with regard to your personal circumstances. performing companies, the valuation premium is much higher. This is what we finance types call a re-rating. Stephen Hays, Founder of What If Ventures www.whatif.vc a mental health focused venture capital fund and host of the Stigma Podcast. 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 The indications for the new year are good. What is occurring in the public markets, and how do these developments impact startups and VCs in the digital health and mental health markets? Notably, 2022's year's Q4 $2.7B total was less than half of last . Since that time, our industry has quickly matured from the infant stages of technology adoption (think: EMRs, HIE, PHM) to its current teenage digital health self. Other cookies to personalize content and analyze access to our website are only set with your consent. Adopting a more conservative mindset, Q4 2022 saw Big Tech players recenter digital health strategies within their tried-and-true operational fields. Stephen Hays. Investing in early stage mental health and addiction solutions. The average revenue multiple for small tech companies increase slightly as their market cap increases, from 2.2x to 2.6x. Revenue multiples for eCommerce businesses tend to be in the range of 0.7-3x. The days adjusted same-facility revenue in the fourth quarter increased 10.7 percent from that of 2021. 3 to 3.4 times: 23 percent. A total of 4,579 companies were included in the calculation for 2022, 4,326 for 2021, 4,023 for 2020 and 3,779 for 2019. Especially for young D2C digital health entrants that needed to invest heavily upfront to establish brand recognition and consumer leads, last years unfavorable macro conditions raised roadblocks for market penetration. December 7, 2022. While mental healthcare . Given the rise of many pill mill businesses, we expect the FDA and other regulatory bodies will enforce increased clinical protocol scrutiny. The management company may decide to cancel the arrangements it has made for the distribution of the units of its collective investment undertakings in accordance with Article 93a of Directive 2009/65/EC and Article 32a of Directive 2011/61/EU. Report UCM Digital Health Valuation & Funding. We would love to hear from you. Valuation Multiples Over Last 12 Months The single biggest question facing my business today is what valuation multiple is the right one to use when pricing private financing rounds in this space. 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. Rated 4.3 by 3 people. As an investor, Im starting to anticipate that great deals will once again be available, at better prices. $230M / (1 + 50%)^5 < Post-money valuation < $230M / (1 + 40%)^5. Digital health startups offering mental healthcare secured the top clinical funding spot in H1 2022, according to the research. Join our community of 3,000 + Founders, Entrepreneurs & Advisors. For information on opportunities and risks as well as tax information, please refer to the current detailed sales prospectus. 3. For example, if a startup is showing an annual revenue of $1,000,000, the estimated valuation of this company using revenue multiple valuations by industry will be: Valuation = $1,000,000 * 3.67 = $3,670,000. The Bellevue funds have NOT been licensed for public offer or sale to the public in the United States in accordance with the US Investment Company Act of 1940 or the US Securities Act of 1933, or in Canada, Japan, Taiwan, Malaysia, Hong Kong or Israel in accordance with the laws in force in those countries. Paying agent in Switzerland is DZ PRIVATBANK (Schweiz) AG, Mnsterhof 12, PO Box, CH-8022 Zurich. 80 people interested. In a tight labor market, employers are keen to attract and retain the best and most diverse workforce and many employees expect certain benefits as part of the compensation package. EBITDA multiples valuation is a go-to technique for most investors and financial analysts dealing with high-profit mergers and acquisitions. For that reason, I created a Next Twelve Months (NTM) revenue forecast index for each of the companies in our peer group. What is the right multiple? Representative agent in Switzerland Waystone Fund Services (Switzerland) SA, Avenue Villamont 17, CH-1005 Lausanne and paying agent in Switzerland: DZ PRIVATBANK (Schweiz) AG Mnsterhof 12, PO Box, CH-8022 Zrich. 3.5 to 3.9 times: 15 percent. 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. Similar to the transition that ecommerce and retail industries had over the last 20 years. The table below lists the current & historical Enterprise Multiples (EV/EBITDA) by Sector.The multiples are calculated using the 500 largest public U.S. companies.Comparing the current enterprise multiple of a sector/industry to its historical average value can be used to evaluate if the sector is currently undervalued or overvalued.Note: The ratio is not available for the Financials sector as . It is a 2 day event organised by Riverstone Training and will conclude on 14-Oct-2022. The information contained on this site does not constitute a financial, legal, fiscal or any other recommendation. Update your browser to view this website correctly. We expect to see a record number of acquisitions as large digital health companies, both public and private, recognize the need to add mental health to their offerings to deliver comprehensive care., There has been much debate about the tension between DTC companies doing good by expanding access or doing harm by scaling irresponsibly. 2021 was an unprecedented year for digital health. Prospectus, the key investor information document ("KID"), the management regulations and the semi-annual and annual reports are available free of charge in German from Bellevue Asset Management (Deutschland) GmbH, your advisor or intermediary, the paying agents, the responsible depositary (UBS Europe SE, Bockenheimer Landstrasse 2-4, D-60306 Frankfurt am Main) or from the management company Universal-Investment-Gesellschaft mbH, Theodor-Heuss-Allee 70, D-60486 Frankfurt am Main, https://www.universal-investment.com. Investors and . 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. These may be subject to change and the use of the site may be restricted or terminated at any time without prior notice. Nothing on this page is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. And while these companies did not perform as well in the public markets in 2021 as in prior years, we are confident that the overall basket of digital health assets is more mature and valuable than ever before. According toRock Health, a US-based venture fund dedicated to digital health, the number of HealthTech unicorns is growing, and share prices for digital health companies have broadly increased since the COVID-19 pandemic took hold. According to the Digital Health Funding and M&A 2021 First Half Report released by Mercom Capital, the first half of 2021 closed with $14.7 billion invested across 372 US digital health deals with a $39.6 million average deal size. HealthTech has the potential to make healthcare more accessible and convenient far beyond the worldwide pandemic. While diminishing margins have forced big healthcare organizations (especially health systems) to focus on near-term needs, successful players will continue to plant seeds for better seasons. 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. We first saw this shift from a business case to a wellness case in mental health, caregiving, and maternal health. About the Author: Stephen Hays After decades of addiction and struggling with bipolar disorder, Stephen was fortunate to receive help and has focused his attention on funding solutions to the problems he lived with.