Launched two years ago, the startup netted $300 million in a Series C round in December, increasing its valuation to $4.8 billion. There are some companies we can point to that are similar in how they generate revenue, who their customers are, as well as their growth rates and margins, but it is almost always impossible to find the perfect pure-play comp. 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. 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. Digital health startups offering mental healthcare secured the top clinical funding spot in H1 2022, according to the research. Teladoc Health is a pure-play tech-enabled disruptive healthcare peer that was recently trading north of 20x forward revenue. If you do not agree with this statement you should refrain from accessing any further pages of this website. eCommerce businesses are generally valued on a revenue multiple to reflect high growth potential and recurring or repeat revenue patterns. More on the Digital Health funding landscape can be found from Rock Health and Startup Health. The multiple has been sliced over the last year. In our 10 laws of healthcare, we talked about the importance for healthcare companies to demonstrate strong clinical and financial ROI. 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. By JEFF GOLDSMITH and ERIC LARSEN. Mass General Brigham announced plans to grow its hospital-at-home programs from 25 patients to 200 over the next two years, while 12-hospital health system Allina Health partnered with Flare Capital Partners to spin out hospital-at-home company Inbound Health ($20M), delivering extra-clinical care across 185 different diagnoses. Legal entities or natural persons to which such prohibitions apply must not access or use these sites. Navid Farzad, Partner, Frist Cressey Ventures. As the digital health field becomes more crowded, clinical outcomes will become a key competitive differentiator, 4. Paying agent in Switzerland is DZ PRIVATBANK (Schweiz) AG, Mnsterhof 12, PO Box, CH-8022 Zurich. Rock Health Advisory provides guidance on digital health strategy, access to proprietary funding data, and in-depth perspectives on the digital health market. Adoption of B2B models doesnt necessarily change a D2C companys customer-centricity. The days adjusted same-facility revenue in the fourth quarter increased 10.7 percent from that of 2021. For employers, health plans, and life science firms bracing for cost challenges or new mandates in 2023not to mention the impending end of the COVID-19 public health emergencywe hope health systems 2022 moves set the tone for all enterprises balancing the immediate with long-term innovation decisions. All things considered, we believe the outlook for the 2022 investment year is extremely attractive. Revenue is increasing, so why are stock prices going down? Get news, advice, and valuation multiples reports like this one straight into your inbox. Ultimately, the wheat will be separated from the chaff in digital health in 2022; clinical outcomes will support patient adoption. Financial or Operating Metric ( EBITDA, EBIT, Revenue, etc.) Lyra hit unicorn status in 2020 in a pandemic-fueled funding round, and Modern Health, BetterUp and Ginger . Whats 2022s takeaways for MAMAA, other Big Tech players (e.g., Netflix, Nvidia, Samsung), and middle children? 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. Increasingly, benefit managers are now looking at social factors as well when making purchasing decisions. All but one company have rising revenue expectations on the whole across all analysts. Let's do the math with a real . 2022 was a necessary reminder that investment is cyclical, and that strong players build resilience in weathering funding climate changes. 2023 will likely see some fallen unicorns accept acquisition bids if cash reserves are short. 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. Information on valuation, funding, cap tables, investors, and executives for UCM Digital Health. 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. Forty-five percent of provider organizations reported accelerating their software investments in 2022 to streamline operations. While global M&A has suffered in 2022, the Fintech sector saw M&A activity rise sharply this year, with 591 deals recorded in the 2022. EBITDA multiples valuation is a go-to technique for most investors and financial analysts dealing with high-profit mergers and acquisitions. And clinical workflow software, which earned eighth place in 2022 ($1.5B), moved up from eleventh in 2021. Investment or other decisions should not be made solely on the basis of this document. Surgery Partners' revenue was $707.1 million in the fourth quarter of 2022 and $2.5 billion in the full year 2022, respective increases of 15.9 percent and 14.1 percent year over year. Health systems are looking for digital solutions that are easy to understand, can be deployed relatively quickly, and deliver tangible cost savings and efficiencies. For example, a Seed startup could be valued using 50-60% IRR, whilst a Series A startup would instead use 40-50%. 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. 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. They are beginning to place a premium on benefits that support diversity, equity and inclusion, as well as employee satisfaction and productivity. Some studies even estimate that 30% of the remaining healthcare workforce are considering leaving their full-time hospital jobs in the next two years. I was slightly curious regarding whether or not equity research analysts believed that the operating environment would deteriorate over the coming 12 months. 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. Funding for digital health ventures reached an all-time high in 2020 with a total of $23.3 billion and the first half of 2021 is already nearing last year'stotal, with $21.5 billion invested. As Bessemer has been investing in healthcare for four decades, last year was unlike anything we have seen before. Join our community of 3,000 + Founders, Entrepreneurs & Advisors. 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. 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. Take a look at the above chart which shows the average EV/NTM Revenue multiple for the peer group. Finally, stay up to date with the latest headlines in healthcare technology and Rock Health news by subscribing to the Rock Weekly. 2021 was generally a very challenging year for small and mid-sized growth stocks. The value of revenue is being re-rated by the markets as the macro capital environment tightens. We would love to hear from you. The average price-to-EBITDA multiple for hospitals was 9.5x in 2011, a 4.4 percent increase from 2010. The increased acceptance of digital solutions in the wake of the pandemic has pushed up the potential growth trajectory of the Digital Health investment case. The image above is an example of Comparable Company Valuation Multiples from CFI's Business Valuation Course. Global healthcare funding grew 45% YOY in 2020, and then added a further 79% in 2021, reaching a record $57.2bn invested. 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. Value on investment alongside return on investment, Additional predictions from healthcare leaders. We expect this to result in more consolidation and opportunities for M&A. However, if capital flows begin to tighten as capital access tightens, we could be in store for a sharp pullback in startup valuations as well. As an investor, Im starting to anticipate that great deals will once again be available, at better prices. For example, in mental health, the massive uptick in need has driven a huge amount of activity and access, however clinical and financial outcomes remain opaque. What does this mean for startups? Braff said that services-based businesses, like the mental health segment, would normally sell for a valuation range of 4x to 6x of EBITDA, earnings . Even companies where investors generally want to see more proof that their strategies work, show very good return potential, and levels of risk that are tolerable in view of their significant corrections and the investment communitys modest expectations. In 2022, the strained supply of clinicians in healthcare is likely to be exacerbated. Specifically, Teladoc Health(NYSE: TDOC) and Lifestance Health Group (NASDAQ: LFST) have underperformed the broader underperforming peer group. 2 FinSA, Professional/Institutional investors: according to Art. At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. In addition to dealing with frontline priorities, 2022 saw key health systems continue to carve out brainspace to expand and explore new businesses that would diversify revenue streams in years to comean important balance even as tough times bias toward short-term solutions. The most impactful findings of the "2022 RIA Deal Room" report include: Eye-opening valuations and a flattening curve. 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 For example, our portfolio company US Health Partners is assisting cardiologists in breaking free from the traditional hospital structure to run independent practices as they transition to digital and value-based care. I suspect that as long as investors are seeking yield, then moving further down that risk spectrum into the private markets, valuations in the startup world will not come in. Prospectus, Key Investor Information Document (KID), fund contract as well as the annual and semi - annual reports of the Bellevue Fund under Swiss law are available free of charge from: Switzerland : PMG Fonds Management AG, Dammstrasse 23, 6300 Zug or Bellevue Asset Management AG, Seestrasse 16, CH - 8700 Kusnacht. Inspire Medicals sales expectation for 2021 is around USD 233 mn at a gross margin of 85-86%, impressive numbers compared to 2020. Ambitious hospitalathome initiatives were launched to free up hospital beds, allow top of license practice, and reimagine care pathways. Numerator / Denominator = Ratio = Business Value / Business Metric = Multiple. What is occurring in the public markets, and how do these developments impact startups and VCs in the digital health and mental health markets? 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. Several D2C digital health equities including Peloton (-78%), Owlet (-79%), and Beachbody (-78%) ended the year at fractions of their 2022 opening prices. 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. 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. Global Strategy on Digital Health 2020-2025. You can also find us on twitter and LinkedIn. 2. 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 half-year and around 3x the year prior. The financial products mentioned on this site are not suitable for all investors. In a year of roadblocks, big health players were pushed to implement near-term solutions while still stretching to keep eyes on the innovation horizon. As Avi Dorfman, founder and CEO of Clearing told us: As telemedicine becomes increasingly mainstream, digital infrastructure companies with turnkey offerings will emerge, enabling entrepreneurs to focus product & engineering resources on the creation of personalized patient experiences. Join our community of 3,000 + Founders, Entrepreneurs & Advisors. At-home diagnostics, digital biomarkers, and remote patient monitoring innovation continue to improve the virtual care experience, however, telemedicine isnt a complete replacement for diagnosis or treatment that requires an in-person visit. COVID-19 continues to put a strain on our healthcare system and cause burnout to the heroes who have been on the frontlines fighting this pandemic. These entities provide outsourced management functions, including not only administrative and financial but also care management services. LGBTQ+ people are a large and growing part of the workforce, with 1 in 5 Gen Z identifying as LGBTQ+. However, we are certainly preparing for any outcome. Investors can apply to join syndicate and invest in our deals here. In this article, we provide an overview of the digital health . 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. A mandatory rule is that the represented . 1. It is a 2 day event organised by Riverstone Training and will conclude on 14-Oct-2022. Rarely do we find a pure-play public comp that we can compare to a startup. Deal Type Date Amount Raised to Date Post-Val Status Stage; 5. In turn, doctors can perform electronic consultations as well as monitor their patients remotely for less threatening situations and illnesses. Global venture capital funding, including private equity and corporate VC, into digital health was the highest ever in the first quarter 2021 at $7.2 billion, according to Mercom Capital Group. 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. Digital-health startups banked $10.3 billion in the first half of 2022, trailing the $14.7 billion the industry raised in the first half of 2021. What is occurring in the public markets, and how do these developments impact startups and VCs in the digital health and mental health markets? We expect future M&A activity in the data center industry to be largely driven by the shrinking supply of available, high-quality data center real estate, which will continue to push valuation multiples higher. 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 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. Revenue valuations have come in. UCM Digital Health Valuation & Funding. The swiss agent is IPConcept (Schweiz) AG, In Gassen 6, PO Box, CH-8022 Zurich. We expect that the market will place . Now we must discount the exit value to obtain the post-money valuation as shown below: Post-money valuation = Exit value / (1 + IRR)^5. 5 paragraph 1 and 3-4 FinSA and Art. The information provided is accurate at the time of publishing. To illustrate the slope of change, Q4 2022s $2.7B in funding sits 68% lower than Q2 2021s summit. 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. Currently, the Digital Health sector is valued significantly lower than at the beginning of 2021. After an astonishing $45 billion poured into new digital health companies in 2020 and 2021, and an early 2021 peak in market valuations of publicly-traded digital health providers, valuations and multiples have collapsed. Many startups were benchmarking to that valuation when they raised money in our space at 20x and even 40x ARR (or higher). As an investor, Im starting to anticipate that great deals will once again be available, at better prices. How much do SaaS companies spend on customer support or marketing? Inflationary pressures burned consumers discretionary dollars. Health tech grabbed a serious share of the attention. For others, 2023s continued pressures might be a final nail in the coffin, with shuttered doors or acquisitions on the horizon. EBITDA is an acronym that stands for earnings before interest, tax, depreciation, and amortization. The Digital Health 150 is CB Insights' annual ranking of the 150 most promising digital health startups in the world. Digital health companies must rethink incentives to recruit and retain the best clinician talent. Last year, we talked about the critical role that Advanced Practice and Ancillary Providers (APAPs) would play in clinical teams. This may involve platforms for career development, benefits, and inspiring company culture and values. These new companies are great examples of the new breed of digital MSOs serving the independent practitioner. U.S.-based digital health startups brought in almost $30 billion in 2021, almost doubling the total investment the year prior. 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. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. As we start the new year, we at BVP are excited to forge ahead and partner with audacious healthcare entrepreneurs who want to create revolutions of their own. 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 . Despite CMS announcing their intent to maintain reimbursement for select video-and-audio-only services through 2023, we saw a drop in the number of visits and declining satisfaction across consumers with telemedicine in 2021. We also expect M&A activity to pick up significantly. I believe that the right valuation multiple is above where the market is now (likely in the 7x to 10x forward revenue range broadly with some upside exceptions). But downhill paths carry both positive and negative connotations, and the following lessons from 2022 can help to make the most of the current market: Read on for our analysis of 2022s biggest digital health moments and trends, plus takeaways to make for a smoother slide into 2023. Nothing on this page is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. Not to mention, conservative VC activity shortened cash runways. This percentage includes digital health companies that sell exclusively to consumers, as well as those that sell to consumers in addition to other customer types (e.g., employers, providers, payers).