Digital health startups received $57 billion in 2021

It represents a 79% increase over the previous year, CB Insights reports. The COVID-19 pandemic is fueling the appetite for digital health technologies.

Digital health startup companies pulled in record-shattering money from investors in 2021, and analysts expect the interest to continue.

In 2021, digital health startups received $57.2 billion worldwide, according to a report from CB Insights, a New York firm that tracks private companies and how much money they raise. That’s a 79% increase from the previous year, when digital health startups received $32 billion.

The CB Insights “State of Digital Health” report offers perspective on the huge appetite of investors. The firm said the COVID-19 pandemic is driving the demand for more digital health solutions.

Here are some highlights from the report.

Domestic dominance: The U.S. looms as the world leader in the digital health market. American companies pulled in a record $37.9 billion in 2021, a sum surpassing the entire global market in 2020. American companies received $10.8 billion in the fourth quarter of 2021. That’s more than Asia, the world’s second largest market, received in the entire year ($10.7 billion).

More unicorns: Worldwide, there are 85 private startups valued at more than $1 billion, earning the “unicorn” designation. There were 57 unicorns in 2020, so that’s a 49% increase.

Mental health: Startups focusing on mental health received $5.5 billion in 2021, up from $2.3 billion the previous year, or a 139% increase. Investors generally have shown an appetite to put more money in behavioral health in general, and some of that is going to digital health companies.

Record mergers: There were 574 mergers and acquisitions involving digital health startups worldwide in 2021, a 44% increase from 2020. CB Insights expects to see the trend continue as bigger companies enter the digital health market.

Some recent deals include Best Buy’s $400 million purchase of Current Health, which provides healthcare services in the home. Best Buy announced the deal in October 2021. Also, Walgreens Boots Alliance announced it was gaining majority ownership of VillageMD last October. Walgreens said it was investing more than $5 billion in VillageMD. The drugstore chain previously owned 30% of the company.

Bigger deals: The median size of digital health deals in 2021 reached $5 million, up from $4 million the previous year. The average size grew to $25 million, a 47% increase compared to 2020.

Digital therapeutics: The market for digital therapeutics, software-based programs to treat medical issues, rose to a record $3.4 billion, according to the report. Funding for digital therapeutics more than doubled, rising from $1.5 billion in 2020, a 127% increase.

Other analysts have projected more deals involving the healthcare industry in 2022.

Earlier this week, KPMG released a report showing investors are very bullish on healthcare and the life sciences, with 70% of those surveyed saying they plan to increase their merger activity in the year ahead. The KPMG report showed keen interest in technology, particularly telehealth.

While the merger of hospital systems dropped last year, analysts project more deals and acquisitions are coming in 2022. They said some of the activity may involve hospitals acquiring providers of outpatient services, home healthcare or telehealth.