Venture capital firm Karista has published a European mapping of digital health investment funds in response to the growing demand for investment in the sector.
With more than 626 companies active in the digital health sector, 63% of which were founded in the last five years, the e-health mapping was published by Karista in order to encourage more funds to invest in this promising sector.
Currently, a total of 84 European funds has invested in digital health, 26 of which are French. Of these, only 14 were dedicated to digital health, of which 6 were French.
While France leads the way in terms of investment in the sector, compared to the rest of Europe, funds dedicated to digital health are still lagging behind, constituting 23% and 17% of investment funds respectively. This is mainly due to the young maturity of this growing market. Indeed, the healthcare sector is currently facing an acceleration of its digitalisation, stimulated by the rise of remote medicine and the challenges brought forward by the COVID pandemic.
The mapping, which is expected to evolve and be updated in the coming months, includes all funds with global headquarters in France, Germany, Spain, Italy, the UK, the Netherlands, Austria, Luxembourg and Belgium. Gathering useful public information, e-health provides an overview of funds that have invested in at least three companies in the digital health sector in Europe. At the same time, it also provides information on the leading investments by stage.
A large majority of these funds invest in early-stage companies (57% versus 14% in late-stage and 29% in multiple-stage), which reflects the maturity of European companies in the sector, which are often recently created. Through the mapping, it is also possible to observe how late-stage and multi-stage funds more often invest in healthcare IT, a more established vertical sector.
The average fund size seems to be moderate, with funds typically investing in the health sector (Biotech, Medtech, Diagnostics…) showing a growing interest in digital healthcare while generalist funds are also closely following this sector and gradually taking positions in it.
With European Healthtech startups raising a whopping $2.3 billion in Q3 2020, closely following the 2019 record of $2.9 billion, there has been a significant increase in their investments over the past two years.
What exactly is digital health?
This sector includes companies that belong to the broader health field (ranging from prevention/wellness to digital therapy) and have developed digital software or technology as a differentiating factor. And if the e-health sector is accessible to all, the funds that invest in digital health come mainly from the health sector as these investments are often accompanied by a partnership or collaboration bringing together pioneering medical expertise and cutting-edge technological innovations. Moreover, the traditional criteria used to evaluate tech companies are only partially applicable to this sector.
Although the industry is undeniably booming and valuations are strongly supported by the growing interest in it, it is still impossible to establish a proper performance of the industry because, for the time being, there have been too few exits (M&A and IPOs), especially from European companies.
What about US companies?
Despite their currently limited presence on the continent, for the last five years, US funds have been entering the European market, and to a lesser extent, France. In the healthcare sector in general, the French market is more difficult to understand than other European markets, notably because of its complex go-to-market. Often based in London, US funds first approach the UK market before tackling the Belgian and Dutch markets. US funds most often intervene in France in late stage (3rd and subsequent rounds) in co-investment with local funds.
Karista’s mapping will provide a unified understanding of healthcare technology investment, strengthening existing opportunities by highlighting funding developments across the continent. Making it a valuable contribution to the future of European healthtech.