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Europe’s Digital Health Exits: 10 years just happened in 12 months

One of the crucial events in a startup’s life, that only ~1%(yes, only one percent) ever reaches, is the exit. A rundown of Europe’s Digital Health landscape would thus be incomplete without mentioning exits.

After a dive into the European Digital Health ecosystem and an analysis of all the exits that have occured to date, these are the key findings as published by SpeedInvest:

  • There has only been 22 publicly known acquisitions in the European Digital Health industry in the last 10 years.
  • 13 of these exits occured only in the last year.
  • All of these exits have been M&A, with no IPOs as of now.

Nothing occured for 8 years, then a lot happened in only 2!

Below you will find a visualization showcasing why Digital Health in Europe has only just begun.

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Four observations regarding these transactions:

  • The number of Digital Health exits in the U.S. exceed 52 in the first six months of 2020 alone. This is 2.5 times the number of European exit activity that happened in the entire decade, making the number extremely low.
  • Although it is not surprising, the vast majority of these transactions are M&A, with confidential terms, which makes it challenging to benchmark exit evaluations.
  • With the exception of Aurora Health, all the other startups that exited were founded in the years between 2011 and 2015.
  • One thing we expect to change is that the European digital health founders have been keen to exit quickly, even though for fairly small returns.

Mental health, consumer health and generalist telemedicine are the exit targets

The graph below showcases that the most popular consumer startups are those with a focus on mental health and on-demand telemedicine. In fact they represent 50% of the entire number of exits.

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With a further analysis of the startups featuring in the 2 most popular categories, it is observed that:

  • Consumer-facing mental health applications have been the most popular acquisition targets. Apps in this area include: 7Mind (mindfulness), 5th Corner Inc (behavioral learning programs), Aurora Health (depression screening), Shim (wellbeing chatbot) and Some Analytics (workplace mental resilience programs).
  • The second most popular targets were the on-demand telemedicine providers, such as Teleclinic and Caremondo (medical tourism provider) from Germany and Mes Docteura and Keldoc from France. Keldoc is Doctolib-like and offers appointment bookings for offline and telemedical consultations.

Time to exit: 5 years

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There is a noticeable equal distribution when it comes to the age at which startups in the Digital Health industry exit, with the average time period being five years. The graph below offers context, showing the Digital Health startups that had a shorter time to exit in relation to others.

This happends due to digital health founders, on average, exiting prematurely, usually at the first given opportunity. Daniel Keiper-Knorr argues that even shorter exits have the potential to be life-changing and are, of course, huge learning experiences for the founders, although VCs will probably object to this. We conclude that founders are doubtful about long-term growth options, and this is seen in the relatively small number of digital health cases in Europe to date.

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Surprisingly low funding until the exit

The amount of money European Digital Health companies manage to raise prior to their exit is surprisingly low and the total funding per startup is less evenly distributed. There are two notable points.

  • Biovotion and Touch Surgery were the only two startups that raised noteworthy funds prior to their exit, exceeding the €10M threshold, accounting for 44% of the total of funds raised by exited startups.
  • Average funding (where it is possible to access data) is at €6M, while the median funding is at €1.7m.

All in all, European Digital Health founders seem keen on quick exits, although for fairly small returns.

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Acquirers

So, who ispurchasing Digital Health startups? First, let’s take a quick look at the summary provided by Rock Health concerning the US exit market.  

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Digital health acquirers in the US in the last decade (Source: Rock Health)

In comparison, in Europe most acquirers fall into one of the four categories below.

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Digital Health Players

  • Digital Health companies are the biggest acquirers of Digital Health companies, both in Europe and the US. This showcases the importance of the Digital Health unicorns to the ecosystem and it mirrors the general trend in the software industry. These unicorns are massive sources of capital and M&A activity. As more companies grow in this field, we expect to see a rise in M&A activity also.
  • Buy-and-build strategies drove most acquisitions, as Digital Health scale-ups seek to expand their offering by obtaining exclusive tech and new client segments. Biofourmis, based in Boston, is a good example as it decided to complement its analytics platform by obtaining swiss wearable company Biovotion and also, Swedish KRY’s mental health chatbot tech, built by Shim in Stockholm.

Mixed industries: media, pharma, providers

  • Included in this miscellaneous group are: the biopharma giant Roche with it’s acquisition of the healthcare-focused mutual fund (Mutuelle Nationale Hospitaliere), an international hospital group (Schoen Clinic), an insurance company (Groupe VYV) and Mysugr.
  • The motives of acquisition in this miscellaneous category do differ but they also followed a buy-and-build pattern. A trend in pharma, moving ”beyond the pill”, is reflected perfectly with the Mysugr acquisition. The fact that it still one of the only exits in the field shows how challenging pharma is finding it to execute this strategy, and how hard startups may find this exit channel.
  • ”Miscellaneous companies” are the second largest category in Digital Health acquiers in the U.S. as well.

M&A has been a way for healthcare distributors to enhance their product offerings. The pharmacy group Zur Rose’s acquisition of Teleclinic is a good example, which is logical considering that 50% of consultations performed on Teleclinic’s platform result in electronic prescriptions.

Medical device companies are theoretically natural acquirers for Digital Health startups but practically this type of deal is hard to come by in the U.S. and in Europe. In Europe, one of the two M&A deals was when the largest medical device supplier globally, Medtronic, acquired Touch Surgery. This complemented there already large portfolio of surgically implantable medical devices with a high-tech surgical training provider.

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