Great Expectations: Investing in Health Tech
In the first of this two-part series, we explored how shifting consumer expectations are transforming the healthcare industry and where we think the biggest opportunities are for Health Tech firms. Now we’re going to dive into what this means for investors in 2022 and beyond.
Here at EQT Growth we think there are three areas of innovation that are the most imminently compelling for Growth investors: research and development processes, operational efficiency and patient care delivery. Against this backdrop, now the question is what role can growth equity play in supporting companies in these areas.
Rapidly growing investment
Investment in Health Tech has accelerated since 2010, with capital invested in Health Tech globally growing at ~20% per year (source: Galen Growth). Compared to other sectors, Health has seen the greatest increase in capital invested in 2019 to 2020, which demonstrates the strong upwards trajectory of the market and that we are now at an inflection point in growth.
To further demonstrate this point, EQT Growth together with the Motherbrain team, have analysed the European Health Tech Fundraising activity in the last twelve months, as of November 2021, to understand in which regions and at which stages capital has been most concentrated.
As illustrated in the chart above, the UK has by far seen the most funding in Health Tech in the last twelve months. Looking more closely, it is evident that the majority of capital invested within the UK has gone to more Life Sciences-focused sectors, such as clinical trials enablement, drug discovery and other R&D processes. This may partly be driven by the vast talent that comes from the country’s large medical institutions and by capital coming from innovation-led Life Sciences Funds.
France, Germany and Switzerland are also ones to watch as capital has poured into these regions, through the likes of Doctolib, Alan, Withings, Ada Health and MindMaze.
The increasingly critical role of growth equity
While we have seen large growth rounds across Europe, the total pool of capital invested in Health Tech is still much more prevalent in early fundraising rounds. As shown in the chart above, around $11bn has been raised in Health Tech in Europe over the past 12 months versus around $2bn in 2016, a growth of more than 400% within five years. More than two-thirds of this capital has been deployed in Series B and earlier rounds of fundraising.
We at EQT Growth believe that this highlights a very important point for the European Health Tech landscape. Growth-stage capital will become increasingly critical — and at sums larger than before — as these earlier stage businesses reach product-market fit and are ready to scale.
Whilst COVID-19 led to the adoption of technology and acceleration in innovation within Healthcare Systems globally, we are still in very early days relative to other sectors. It is more important than ever to support and back those companies acting as a positive force for society, which will lead to productive, inspiring and effective outcomes for all in society.
We would love to hear what you think. Comment below or join the conversation on our LinkedIn and Twitter. And if you are a Health Tech entrepreneur looking for Growth stage capital, we would be thrilled to get in touch!
