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September 14, 2022

Venture capital healthtech funding drops 41.2% as firms brace for economic decline

The global fall in VC activity follows a surge in investment in the years before and amid the pandemic.

By GlobalData Thematic Research

Venture capital (VC) financing within healthtech has fallen 41.2% compared to the same time last year. The Asia-Pacific region had the largest year-on-year decrease (-64.8%), followed by Europe (-45.8%), and North America (-38.7%). In contrast, funding for the Middle East and Africa, and South and Central America markets grew by 158.7% and 16.4%, respectively. North America remains the largest funding market, accounting for approximately 70% of all VC deals in healthtech.

The global fall in VC activity follows a surge in investment in the years before and amid the pandemic, which saw the total deal value grow by 132% from 2015 to 2020.

The top five themes within the healthtech sector, as identified by GlobalData’s Deal Database, include artificial intelligence (AI), big data, digital media, digitalisation, and the Internet of Things (IoT).

The Covid funding boom

Investment in life science had been steadily increasing over several years; however, the Covid-19 pandemic brought it to the forefront of the political, economic, and social conversation. Healthtech companies benefited from this new-found public interest, experiencing a 48.5% uptick in VC funding in H1 of 2021, compared to the same period of the previous year.

Recession on the horizon

Amid rising interest rates and global recession fears, VC firms are reducing their exposure to the market and urging portfolio companies to secure funding or cut costs to extend their runway. Global markets have shifted away from venture activity towards safe-haven assets, reflecting high market volatility and low investor confidence.

This slump in venture financing will force start-ups to seek alternative means of funding such as angel investing, crowdfunding, and debt financing. The increasing cost of borrowing will hinder start-ups’ journey towards profitability and reduce the number that reaches maturity.

The slowdown in the venture ecosystem has been mirrored in both M&A and IPO markets, limiting opportunities for investors to exit and for companies to raise funds.

Global populations will continue to age

According to the World Health Organization, by 2030, one in six people will be aged 60 years or older. This trend of ageing populations, caused by improvements in care and living standards, will be accompanied by higher incidence rates of age-related diseases including diabetes, neurodegeneration, and cancer.

Global ageing will not be geographically uniform. By 2050, 80% of those over 60 will be living in low- to middle-income countries. Preventative medicine is needed to alleviate the long-term strain on already overburdened healthcare systems. Digital and telemedicine will make healthcare more accessible, and the Internet of Things will give people greater agency in their health and shift the point of care towards people’s homes.

Healthcare is notoriously slow to adapt to new technologies and ways of working. Given the future of age demographics, now is the time for greater investment in healthtech to facilitate the modernisation of healthcare.

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