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Venture Capital’s New Favorite Industry

Dealmaking is surging around retail health and wellness technology.

The Covid-19 pandemic brought digital health and wellness into the mainstream — and it’s made the retail health and wellness tech industry an increasingly attractive target for venture capitalists. 

Digitized health and wellness investment activity hit a peak in 2020, generating $7.3 billion in venture capital deal value across 449 deals, according to PitchBook. The industry started off the new year strong, as well: In the first quarter of 2021, industry deal value hit a quarterly record of $4.2 billion across 153 deals, PitchBook said in a first quarter report on emerging technology investments.

PitchBook researchers attributed the strong 2020 dealmaking to the pandemic and the increased development and usage of telemedicine products. By 2025, the research firm expects the mobile and digital segment of the health and wellness tech market to reach between $350 billion and $400 billion, a meteoric projection from a less than $50 billion market size in 2019. 

“Virtual health companies benefited from the pandemic as rules hindering the use of telemedicine were repealed, payers increased telehealth coverage, and laws preventing ‘noncritical’ in-person appointments forced providers to conduct appointments remotely,” PitchBook said in the report. 

In the first quarter of 2021, PitchBook said the sector’s leading segments — virtual health and personalized medicine and testing — carried its record-breaking VC activity with “five VC mega-deals each and a total of $1.7 billion and $1.4 billion invested, respectively.” Aside from mobile and digital health companies, late-stage VC activity outpaced early-stage deal count in all segments under the retail health and wellness tech umbrella.  

By the end of the first quarter of 2021, which concluded on March 31, Ro, a U.S.-based telehealth company, was the top VC-backed retail health and wellness tech company, having raised around $876.1 million to date. Close behind was 23andMe, a U.S.-based genomic testing company with a total of $873.2 million of VC investments, according to the report. Other top investments included fitness applications, smart device companies, digital therapeutics, and bioinformatics firms. 

At-Home Health and Fitness Is Here to Stay

As for the future of health and wellness tech, the PitchBook analysts see opportunities in fitness technology and remote patient monitoring, or RPM, devices — technology that allows patients to take their vitals at home and send the information to a doctor virtually. In both cases, the pandemic is credited for the rise in VC interest. With RPM, digital diagnoses entered the mainstream as people practiced social distancing and tried to avoid infection in public spaces. Fitness tech meanwhile “reached an all-time high in 2020 with about $2 billion raised” as the pandemic steered people away from public facilities and into home gyms. PitchBook expects the fitness technology market to reach $1.1 trillion by 2023. 

“As the pandemic subsides, vaccination rates increase, and consumers return to physical retail, we believe it is unlikely they will fully abandon at-home fitness practices, which often include costly workout equipment and subscription plans, along with digital fitness communities,” PitchBook said in the report. “We expect omni-channel fitness experiences that combine at-home and in-person experiences are likely to see sustained demand.”

But venture capitalists and companies alike may face challenges in profiting off of RPM technology: Regulatory hurdles, like the biometric information privacy act in Illinois, may stand in the way of immediate monetization.  

“The RPM market is moderately fragmented and highly competitive. We expect a growing trend of partnerships between RPM providers and other healthcare management providers,” PitchBook said in the report. “We also expect growth in remote patient monitoring devices to outpace that of consumer biometric devices.”  

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