digital health valuation multiples 2022

In August 2021, the median public B2B SaaS company hit a record high value at 16.9x its current run-rate annual recurring revenue (ARR). Healthcare stakeholders are increasingly joining efforts with HealthTech companies to improve and increase access to remote care. Investors aggressively fundraise into the downturn. Fifty-nine percent of that funding came from 48 "mega deals" that involved over $100 million each, including . We believe the continued spotlight that COVID has shed on the challenges facing our healthcare system alongside the many opportunities for innovation outlined in this article will make 2022 another banner year for healthcare investing. Only one company, Amwell, has analysts who believe that their revenue will be lower in one year than it is now. Update your browser to view this website correctly. By competing in earlier rounds, investors are more likely to pay more on a risk-adjusted basis for a startup than its later-stage funders, twisting the risk-adjusted valuation upside down. While the broader markets look to be in the midst of a correction, we are optimistic about the myriad of opportunities for innovation in the largest market in our economy that is still in just the teenage years of its own digital revolution. This year's winning companies include startups working on interoperability and data integration, home care and monitoring, AR/VR in healthcare, hybrid care, and more. Refreshingly simple financial insights to help your business soar. eCommerce businesses are generally valued on a revenue multiple to reflect high growth potential and recurring or repeat revenue patterns. Investment or other decisions should not be made solely on the basis of this document. Bottoms-up sales strategies may become the norm as companies evangelize clinicians as their customers and focus on use cases spanning clinician-focused fintech products, retail, healthcare, and online community-building ecosystems. At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. Specifically, Teladoc Health(NYSE: TDOC) and Lifestance Health Group (NASDAQ: LFST) have underperformed the broader underperforming peer group. The value of revenue is being re-rated by the markets as the macro capital environment tightens. We support this omnichannel delivery of care through our care coordinators that navigate members to high performing in-network gastroenterology providers, labs and pharmacies, as needed, said Founder and CEO Sam Holliday of Oshi Health. Given the rise of many pill mill businesses, we expect the FDA and other regulatory bodies will enforce increased clinical protocol scrutiny. Finally, its important to draw boundaries between conflicting business unitsprobably best to steer clear of mixing healthcare and consumer marketing, and focus instead on cloud hosting and patient data interoperability. 80 people interested. At the beginning of 2022 when Big Tech companies were awash in cash reserves, MAMAA players propped up internal healthcare experiments and waded into new territory with partnerships and acquisitions. 2022. Privacy policy. These can be dependent on: Customer profile and purchasing patterns. In 1H 2022, US-based health IT companies raised $9.4B, which is 40% below 1H 2021, but still 46% higher than the amount of investment seen in 1H 2019 (see the chart . The multiple has been sliced over the last year. This may involve platforms for career development, benefits, and inspiring company culture and values. Several D2C digital health equities including Peloton (-78%), Owlet (-79%), and Beachbody (-78%) ended the year at fractions of their 2022 opening prices. We need to find ways to help health systems reduce admin burden and free up clinician time. However, that field is under some scrutiny. Healthcare Software (relating to hospital management, patient analytics and pharmaceuticals) was the most active sector, accounting for 65% of transactions. The best healthcare entry points exist where teams already hold expertise (fertile ground remains in these familiar pastures). Its worth calling out that competition is a powerful motivator for health system innovation, especially as retail giants battle their way into care delivery. Deal Type Date Amount Raised to Date Post-Val Status Stage; 5. With that in mind, we looked to our community of founders and aggregated their predictions for 2022. In a tight labor market, employers are keen to attract and retain the best and most diverse workforce and many employees expect certain benefits as part of the compensation package. If you can't read this PDF, you can view its text here. Valuation Multiple = Value Measure Value Driver. A mandatory rule is that the represented . The biggest M&A deal of the year was Data to Decision AG acquisition of MEDIQON GmbHa software company providing data analysis solutions to generate insights capable of driving healthcare sector decisionsfor $30bn. Furthermore, as virtual care companies ask their clinicians to take more license risk, the clinical workforce will exert more pressure on their employers to also abide by clinical protocols and do no harm.. As the digital health field becomes more crowded, clinical outcomes will become a key competitive differentiator, 4. For those that choose to pursue investment instead of M&A, grounded approaches will be the most successful. Investment or other decisions should not be made solely on the basis of this document. For example, our portfolio company US Health Partners is assisting cardiologists in breaking free from the traditional hospital structure to run independent practices as they transition to digital and value-based care. The information, products, data, services, tools and documents contained or described on this site ("website content") are for information purposes only and constitute neither an advertisement or recommendation nor an offer or solicitation (to buy) or redemption (sell) investment instruments, to effect any transaction or to enter into any legal relations. As an investor, Im starting to anticipate that great deals will once again be available, at better prices. Big H2 2022 splashes from retail giants Walmart and Walgreens have raised the stakes for primary care, at-home, and omnichannel care delivery expansion. Global Strategy on Digital Health 2020-2025. We expect to see a record number of acquisitions as large digital health companies, both public and private, recognize the need to add mental health to their offerings to deliver comprehensive care., There has been much debate about the tension between DTC companies doing good by expanding access or doing harm by scaling irresponsibly. 2 FinSA, Professional/Institutional investors: according to Art. Strong growth momentum and non-cyclical demand put Digital Health stocks in an excellent position to deliver a pleasing performance in 2022. This tells me that analysts believe the operating environment for companies in our space will continue to be at least good, if not improving. For example, Zaya Care uses this model in the maternal health space. The table below lists the current & historical Enterprise Multiples (EV/EBITDA) by Sector.The multiples are calculated using the 500 largest public U.S. companies.Comparing the current enterprise multiple of a sector/industry to its historical average value can be used to evaluate if the sector is currently undervalued or overvalued.Note: The ratio is not available for the Financials sector as . Q4 2022: How did the Swiss valuation parameters and the European M&A volume develop? 4 paragraph 3-5 and Art. As risk shifts from health plans to providers, we will continue to see digital managed service organizations (MSO) serve as the chassis of digital health. However, these investments are critical in healthcare and we believe will become long-term competitive moats for those companies that make them early in their life-cycle and prove real differentiation in terms of patient outcomes. Given that deal size generally tracks to valuations, its fair to infer that the median Series A deal valuation is likely at or near all-time highs. Growth stage of the business. To deliver its potential, national or regional Digital Health initiatives must be guided by a robust Strategy that integrates financial, organizational, human and . And while these companies did not perform as well in the public markets in 2021 as in prior years, we are confident that the overall basket of digital health assets is more mature and valuable than ever before. All but one company have rising revenue expectations on the whole across all analysts. Coming out of 2021's breakthrough year, digital health funding slowed in the first quarter, signaling potentially choppy waters ahead for investors in 2022. Lifestance Health Group is the only pure mental health comp that I can find. Inspire Medicals sales expectation for 2021 is around USD 233 mn at a gross margin of 85-86%, impressive numbers compared to 2020. As a cherry on top, burnout pushed record numbers of clinicians to retire or work fewer hours, which kept health systems in crisis modeand paying crisis wages. Multiples expected to hold strong in 2022. Hampleton Partners' latest Healthtech M&A Market Report highlights how the Covid-19 pandemic revealed the inadequacies and opportunities in the world's healthcare systems and how venture and growth capital poured into digital health companies, raising a total of $57.2 billion in funding in 2021, an increase of 79 per cent from 2020. Ambitious hospitalathome initiatives were launched to free up hospital beds, allow top of license practice, and reimagine care pathways. The global digital health market reached a value of US$ 289 Billion in 2021. To be clear, we dont believe only hybrid-care companies will succeed, rather we believe digital-only companies will bridge the pre existing healthcare system to support a hybrid care delivery model. For information on opportunities and risks as well as tax information, please refer to the current detailed sales prospectus. Currently, the Digital Health sector is valued significantly lower than at the beginning of 2021. WASHINGTON, Oct. 09, 2022 (GLOBE NEWSWIRE) -- Global Digital Health Market was valued at USD 145.57 Billion in 2021 and is projected to surpass the valuation of USD 430.52 Billion by 2028 at a . There remains, however, a huge disparity between the M&A and the fundraising markets, with most buyers of these start-ups opting for early-stage acquisitions. Many startups were benchmarking to that valuation when they raised money in our space at 20x and even 40x ARR (or higher). This holds true within the mental health space and largely within the digital health startup landscape. Fund documents Bellevue Entrepreneur Switzerland. Global healthcare funding grew 45% YOY in 2020, and then added a further 79% in 2021, reaching a record $57.2bn invested. The indications for the new year are good. We need better integration of clinical models to enable the treatment of comorbid conditions, such as Diabetes and Major Depressive Disorder. Also, J.P. Morgan Healthcare Conference was very positive with some companies already giving pro-active guidance of their results after being challenged by investors worried over Covid-impact. Not to mention, conservative VC activity shortened cash runways. Similar to the transition that ecommerce and retail industries had over the last 20 years. The management company may decide to cancel the arrangements it has made for the distribution of the units of its collective investment undertakings in accordance with Article 93a of Directive 2009/65/EC and Article 32a of Directive 2011/61/EU. These companies will focus on different steps in the value chain of virtual care: For example, (1) communication and remote patient monitoring with companies like Memora Health and Avon Health, (2) EHR, data storage and analysis with companies like Zus Health, Healthie, and Canvas Medical, (3) provider workforce management and productivity with companies like our portfolio company AspenRx, and (4) billing and payment pipes with companies like Candid Health. According toRock Health, a US-based venture fund dedicated to digital health, the number of HealthTech unicorns is growing, and share prices for digital health companies have broadly increased since the COVID-19 pandemic took hold. For digital health insights targeted to your needs, drop us a note. As of 2022, the global SaaS market was valued at $186.6 billion. I suspect that as long as investors are seeking yield, then moving further down that risk spectrum into the private markets, valuations in the startup world will not come in. Health systems strategizing for the years ahead are coming to realize that their beyond-the-hospital care offerings must stand up to a growing pool of competitors. Prospectus, the key investor information document ("KID"), the management regulations and the semi-annual and annual reports. 2022s total funding among US-based digital health startups amounted to $15.3B across 572 deals, with an average deal size of $27M. 3 to 3.4 times: 23 percent. Tech, Trends and Valuation. We continue to be bullish on clinical models that can integrate and treat comorbidities enabling holistic and longitudinal care. Strategic healthcare M&A rebounded in 2021 from a down year in pandemic-ravaged 2020, with volume up 16% and total deal value rising by 44%, to $440 billion. This article is part of Bain's 2022 M&A Report. This has resulted in an increase in valuation multiples for platform acquisitions from 7.6x EBITDA in late 2000s up to 14x EBITDA in 2021 (see Figure 9). In a year of roadblocks, big health players were pushed to implement near-term solutions while still stretching to keep eyes on the innovation horizon. There are some companies we can point to that are similar in how they generate revenue, who their customers are, as well as their growth rates and margins, but it is almost always impossible to find the perfect pure-play comp. But downhill paths carry both positive and negative connotations, and the following lessons from 2022 can help to make the most of the current market: Read on for our analysis of 2022s biggest digital health moments and trends, plus takeaways to make for a smoother slide into 2023. By Steve Kraus, Sofia Guerra, Andrew Hedin, Morgan Cheatham, $14.6 billion across 464 companies in 2020, we saw a drop in the number of visits and declining satisfaction across consumers with telemedicine in 2021, has increased wages for per-diem and travel nursing and Allied Health 3x in 12 months, Roadmap: Enabling entrepreneurship in the creator economy. EBITDA is an acronym that stands for earnings before interest, tax, depreciation, and amortization. Aaron Snyder, founder and CEO of US Health Partners, highlighted, COVID-driven burnout and increased administrative burden will drive hospital-employed clinicians to the private sector in record numbers in the coming years.. HGP Releases its July 2021 Semi-Annual Digital Health Market Review July 22, 2021. The next mental health startup to reach a billion dollar valuation was Calm in 2019. 2021 was generally a very challenging year for small and mid-sized growth stocks. We expect the narrative in mental health to shift focus from access to quality. The funding slowdown was especially severe in the second half of the year, with Q4'22 funding clocking in at $10.7bn the lowest quarterly level . LGBTQ+ people are a large and growing part of the workforce, with 1 in 5 Gen Z identifying as LGBTQ+. Others expanded their revenue potential by diversifying into B2B. Q4 2022: How did the Swiss valuation parameters and the European M&A volume develop? This represents a 46% increase on 2021 numbers, and a whopping 70% increase on pre-pandemic (2019 . The last 18 months have increased valuation complexity in the media sector. Please join the conversation and dont forget to introduce yourself when you join. As a cherry on top, 2021 saw the Fed underestimate percolating inflationary concerns and extend monetary easing measures, inflating asset prices and valuations. Revenue valuations have come in. About What If Ventures What If Ventures exists to invest in mental health and digital health focused startups. For some D2C players, differentiated tech and/or B2B sales will help to deflect bottom-line impact. Some macro factors such as rising input costs, supply chain challenges and labor shortages might even have a positive impact on the course of business at digital health companies in view of their efficiency-enhancing solutions. In 2022, the rate of decline accelerated: H1 2022 averaged $5.2B in quarterly funding, and in H2 2022 average quarterly funding fell to $2.4B. In 2022, there is an opportunity for a new crop of companies to successfully build the connective tissue between the physical and digital worlds. Now we must discount the exit value to obtain the post-money valuation as shown below: Post-money valuation = Exit value / (1 + IRR)^5. Navid Farzad, Partner, Frist Cressey Ventures. Although HealthTech companies posted their best-ever multiples in 2021, they are still significantly lower than the SaaS industry median. 2023 will likely see some fallen unicorns accept acquisition bids if cash reserves are short. More than private market valuations, this trend will pressure the amount of capital available, and even more so if the public markets continue to contract and investors can find yield in less-risky public securities. David Kopp, Executive Chair, Oar Health. UCM Digital Health Valuation & Funding. As an example, when we set out to build Clearing 1.5 years ago, we developed an EMR in-house because legacy systems were too inflexible to meet our needs. For growth-stage startups that didnt raise in 2022, limited cash reserves may push once-crowned digital health unicorns back to the fundraising table (possibly at lower valuations) or toward M&A territory. Changes in foreign-exchange rates may also cause the value of investments to go up or down. Mental Health Startup Community Slack Channel We have created a slack channel for founders, investors, and supporters of the mental health startup ecosystem. More than private market valuations, this trend will pressure the amount of capital available, and even more so if the public markets continue to contract and investors can find yield in less-risky public securities. Some players differentiated through new features, product category expansions, and forged partnerships to enhance consumer value. The exact valuation multiples will range overtime but studying multiples over the last five years we see an average of 7.2x, median of 6.3x. Whenever investment starts to pick up again, digital healths next growth trajectory will look more like 2011-2019 than 2019-2021a slower and more sustained path that better reflects startup risk and prioritizes companies taking measured paths to success. Here are 16 statistics on the valuation multiples most typically observed for various interests in predominantly in-network centers: Minority interest, single-specialty. In 2022, the strained supply of clinicians in healthcare is likely to be exacerbated. As Avi Dorfman, founder and CEO of Clearing told us: As telemedicine becomes increasingly mainstream, digital infrastructure companies with turnkey offerings will emerge, enabling entrepreneurs to focus product & engineering resources on the creation of personalized patient experiences. Startups vary in profit margins. The increased acceptance of digital solutions in the wake of the pandemic has pushed up the potential growth trajectory of the Digital Health investment case. 2022 was a necessary reminder that investment is cyclical, and that strong players build resilience in weathering funding climate changes. I was slightly curious regarding whether or not equity research analysts believed that the operating environment would deteriorate over the coming 12 months. Health, Safety & Fire Protection Equipment: 10.52: Healthcare Facilities . As of November 15, the average multiple across health services sub-sectors was 14.4x, down from 15.9x as of December 31, 2021 and 14.9x as of December 31, 2020. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. Lets dig in. You transform that PE ratio into a "multiple" you can use in valuation analyses by multiplying both sides of that simple equation by the business metric to get this new equation: Business Value = Business Metric x the Multiple. We ended 2021 reflecting on the rise of digital health solutions selling direct-to-consumer (D2C), as increased out-of-pocket healthcare spend gave startups consumer dollars to aim for. For health systems, a top 2022 priority was identifying immediate steps to stop the bleeding (healthcare pun intended). It has been a rough year so far for digital health.

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