Medtech venture funding hits new heights

Private device makers enjoy the biggest quarter for four years – and the average deal is larger than ever.

Venture financing

Venture investors threw money at the medical technology sector as Covid-19 raged. Now, as the pandemic is easing, at least in many Western markets, VCs are investing even more. 

An eye-watering $4bn has been invested in private medtechs between January and June 2021, and the second quarter’s haul of $2.4bn is the largest since the first quarter of 2017. Easy money has been around for a while, and M&A and IPOs deals are getting done at very healthy rates, so backers clearly feel justified in making substantial bets. 

The analysis below considers private groups involved in the medical device, diagnostics and digital health arenas; it does not include drug makers.

As with the greatest share price moves among listed medtechs, the pandemic has driven much of the action. Some of the biggest rounds have gone to companies active in telehealth, digital therapies and home treatment, all of which have seen increased uptake under lockdown. Covid-19 diagnostics developers, too, are present and correct. 

Telehealth companies such as the Swedish company Kry, which does business in the UK and US as Livi, and Zocdoc, all of which facilitate virtual doctors appointments and electronic prescriptions. Wuxi and Binx have both developed tests for Covid-19, and Color straddles telehealth and testing, having developed its own Covid-19 diagnostics and offering a tech to schedule these, and other, tests.

Top 10 VC rounds of H1 2021
Date Company Investment ($m) Round Focus
Jun 28 CMR Surgical 600 Series D Robotic surgery
Apr 27 Livi/Kry 316 Series D Telehealth
Jun 23 Quanta 245 Series D Home dialysis
Jan 4 Color 167 Series D Telehealth
Feb 11 ZocDoc 150 Undisclosed Telehealth
Feb 23 Wuxi Diagnostics 150 Series B In vitro diagnostics
Apr 13 Cequr 115 Series C Diabetic care
May 26 Akili Interactive Labs 110 Series D Digital health
Feb 16 Mainstay Medical 108 Series D Neurology
May 27 Binx Health 104 Series E In vitro diagnostics
Source: Evaluate Medtech.

There are also signs that VCs have their eyes on the post-Covid-19 era. One of the last rounds of the first half was also the biggest: the UK-based robotic surgery company CMR Surgical, a unicorn since 2019, scored a £425m ($600m) series D, which it will use to increase sales fo Versius, its system to aid soft tissue procedures. 

Around 1,000 or so procedures have so far been carried out with Versius. Most have been gynaecological, particularly hysterectomies, or colorectal. The machine is on sale in Europe, Australia, India and the Middle East, and US approval could come this year. taking share from the market leader, Intuitive Surgical, will be no easy task, but VCs clearly have faith. 

This is unlikely to be the last time CMR appears in these rankings. The group intends to stay private for some time yet, so its backers, who include Softbank, Ally Bridge Group and GE Healthcare, will have to wait a little longer for a return.

Unprecedented

Of course, these biggest rounds are not going to start-ups; the companies in the top 10 are an average of 10 years old. And the overall trend in the sector to larger, later rounds has reached a new pitch. 

64 venture deals were done in the first half, pushing the average round size to an unprecedented $62.5m. The same trends that exist in medtech are also at play in biotech, but even that sector cannot match medical devices: the average deal size in biotech was around $50m in the second quarter.

Only nine rounds in the first half of this year were series A, and just three were seed capital. For the true start-ups the financing climate is not nearly as rosy as it might first appear. 

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