Venture Investment in Health Care Sets Record in 2021

SANTA CLARA – Venture investment in healthcare reached new heights in 2021, with more than $80 billion invested in biopharma, medical device, diagnostics/tools (dx/tools) and healthtech companies, according to Silicon Valley Bank’s annual Healthcare Investments and Exits Report.

The more than 30% increase over 2020’s record is punctuated by a banner first half of the year.

“Venture fundraising and investment in healthcare has continued at a torrid pace this year due to the great exit environment and lofty step ups in valuations,” said report author Jon Norris, Managing Director of SVB’s Life Science and Healthcare Practice. “With newly closed venture funds dedicated to healthcare this year, there is a large pool of capital to support new investments and create a well-funded venture healthcare ecosystem for years to come.”

SVB’s annual report analyzes and predicts trends for venture capital investing, fundraising and exits that shape the biopharma, medical device, diagnostics/tools and healthtech sectors in the US and Europe.

Notable Results of 2021:

  • Healthcare venture fundraising nearly doubled 2020’s record at $28.3 billion, providing a large pool of dedicated capital to support new investments in the coming years.
  • All sectors saw records in investment activity, highlighted by healthtech more than doubling 2020’s investment levels, with later-stage $1B+ valuations surging to create 42 new unicorns in 2021 – more than 4x 2020’s total.
  • Biopharma investment totaled $36B, as Biopharma Seed/Series A saw an outsized increase in anti-infective investment. There continued to be a drop in orphan and rare disease activity.
  • Mega deals in dx/tools tripled compared to 2020 with 38 $100M financings due to robust activity from late-stage investors.
  • Early-stage device investment hit a record at $1.2B, driven by (non-invasive monitoring) NIM investment, which was up 92% over 2020.
  • Overall, deal investment declined slightly in the second half of the year as investors worked through a difficult public market environment.
  • Venture healthcare exits also set records in 2021 with record IPO activity across every sector and private M&A records for healthtech, dx/tools and device sectors.

Outlook for 2022:

“Looking ahead to 2022, we anticipate a slight decrease in fundraising and investment more closely mirroring the record levels seen in 2020, as VCs prep their existing portfolio for exits but continue to invest recently-closed funds,” said Norris.

  • SVB expects venture fundraising to hit $16B and investment in companies to total $64B.
  • Biopharma will likely see lower overall investment in the sector and a slowdown in IPO activity. However, M&A should pick up in 2022 with a strong pace of private pre-clinical M&A continuing.
  • Heathtech should see a continued strong year of M&A as SVB anticipates massive consolidation in this sector. Investments will be healthy but not at 2021 levels. The IPO market will remain open to more mature companies.
  • In dx/tools, SVB estimates slightly fewer IPOs in 2022 and at lower valuations. Private M&A will remain strong with more than 20 deals predicted in 2022.
  • SVB expects that investment in the device sector will decline as hybrid investors slow down mezzanine investing. M&A should continue to be robust, but the IPO market will be more discerning.