This blog is part of a larger series about digital health in Europe. Check out why and how we’re systematically mapping out the Digital Health ecosystem in Europe and our full analysis of 600+ digital health startups founded in Europe in the last decade. TLDR: as one of the most active investors in early-stage Digital Health in Europe, we’re surprised how little data there is on this fast-growing vertical. We want to change that.
An overview of Digital Health in Europe would be incomplete without mentioning one of the key events in a startup’s life — for the ~1% (yes, one percent) that get as far as this point: the exit.
As part of our deep dive into the European Digital Health ecosystem, we analyzed all the exits in this space to date. The key learnings:
Here’s a visualization of why we believe this is only the beginning of Digital Health’s time in Europe.
Three high-level observations about these transactions:
Taking a closer look at the types of Digital Health companies acquired, the chart below shows that consumer startups with a mental health focus and on-demand telemedicine have been the most popular exit targets, representing 50% of all exits.
Diving deeper into which startups feature in the 2 main categories, we see:
The age at which Digital Health startups exit is evenly distributed. Both the average and median time to exit is five years. For context, a quick comparison below shows that Digital Health companies on a shorter path to exit relative to other startups.
Based on our experience and insights, we think this is because digital health founders generally exit too quickly, often at the first opportunity that presents itself. VCs may frown at this, but Daniel Keiper-Knorr has a case when he argues that even smaller exits can be life-changing and huge learning experiences for founders. Given how few breakout digital health cases we’ve seen in Europe to date, we also understand that founders have doubts about longer-term growth options.
Notably, European digital health companies don’t always raise a lot of money before they exit, and total funding per startup is less evenly distributed with two points of note:
All together, Digital Health founders in Europe seem eager to exit quickly, but for fairly small returns.
So, who is buying Digital Health startups? First, take a quick look at Rock Health’s summary of the US exit market.
In Europe, by contrast, most acquirers fall into the following four categories.
Digital Health Players
Mixed industries: media, pharma, providers
Healthcare distributors have also enriched their product offerings through M&A. One recent example is pharmacy group Zur Rose’s acquisition of Teleclinic, which makes sense given that 50% of consultations performed on Teleclinic’s platform result in electronic prescriptions.
In theory, medical device companies are natural acquirers for Digital Health startups. In practice, this type of deal is rare in Europe and the US. In one of only two M&A deals in Europe, Medtronic, the largest medical device supplier in the world, acquired Touch Surgery, complementing a large portfolio of surgically implantable medical devices with a high-tech surgical training provider.
It’s an exciting time for Digital Health startups in Europe. As we argued in our deep dive on Digital Health in Europe, it’s a nascent but fast growing sector. From an investor perspective, the ecosystem still lacks healthy and repeatable exit routes that can help drive VC returns. This is changing quickly, but from a very low level. As more European Digital Health companies reach scale and build a stronger M&A appetite of their own (think of recent funding rounds by KRY, Doctolib, Babylon), we think the flywheel is just about to begin to get going.
We hope you’ve found this blog useful. Drop me an email or get in touch on LinkedIn if you’d like to share feedback, ideas on how to improve, or just want to nerd out on digital health. Also, stay tuned: Next up are regional deep dives based on our awesome database.
Authored by Felix Faltin, a member of the Speedinvest Subscriptions & Health team, with contributions from Henri Ashe-Taylor. The face of software is changing rapidly, and this shift is what the team is looking for: consumer subscriptions designed around emerging, everyday needs; SaaS that looks and feels like the consumer tech we can’t live without; Digital Health applications that redefine the relationship between patients and doctors. Their experience, network and grit can get founders where they want to be.
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