We’re one of Europe’s most active pre-seed and seed investors in Digital Health. Check out our full analysis of 600+ Digital Health startups founded in Europe in the last decade and our overviews of the Digital Health ecosystems in France and DACH.
It’s still early days for the Digital Health startup ecosystem in Europe, but we’re moving fast. When we published the first ever overview of Digital Health Exits in Europe in November 2020, we counted 22 exits ever in Europe up to that point and concluded that more happened in 2 years than the 8 years prior.
4 months later, at the end of Q1 2021, that number is 37 -- a 68% increase. This pace of change is why we’re updating our analysis in real time.
Only ~1% of startups ever exit, but exits are key moments for founders, investors and the entire startup ecosystem. They provide liquidity, release talented individuals who will start new ventures, and make the sector more attractive for investors. In a young ecosystem, exits matter even more.
Key findings we’ll share below:
Here’s a visualization of all the exits we count to date, include the startup, acquirer and known details of the transactions.
Of these, 17 exits happened in the last 5 quarters alone:
And here’s a year-by-year exit count:
Three high-level observations from our last analysis still apply:
One observation from last time needed updating
Interestingly, although the UK leads Europe by overall company formation and investment in Digital Health, Germany is the clear #1 source of exited Digital Health startups.
The chart below shows that on-demand telemedicine, enabling tech and mental health startups have been the most popular exit targets, representing more than two thirds of all exits. In our last post, mental health had still been the #1 category with 6 exits.
The biggest increase in exit activity has been driven by an ongoing consolidation in on-demand telemedicine. Telemedical providers have bought backend solutions, like Vi Health (acquired by Numan), Sprechstunde.online (acquired by Zava) or Doctorlink (acquired by Health Hero), as well as independent on-demand platforms like MedHelp (acquired by KRY) and Fernarzt (acquired by Health Hero). This extends a trend of prior acquisitions of telemedical providers like Teleclinic in Germany and Mes Docteurs in France.
The average time to exit for a Digital Health company in Europe is 6.4 years, the median time to exit is five years, a slight acceleration compared to our prior analysis.
For context, a quick comparison below shows that these are slightly shorter paths to exit relative to other startups.
In our experience, Digital Health founders generally exit at the first opportunity that presents itself. VCs may frown at this, but in an immature market, as our partner Daniel Keiper-Knorr has argued before, 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 understand that founders have doubts about longer-term growth options.
European Digital Health companies don’t always raise a lot of money before they exit:
So, who is buying Digital Health startups? As a benchmark, here’s the US landscape taken from Rock Health’s summary of the US exit market.
Both in the US and Europe, Digital Health companies are the biggest acquirers of Digital Health companies, accounting for over 50% of exits, followed by pharma distributors and a mix of other strategic players:
And here’s an overview of which companies have been buying:
This pattern mirrors general trends in the software industry and is the reason why successful Digital Health companies are a benefit to the wider ecosystem; they’re major sources of capital and M&A activity. As more companies mature in this space, we also expect M&A activity to heat up.
Most recent acquisitions were driven by a buy-and-build strategy, as Digital Health scale-ups seek to expand their offering by acquiring proprietary tech and new client segments. Examples include
Similar to the US exit market, a large portion of exit activity is driven by a broad mix of commercial players. Some patterns we see here are:
In our first exits article said that it’s an exciting time for Digital Health startups in Europe, that the sector is nascent, but growing fast.
Healthy and repeatable exit routes are only just emerging and will help drive founder rewards and investor returns. 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 only just beginning to turn.
We hope you’ve found this article useful. We’ll update it towards EOY 2021, or before if things heat up quickly.
Drop me an email or get in touch on LinkedIn if you’d like to share feedback - or if you’re building a Digital Health startup and are looking for advice around funding!
Authored by Felix Faltin, Digital Health expert on the Speedinvest Subscriptions & Health team. 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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