Venture capital (VC) fundraising in healthcare continued record-breaking activity, despite a difficult public market and frothy private valuations in 2020 and 2021. Fundraising in 1H 2022 was led by large hedge funds and private equity (PE) payers closing private funds with allocations to healthcare, followed by veteran biopharma-focused firms closing upsized funds. Additionally, many traditional tech investors closed new funds and continued to set aside some money for healthcare, primarily focused on healthtech.

Investment into healthcare companies in 1H 2022 exceeded $38B, highlighted by Altos Labs’ $3B biopharma financing in Q1. Q2 investment dropped 36% from Q1 but trended up by the end of June. Though investment in 1H 2022 was lower than the record in 1H 2021, it beat 1H 2020 totals by 37%.

Biopharma early-stage activity persisted, unabated by public market turmoil. We continued to see many large $50M+ series A deals, which provide a longer runway to potentially outlast a difficult down market. LIPO (likely to IPO)2 activity declined precipitously in Q2 2022, lowering overall investment back to 2020’s pace.

HealthTech experienced record early-stage investment in 1H 2022, but Q2 investment dropped 40% from Q1.

Early-stage was highlighted by larger series A financings, mostly in clinical trial enablement. Later-stage financings fell shy of 1H 2021’s blockbuster record. While mega-rounds3 ($100M+) continued, that activity declined significantly in Q2. Alternative care investment declined while provider operations investment remained strong. We expect healthtech investment pace to continue to slow in 2H 2022.

Dx/Tools early-stage investment yielded a strong Q1 for this sector but slowed substantially in Q2. Many of the larger early-stage deals focused on neurology. Later-stage investment was ahead of 1H 2021’s pace, led by R&D tools financings, although dx tests deals and dollars were down. We continued to see the later-stage valuation pressure that we noted 2H 2021, leading to lower step-ups for these companies in 1H 2022.