Britain’s healthtech start-ups have raised $1.3bn from 86 transactions in 2023 YTD
Adoption of digital technologies and services increasing rapidly
Fragmented country markets dominated by domestic VCs
November 15, 2023 (Preqin News) – Amid a wider investment slowdown in Europe’s healthtech, the UK has consolidated its position as one of the region’s most resilient economies for the sector’s start-ups, boosted by its top-ranked life sciences institutions and government measures aimed at tackling long-term healthcare costs.
UK-based healthtech start-ups have raised $1.3bn so far in 2023, equivalent to 84% of 2022’s total, according to Preqin data. For Europe as a whole, year-to-date investment from 257 deals stands at $2.6bn, or 59% of the previous year’s total of $4.4bn. While the UK’s share of deal numbers has hovered around a third for the past five years, its share of total capital increased from 33.5% in 2022 to 47.6% in 2023 YTD, as of November 2.
Faced with an aging population and following the COVID-19 outbreak – when the pandemic severely tested the country’s National Health Service (NHS), one of the world’s largest nationalized health providers – policymakers have stepped up efforts to incorporate technology into the nation’s healthcare program. Greater emphasis has also been placed on the life sciences sector in the UK, home to four of the world’s top 25 life sciences institutions, including the universities of Oxford and Cambridge.
The UK – which, according to the Association of British HealthTech Industries, has 4,300 healthtech companies with a combined turnover equivalent to $37bn – has a clear lead in investment levels over nearest rivals France ($353.8mn), Denmark ($203.9mn), and Germany ($184.1mn). UK authorities have embraced digital healthcare, with myriad initiatives including The Topol Review (2019) and Wade-Gery Review (2021), that are encouraging patients and providers to use digital services. The number of registrations to the NHS App increased from two million in 2021 to 30 million in 2023.
The Netherlands Enterprise Agency’s CBI unit, focusing on promoting imports from developing countries, reported that, while Germany is the largest market in Europe, the UK is the most open to accelerating AI adoption because of widespread acceptance and use of outsourcing, a cost-cutting business culture, and its long-standing business relations with many countries.
The UK’s National Health Service is reportedly close to a £480mn ($579mn) deal to use Palantir Technologies to analyze medical data, despite widespread concerns about privacy and how the data will be used, an indication of the government’s resolve to push the adoption of new technologies.
Healthtech played a key role in supporting medical personnel through the COVID-19 crisis by using telemedicine, automating online registration, and digitizing patient records. But AI technology will need to further digitize healthcare and create an intelligent system to enable European governments burdened with increasing care costs exacerbated by aging populations.
In the Forces of Change: The Future of Health report, Deloitte forecasts that, by 2040, healthcare will move from a traditional model of treatment to a more consumer-centric system, focused on prevention and well-being. Highly personalized, data-driven tools and sensors will monitor patients’ conditions, while machine learning will detect cancer and Parkinson’s disease at an early stage and support the workflow in clinical trials and drug discovery. AI-powered robots will help nurses, doctors, and those in assisted living to address skills shortages and increase efficiency.
These trends and technologies will create huge opportunities for the private sector, but the challenge for start-ups in Europe will be to access a market fragmented by different national healthcare systems, regulations, and languages. Developing apps to interconnect electronic patients’ records and facilitate data exchange and interoperability across borders will be at odds with data protection and privacy regulations, further hampering commercialization.
Additionally, European entrepreneurs and VCs tend to focus on their domestic market, which makes it more difficult for start-ups to become regional players. Preqin data shows that High-Tech Gründerfonds has invested in 33 transactions out of 39 in Germany’s start-ups, followed by IBB Ventures (17) and HV Capital (15). Bpifrance deployed capital in 35 companies based in France, followed by Elaia Partners (14) Kurma Partners (10), LBO France (10), and Bpifrance Investissement (10). In the UK, the US-based SOSV is the most active investor with 28 rounds, but aside from SOVS, the most active investors are domestic VCs, such as Mercia Asset Management (25), Octopus Investments (20), Parkwalk Advisors (20), Seedcamp (14), and Foresight Group Holdings (13).
Top three most active investors in European healthtech start-ups, excluding the UK, over the past five years:
High-Tech Gründerfonds (39). Bonn-based VC firm with €1.3bn in assets under management (AUM) is the most active seed and series A investor, with 15 and 13 deals, respectively.
Bpifrance (35). Located in Paris, the sovereign investor is the most active series B investor with six investments.
IBB Ventures and Enterprise Ireland rank third with 17 rounds each.
Top three most active investors in UK-based healthtech start-ups over the past five years:
SOSV (28). The US-based VC firm is the most active seed investor with 24 rounds.
Mercia Asset Management (25). Located in the UK, the VC firm is the third most active series A investor with five rounds on its record.
Octopus Investments (20) and Parkwalk Advisors (20). The UK-based VC firms have dominated series A funding, with Parkwalk Advisors leading the way with seven rounds, followed by Octopus Ventures with six transactions.
The opinions and facts included within the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin providing the information in this content accepts no liability for any decisions taken in relation to the above.