Editors' Pick Health Innovation Technology Venture Capital

New York-Based Digital Health Startups Raised $2.4 Billion In The First Quarter Of 2021

New York City has become a hotbed of digital health investment, with 64 companies raising a record high of $2.4 billion in venture funding in the first quarter of 2021, according to a new report. “It took nine months in 2020 to achieve the same level of funding,” says Bunny Ellerin, the cofounder and CEO of NYC Health Business Leaders, which published the report. “Covid was definitely a big inflection point.”

Many of the companies were well capitalized before the pandemic, with nearly 90% already at a Series B funding round or later, but Covid-19 necessitated scaling up new solutions. “The pandemic just crystallized the need for new types of delivery models, new types of payment models, and new approaches to inequity in the healthcare system,” Ellerin says. 

In 2020, 174 New York City-based digital health startups raised $3.6 billion in venture funding, which was a 40% increase over 2019, according to the group. More than half of the funding went to virtual care companies. This trend has continued in the first quarter of 2021, with $1.3 billion in virtual care investment so far this year. The virtual primary care and pharmacy startup Ro raised the most funding, with a $500 million Series D round valuing the 3.5-year-old company at $5 billion. The software company Cedar, which aims to increase transparency and better help patients understand their medical bills, raised a $200 million Series D round. Rightway, which hit unicorn status with a $100 million Series C round in March, is also focused on navigation and helping patients lower their overall drug costs.

Investors are also funding companies focused on addressing not just a patient’s immediate healthcare needs but their social needs, like food, transportation and housing. Cityblock Health, which raised a $192 million Series C extension, partners with health insurers to serve low-income patients with complex care needs in the Medicaid program. Unite Us, which raised an $150 million Series C at a $1.6 billion valuation, is a software platform that connects healthcare providers, insurers, state and local governments, and social services providers, like food banks or transitional housing.

While 2021 is shaping up to be a record funding year, the true test will be how these companies are able to move the needle when it comes to the cost and quality of healthcare. “People have to deliver on the promise of all of this investment,” says Ellerin. “The next stage is seeing how these companies deploy the capital, and how they really impact healthcare.”