Watching Wellness: VC Investment Trends and What’s Next
Venture Capital has shifted during COVID-19. It’s not unexpected, but there are some trends to watch. Thanks to the CB Insights platform, we can get a closer look at what is happening in the wellness space and others. Here are some of the key VC Investment trends, and what to watch for next.
Double Down Deal
In the first half of 2020, the number of deals and the amount of funding have both dropped. Funding is down to $4.6B, a drop of 24%. However, the number of deals only dropped 16%, which means each deal is worth less than it was last year.
The current environment has emerged into a “new normal” so funding for the beauty category has fallen, probably due to the fact that everyone has figured out how to turn off their Zoom video or apply filters.
On the other hand, both deals and funding are up in the mental health space because, well, COVID. More on that in a moment.
Sleep on It
The advice to “rest easy” has never been harder to take, and investors know it. Deals in the sleep category jumped 79% from Q1 to Q2 2020. Where is the growth coming from? Digital therapeutics.
Going to the hospital to do a sleep study is hardly a viable solution, so medical grade wearables that integrate with smart devices are taking up the slack. It also turns out that sleep supplements integrated with mobile apps are gaining popularity with both investors and consumers.
The funding has not risen nearly as much as the number of deals, so if you have an idea in this space, you may have to adjust your funding expectations.
Mental Health in a Crisis
When you first look at the mental health category, there are some immediate big players that come to mind, like Mindstrong and Omada. What do companies who raise successful funding have in common?
· They offer virtual counseling and psychiatric help.
· Some offer exercises and activities that help treat and manage certain conditions.
· Meditation apps that offer individualized options.
· Apps and companies that focus on mental health for specific groups, like women, children, and men.
The key to all of these is that they are digital in nature, and while some also offer to connect consumers with in-person therapy sessions, the appeal of most is the remote nature of their treatment options.
Many of the winners in this category are focused on guided or self-help options that allow for self-management from virtually anywhere.
Getting Fit(ter)
Two fitness startups have achieved $1B valuations this year. The first is Keep, a China-based startup focused on community fitness and online classes. The second is Classpass, a US-based app with a similar focus.
These two global unicorns are atypical. While deals have increased, funding has not kept up, so smaller deals have become the norm. Not to worry. This has just forced startups to be more efficient with the money they can raise.
Where are the deals happening? The biggest categories are wearables and at-home fitness. While medical grade wearables emerge in the sleep space, more sophisticated fitness trackers appear all the time. From Oura rings to Nurvv insoles, consumer grade wearable tech is constantly evolving as new ideas emerge.
And since we’re all working out at home, and often inside, at-home fitness is bigger than ever. Hydrow and Ergatta aim to bring a Paleton type experience to rowing machines. Health coaching has also gone digital, and apps like Noom include diet and exercise recommendations. Some apps, like cure.fit offer primary health recommendations as well.
The COVID impact on gyms is huge, but more companies are betting that at home fitness will continue far beyond a vaccine and the current crisis.
Uniting Separately
While uniting separately, each in our own homes, may seem like an introvert’s dream, it’s not for everyone. All this social distancing and at home fitness doesn’t mean the need for community is going anywhere. Wellness solutions that offer this kind of connection are gaining traction the longer the pandemic continues.
There are a variety of communities out there, from fitness apps that connect athletes and weekend warriors to apps that create online groups for women and others in a particular stage of their life.
As social creatures, we feel the need to connect, and these emerging software solutions show funding following companies who seek to fulfill this need. Isolation has shown us that connection can happen across the world through a variety of platforms, and it’s likely this type of community building will continue post-COVID as well.
Meet the new Meat
The other thing COVID has done? First, there has been a large-scale disruption of supply chains. Second of all, 2020 has thrown other events at us that illustrate clearly how important sustainability is.
This has led to some surprisingly tasty startups. The Impossible brand offers plant based meat alternatives, and they’ve made incredible (seemingly Impossible) strides. Companies like Memphis Meats produce meat from self-reproducing cells.
Meat and food are hardly the only space where sustainability is a big deal. Sustainable sources for supplements, sustainable women’s health products, and clean ingredients and botanicals in beauty products all highlight this emphasis.
Self-Care
When it comes to self-care, both funding and deals are down, but there are some clear trends toward things like at home testing and virtual coaching and chatbots, similar to what is happening in the personal fitness space.
This trend is despite rising media interest in self-care. There is some light in the sexual wellness space, both in products from companies like Hello Cake and apps and digital therapeutics in the mental health space.
Inclusive Specialization
The wellness space like others has become more focused on being inclusive. This not only means a change in marketing approach, but also a change to products that are targeted more specifically at a demographic group. This is an opportunity for startups to show care for communities of all types.
Companies with a more inclusive and sustainable approach to staffing will fare better in funding stages as consumer desires drive business decisions.
Venture Capital has shifted with COVID, and will likely shift again as we emerge beyond a vaccine. If the first half of 2020 is any indication, sustainable companies, and those focusing on fitness and mental health at home will continue to win the day.
It’s hard to say what the future holds, but the one thing we can count on this year is change.