Digital health funding holds steady in Q1 after year of decline

Article By: Emily Olsen

Blog Source From : https://www.healthcaredive.com/

Dive Brief:

• Global digital health funding held steady in the first quarter of 2023, capturing $3.4 billion for the second quarter in a row, according to a report by CB Insights. That marks the first period without a quarter-over-quarter funding decline since the fourth quarter in 2021.
• The number of digital health deals also stayed consistent, bumping up 1% from the fourth quarter last year to 387 deals.
• The digital health sector defied trends seen in the larger venture capital environment, where funding fell 13% quarter over quarter.

Dive Insight: 

Though investments in the sector held steady quarter over quarter, the report noted that digital health funding is still at its lowest level in years. Investments soared in 2021 in the wake of the COVID-19 pandemic, only to fall 57% year over year in 2022. 

Another challenge for startups emerged in March with the collapse of Silicon Valley Bank, a popular lender and bank for technology companies. According to analysts from Rock Health, SVB’s sudden failure likely halted digital health companies’ funding momentum from early in the year and forced them to quickly find new banking institutions. 

In the first quarter this year, 44% of funding went to care delivery and navigation technology companies, which raised a total of $1.5 billion. These startups also boasted the highest average disclosed deal size at $12.6 million. 

Monitoring, imaging and diagnostics tech startups scooped up $700 million, the second highest-funded category of digital health companies, while drug research and development companies came in third with $400 million. 

The digital therapeutics and wellness technology sector raised $200 million in the first quarter, but had the lowest average disclosed deal size at $4.3 million. Digital therapeutics companies are raising funds after Pear Therapeutics, a pioneer in the field recently filed for bankruptcy and was sold for parts at auction. 

Meanwhile, mega-rounds, or deals worth $100 million or more, continued to decline, making up 17% of digital health funding in the first quarter, the lowest level since the second quarter of 2019.

Mega-rounds in the first quarter of this year included kidney care company Monogram Health’s $375 million raise, primary care provider Carbon Health’s $100 million round and fertility startup Kindbody’s $100 million raise.

But M&A exits more than doubled quarter over quarter, reaching 39 in the first quarter compared with 15 in the fourth quarter last year. This period includes the highest number of M&A exits since the second quarter of 2022.