Digital health startups raised $2.2 billion throughout 125 offers in the third quarter this 12 months, marking the lowest-funded quarter since This autumn 2019.
Tea report by Rock Health discovered digital health funding has reached $12.6 billion throughout 458 offers to date this 12 months, far beneath 2021’s booming funding panorama. Funding additionally fell 48% between Q2 and Q3 this 12 months, whereas the variety of offers solely dipped 14%.
Though it looks as if saying information for the sector, Rock Health researcher Mihir Somaiya wrote that the variety of small and earlier-stage offers stayed pretty regular. Plus, there was loads of massive digital health information this quarter.
“Given the years choppy venture waters and public market correction, investors are holding back from the market, waiting to strike once things stabilize. Q3s low funding numbers the lowest quarterly funding total in the past 11 quarters reflect that sentiment,” he wrote. Rock Health’s Adriana Krasniansky, Megan Zweig and Bill Evans additionally contributed to the report.
“Yet, even though the market isnt the same as it was, this quarter has featured some standout digital health activity, including major acquisitions by Amazon and CVSand Akilis SPAC close, this years first digital health public exit.”
So why have been there so few later-stage offers this quarter? The report famous solely six raises at Series C or greater, in contrast with 19 in Q2 and 32 in Q1. There have been additionally solely two mega rounds, or rounds price $100 million or extra.
The authors counsel three potential explanations behind the slowing late stage funding. Deals could have been pushed forward to 2021 to reap the benefits of the booming funding surroundings, others could also be occurring quietly by way of spherical extensions or enterprise debt, and there are some rounds that simply aren’t occurring.
The quarter additionally noticed some shift in which worth propositions are scooping up enterprise {dollars}. Companies touting nonclinical workflow instruments have raised $1.8 billion to date this 12 months, taking the highest funded worth proposition in contrast with seventh place in 2021. That might mirror a continued give attention to enhancing clinician burnout and managing workers shortages.
Digital psychological health firms proceed to steer as high funded therapeutic space, bringing in $1.7 billion to date in 2022. The report additionally famous a shift to extra advanced psychological sickness administration.
Somaiya wrote that whereas Q1 and Q2 could have appeared like an adjustment coming off the blockbuster funding of 2021, this quarter has demonstrated a transfer away from the pandemic-fueled digital health market.
“Rational prices promote long-term market health and, if anything, diminish near-term worries,” he mentioned. “Nonetheless, well be watching Q4 closely to see which of these trends take hold to shape the market going into 2023. Small ripples can lead to big waves and were curious to see where these directional turns lead.”
