Digital well being startups raised $3.4 billion throughout 132 offers within the first quarter, in response to Rock Well being’s newest funding report.
Although funding in Q1 surpassed the final two quarters — the place firms notched $2.7 billion in This autumn and $2.2 billion in Q3 — the authors famous this most likely is not a return to the booming funding surroundings seen in 2021 and early 2022.
“General, Q1’s mega-deal upticks don’t essentially foreshadow a sector rebound. Fairly, they point out that the sector’s extra established gamers and traders are looking for their sea legs on this market, selectively deploying these dry powder reserves they’ve been stockpiling since 2021 into groups and initiatives they know,” Rock Well being’s Mihir Somaiya, Galen Shi and Adriana Krasniansky wrote.
For one, digital well being noticed a comparatively massive variety of mega-deals, or rounds value $100 million or extra, after a drought throughout the previous two quarters. The report famous six mega-deals in Q1, which made up 40% of the quarter’s whole digital well being funding.
A few of these offers included kidney care firm Monogram Well being’s $375 million increase, staffing startup ShiftKey’s $300 million spherical and medical trial platform Paradigm’s $203 million Sequence A. Notably, Paradigm was co-incubated by ARCH Enterprise Companions and Normal Catalyst.
However digital well being firms nonetheless aren’t going for a public exit. The report discovered zero IPOs within the first quarter, and digital well being shares traded practically 50% decrease originally of 2023 than they did firstly of 2021.
The unappealing public markets could also be one cause for the expansion of mega-deals as late-stage startups search for extra cash. The report additionally discovered a rise within the proportion of Sequence D+ rounds relative to different deal levels in contrast with final 12 months. Nonetheless, median Sequence D+ deal dimension is all the way down to $58 million from $72 million in 2022.
The aftermath of the Silicon Valley Financial institution collapse might additionally linger for digital well being funding. The report argued not all startups have been affected equally by SVB’s loss, and later-stage firms had extra choices when it got here to selecting a brand new financial institution.
“It’s onerous to overstate simply how supportive SVB was of the startup ecosystem, and the total ramifications of its closure and acquisition on expertise innovation might not be felt till quarters later,” the report’s authors wrote. “On the funding entrance, we anticipate that SVB’s collapse will contribute to the subsequent few quarters of startup financing (debt and fairness) shifting extra conservatively.”
In the meantime, the regulatory surroundings for digital well being can be shifting as the COVID-19 public well being emergency involves an finish. Congress has additionally launched a well being and site information privateness invoice, whereas the Federal Commerce Fee is cracking down on digital well being firms sharing well being information for promoting functions.
“Whereas some could mourn the Wild West of 2021 digital well being — unbridled demand, lax guidelines, low-cost cash — the subsequent period will foster digital well being entrepreneurship and intrapreneurship with guardrails that information innovation quite than stifle,” the authors wrote.
David Higginson will supply extra element within the HIMSS23 session “Leveraging In-Home Machine Studying Improvements for a Extra Human Contact.” It’s scheduled for Tuesday, April 18 at 1:15 p.m. – 1:45 p.m. CT on the South Constructing, Degree 1, room S104.