Digital health funding declines, but check sizes swell: CB Insights

Dive Temporary:

World digital well being funding declined within the second quarter, and the variety of offers reached its lowest degree since 2014, in response to a brand new report by CB Insights. However there are some vibrant spots within the sector, like bigger test sizes and a rise in exits. 
Startups raised $2.9 billion throughout 235 offers worldwide, a 26% decline quarter over quarter, in response to the market analysis agency. 
However the annual common deal measurement for the primary half of 2024 reached $16.7 million, a rise of 40% from 2023 — an indication that traders are inking few offers with greater worth tags. 

Dive Perception:

The digital well being funding ecosystem has confronted a turbulent few years, with funding within the trade skyrocketing in 2021 amid the COVID-19 pandemic. 

However these sky-high funding ranges didn’t final. Analysts and trade watchers tracked an funding dip starting in 2022. Rock Well being, a digital well being enterprise capital agency and consultancy, famous extra startups quietly elevating cash from present traders and in search of extension rounds or unlabeled raises to remain afloat final 12 months. 

Nevertheless, some analysis companies have discovered indicators of enchancment or stabilization in digital well being funding in 2024. 

Although investor {dollars} flowing into the house fell quarter over quarter within the newest CB Insights evaluation, different metrics recommend “a maturation of the panorama alongside a shift in funding technique,” Ja Lee, managing analyst for healthcare on the market analysis agency, stated in a press release. 

Bigger test sizes are one change, she stated. One other is a declining deal with early-stage investments, which have sometimes made up 60% or extra of all digital well being offers, in response to the report. 

In 2024 thus far, early-stage offers have dropped to 51% of all investments, as traders look to “extra built-out options,” Lee stated.

The U.S. market — already a dominant participant in the case of digital well being — is pulling in a bigger proportion of investments too, pushed partially by progress in mid- to late-stage offers. U.S. investments make up 61% of offers within the second quarter, up from 54% final quarter. 

One other doubtlessly vibrant spot for the digital well being market is an uptick in exits, in response to the evaluation. The report discovered 32 exits within the interval, a 23% enhance quarter over quarter.

The quarter noticed two preliminary public choices, one merger with a particular objective acquisition firm and 29 mergers and acquisitions. Three firms using synthetic intelligence went public throughout the second quarter, together with precision drugs agency Tempus AI, drug discovery firm XtalPi and distant being pregnant monitoring firm Nuvo Group.