Dive Brief:
- Olive, a healthcare AI startup that was once valued at $4 billion, announced on Tuesday that the company will shut down.
- The startup, which sold revenue cycle automation tools, will sell its clearinghouse and patient access businesses to Waystar and Humata Health. Those units represent “the heart of Olive’s business,” and the company will wind down the rest of its operations.
- Olive had previously raised hundreds of millions of dollars, including a $400 million funding round, at the height of the digital health funding boom in 2021.
Dive Insight:
Olive’s shutdown is the latest digital health powerhouse to close its doors after interest and funding in the space has waned since pandemic-fueled highs.
U.S.-based digital health startups raised more than $29 billion in 2021, shattering previous totals and propelling some companies to enter public markets.
But funding in the space has declined over the past two years. Startups raised just $2.5 billion in the third quarter of 2023, marking the second-lowest quarter of funding since the fourth quarter in 2019, according to Rock Health. The IPO market has also frozen, with few digital health players turning toward the public markets.
Companies like Olive that thrived during the pandemic-era digital health rush have filed for bankruptcy this year, including Pear Therapeutics, which developed digital therapeutics for substance use disorder and insomnia, and digital health firm Babylon.
Olive faced financial struggles over the past year. The company announced it had laid off about 450 workers in July 2022, with CEO Sean Lane saying the company’s “fast-paced growth and lack of focus” had strained resources. Olive then cut 200 more jobs in February.
The automation startup had also divested product lines, including its population health and 340B management tools and its utilization management products for payers.
Health startups are ripe for merger and acquisition activity in the midst of a stalled funding environment, investors said at HLTH last month. Acquirers may take advantage of the worsened market to buy up new assets, particularly from point solutions providers who face heightened competition from firms that offer a range of products.
