Dive Brief:
- Digital health startups raised just $3 billion globally in the third quarter, marking the sector’s lowest level of quarterly funding since 2016, according to a new report by CB Insights.
- Deal count dropped 33% quarter over quarter to reach 247, the lowest number in nearly a decade, according to the analysis. Funding fell 14% from last quarter, contrary to a broader increasing venture funding landscape.
- Overall, global digital health funding has hit $10.2 billion so far this year, only 40% of last year’s total. Just over a thousand deals have closed in 2023, about half the final count of 2022.
Dive Insight:
Digital health funding exploded in the wake of the COVID-19 pandemic, with startups scooping up $52.4 billion worldwide in 2021, according to CB Insights’ tally.
But investment began to slow last year, and funding has fallen further in 2023. Merger and acquisition activity could be on the horizon for digital health companies as funding dries up, and many startups that raised funds during the pandemic-era boom market will likely have to come back to market soon, according to investors.
Point solutions companies may be even more ripe for M&A as buyers of digital health products look for integrated products that can tackle multiple health concerns, experts told Healthcare Dive this summer.
Digital health funding falls to lowest level in years
Some companies are still raising capital, even in a more challenging investment environment. Mega-rounds, or deals worth $100 million or more, ticked up to six in the third quarter, making up nearly 30% of overall funding.
Care delivery and navigation technology startups led other company types in funding, bringing in $1.3 billion across 105 deals.
Though funding overall declined, median deal size in the year so far is $3.8 million, only down 5% compared with 2022. The authors partly attribute this stability to early-stage deals, which comprised 64% of deals reported this quarter and only slipped in median size by $0.1 million so far this year.
Still, the digital health sector created zero new unicorns, or startups valued at more than $1 billion, for the second consecutive quarter. The IPO market is frozen too, with no public entries reported in the third quarter.
