A recent investment report by Rock Health has found that digital health funding declined to $15.3B in 2022, compared to $29.3 billion in 2021.
Key Digital Health Funding 2022 Insights
The average deal size was found to be $26.7 million, with only 35 mega-deals (rounds worth $100 million or more) in 2022, a large drop off compared with 2021's 88. While the median deal size for Series A rounds reached a high of $15 million last year, check sizes declined for B, C and D raises.
While some companies avoided raising money in the more challenging market to avert a down round, startups offered shares at a lower price compared with their previous financing rounds.
Only 37% of the startups that raised funds in 2022 sold directly to consumers compared with 43% in 2021.
Investors were also found to be less willing to take risks on startups with hefty valuations, favoring slower growth with more established outcomes.
On-demand healthcare was ranked as the highest-funded segment, raising $2.4 billion, while companies promoting nonclinical workflow tools ranked third, raising $2.2 billion. Clinical workflow software came in at the eight position.
In terms of clinical indications, startups offering mental health tools continued to hold the top spot, raising $2.1 billion.
Big tech continued its push into healthcare. 2022 saw Big Tech players making efforts to diversify revenue streams and build businesses in data infrastructure, analytics, and finance. The report noted a more conservative focus in areas where these companies are already successful.
Slow and Steady 2023
Looking ahead to 2023, the report argues, declining funding isn't the death of digital health.
For 2023, analysts expect healthcare startups and enterprises to build on slow and steady strategies like managing cash, restructuring to accommodate revenue volatility, and investing in technology infrastructure.
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Click here to read the complete report.