According to a new report from Pitchbook, the healthcare sector's share of the global private equity and venture capital deal count is expected to further decrease in 2024. In 2020, healthcare accounted for 13.7% of the global private equity deal count, which has now fallen to 10.8% in 2023, the lowest level since 2015. The industry's share of global venture capital deals peaked at 18.4% in 2020 and decreased to 16.5% in 2023. Pitchbook's analysts anticipate these percentages to continue declining in both categories in 2024.
The report attributes this trend to the ongoing impact of the COVID-19 pandemic and its economic fallout rather than a lack of innovation or growth in the healthcare industry. Generative AI has been a notable area of investor interest in 2023, especially in clinical documentation and medical imaging interpretation. The report suggests that in 2024, investor interest may shift towards companies offering generative AI products that enhance care coordination, using large language models to address employee questions and perform specific tasks.
Surgical robotics has also attracted significant investment in 2023, with funding exceeding $860 million. Pitchbook's analysts predict a further increase in funding for surgical robotics startups in 2024, citing factors such as an ageing population, new opportunities in untapped sectors, and the growing appeal of robotic solutions in light of healthcare workforce challenges.
While there has been an IPO freeze in the digital health space in 2023, the report anticipates a change in 2024, with at least three digital health companies expected to go public. However, the report also highlights a challenging market environment for late-stage digital startups, including a limited number of acquirers, low investor demand for unprofitable IPOs, and economic headwinds. The report concludes that even in a scenario where interest rates decline, the impact on the venture market is expected to be gradual, and lower rates may not provide an immediate solution for driving significant deal flow and IPOs.
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