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Digital well being startups raised $2.2 billion throughout 125 offers within the third quarter this yr, marking the lowest-funded quarter since This fall 2019.
The report by Rock Health discovered digital well being funding has reached $12.6 billion throughout 458 offers to this point this yr, far under 2021’s booming funding panorama. Funding additionally fell 48% between Q2 and Q3 this yr, whereas the variety of offers solely dipped 14%.
Although it looks like dire information for the sector, Rock Well being researcher Mihir Somaiya wrote that the variety of small and earlier-stage offers stayed pretty regular. Plus, there was loads of massive digital well being information this quarter.
“Given the yr’s uneven enterprise waters and public market correction, traders are holding again from the market, ready to strike as soon as issues stabilize. Q3’s low funding numbers — the bottom quarterly funding complete previously 11 quarters — mirror that sentiment,” he wrote. Rock Well being’s Adriana Krasniansky, Megan Zweig and Invoice Evans additionally contributed to the report.
“But, although the market isn’t the identical because it was, this quarter has featured some standout digital well being exercise, together with main acquisitions by Amazon and CVS, and Akili’s SPAC close, this yr’s first digital well being public exit.”
So why had been there so few later-stage offers this quarter? The report famous solely six raises at Sequence C or increased, in contrast with 19 in Q2 and 32 in Q1. There have been additionally solely two mega rounds, or rounds price $100 million or extra.
The authors counsel three potential explanations behind the slowing late stage funding. Offers could have been pushed forward to 2021 to benefit from the booming funding surroundings, others could also be occurring quietly by way of spherical extensions or enterprise debt, and there are some rounds that simply aren’t occurring.
The quarter additionally noticed some shift wherein worth propositions are scooping up enterprise {dollars}. Firms touting nonclinical workflow instruments have raised $1.8 billion to this point this yr, taking the highest funded worth proposition in contrast with seventh place in 2021. That would mirror a continued give attention to bettering clinician burnout and managing workers shortages.
Digital psychological well being firms proceed to guide as high funded therapeutic space, bringing in $1.7 billion to this point in 2022. The report additionally famous a shift to extra complicated psychological sickness administration.
Somaiya wrote that whereas Q1 and Q2 could have appeared like an adjustment coming off the blockbuster funding of 2021, this quarter has demonstrated a transfer away from the pandemic-fueled digital well being market.
“Rational costs promote long-term market well being and, if something, diminish near-term worries,” he stated. “Nonetheless, we’ll be watching This fall intently to see which of those traits take maintain to form the market going into 2023. Small ripples can result in massive waves — and we’re curious to see the place these directional turns lead.”
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