Digital well being startups raised $2.2 billion throughout 125 offers within the third quarter this 12 months, marking the lowest-funded quarter since This autumn 2019.
The report by Rock Health discovered digital well being funding has reached $12.6 billion throughout 458 offers to this point this 12 months, far under 2021’s booming funding panorama. Funding additionally fell 48% between Q2 and Q3 this 12 months, whereas the variety of offers solely dipped 14%.
Although it looks as if 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 large digital well being information this quarter.
“Given the 12 months’s uneven enterprise waters and public market correction, buyers are holding again from the market, ready to strike as soon as issues stabilize. Q3’s low funding numbers – the bottom quarterly funding complete up to now 11 quarters – replicate 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 12 months’s first digital well being public exit.”
So why have been there so few later-stage offers this quarter? The report famous solely six raises at Collection C or greater, in contrast with 19 in Q2 and 32 in Q1. There have been additionally solely two mega rounds, or rounds value $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 make the most of the booming funding surroundings, others could also be taking place quietly by means of spherical extensions or enterprise debt, and there are some rounds that simply aren’t taking place.
The quarter additionally noticed some shift through which worth propositions are scooping up enterprise {dollars}. Firms touting nonclinical workflow instruments have raised $1.8 billion to this point this 12 months, taking the highest funded worth proposition in contrast with seventh place in 2021. That would replicate a continued concentrate on enhancing clinician burnout and managing workers shortages.
Digital psychological well being firms proceed to steer within the top-funded therapeutic space, bringing in $1.7 billion to this point in 2022. The report additionally famous a shift to extra advanced 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 autumn carefully to see which of those traits take maintain to form the market going into 2023. Small ripples can result in large waves – and we’re curious to see the place these directional turns lead.”
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