According to findings from CB Insights, funding for digital health startups dropped to $3.4 billion. The dip in funding has stretched to six quarters with the above figure being the lowest amount the segment would raise in a quarter since Q3 of 2017.
Despite the downward trend of funding, CB Insights noted that some startups with serious growth potential were supported by investors. For context, Q2 of 2023 showed an increase in early-stage median deal sizes and mega-round deals.
The digital health segment raised $3.4 billion in the last quarter, $100 million less than what it registered in Q1 ($3.5 billion). It’s worth noting that other sectors also suffered dips in funding. While retail tech recorded a finding drop of 24% quarter-on-quarter (QoQ), CB Insights say fintech’s funding decreased by 48% QoQ.
Care delivery and navigation tech companies got more funding in Q2 of 2023
The number of deals in the digital health space fell by 115, reflecting a Quarter on Quarter decrease of 25%. Based on the study, businesses in care delivery and navigation tech closed the most deals in Q2 (152). Their deals were worth $1.5 billion which was 44% of digital health’s entire deal volume for the past quarter.
Following in second place was the monitoring, imaging, and diagnostics segment. It recorded 77 deals worth $700 million. Health insurance and RCM tech completed 13 deals, raising $400 million and occupying third place.
Interestingly, Q2’s largest digital health deal came from the health insurance and RCM tech niche. Aledade, the biggest network of independent primary care practices in the US, raised $250 million in a Series F round.
Meanwhile, players in the Health data and analytics segment secured $300 million from 30 deals. Finally, Drug R&D tech, digital therapeutics, and digital pharmacy tech closed 25 ($200 million, 48 ($200 million), and 3 deals ($22 million) respectively.
Of the $3.4 billion generated in the last quarter, five companies closed deals that represented 26% of digital health’s Q2 funding. The companies are Aledade ($260 million), Heartflow ($215 million), Strive Health ($166 million), Saluda Medical ($150 million), and Author Health ($115 million).
Read also: Nigerian health tech startup, Remedial Health raises $4.4m seed funding
Other highlights from the study
Four US-based venture capital firms, Andreessen Horowitz, Flare Capital Partners, Frist Cressey Ventures, and SOSV emerged as the major investors for Q2. Although digital health witnessed a funding drop in Q2, US-based startups contributed 66% of the global funding for the quarter.
CB Insights also noted a 10% decline in the median digital health size. Last year, $4 million was registered. Currently, it’s $3.6 million. Meanwhile, mega-round deals and investment grew in this quarter, a trend that hasn’t been seen since Q4 of 2021.
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