Investment in digital health cools after a torrid year

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Last year was a banner year for venture capital investments in digital health startups – the sector raised $29.1 billion across 729 deals, with an average size of $39.9 million. That market boom is over, but the digital health investment space has by no means collapsed, according to a recent report of Rock Health. It’s just to cool off after a hot year.

Digital health startups raised $10.3 billion across 329 deals in the first half of this year, with an average size of $31.2 million. This puts the sector on track to raise $21 billion in 2022, about $8 billion less than the total amount raised last year.

Although the pace of investment has slowed in the first half of this year compared to 2021, venture capital funding for healthcare companies is still ahead of what it was in 2020, David Blumberg, CEO of the company venture capital Capital of Blumberg, pointed out in an interview. He said investment firms are still pumping money into the digital health space, and these startups are still developing technology that appeals to health systems.

“As healthcare systems continue to generate massive amounts of data, funding is flowing to startups that deploy AI and machine learning solutions to harness that data for prevention, diagnosis and treatment.” , did he declare.

Healthcare systems also continue to adopt technology from startups focused on telehealth and remote patient monitoring. Blumberg noted that this trend has been reinforced by the pandemic, which “has accelerated our societal migration to a more virtualized way of living and working.”

When choosing healthcare companies to invest in, Blumberg Capital only considers startups that can demonstrate they are leveraging data to improve clinical outcomes and reduce costs. Blumberg said the company looks at six Ts when evaluating businesses: theme, team, terrain, technology, traction and terms. All companies receiving financing from Blumberg Capital must be able to explain them in detail.

Ferrum and Theater are examples of two companies that entered Blumberg Capital’s portfolio in the past two years. The former uses algorithms to inexpensively and automatically digitize hospital X-ray diagnoses as a “second opinion” for quality assurance, error reduction and training purposes. The latter sells an AI-powered surgical tool that extracts and annotates key moments from real-world procedures to help train surgeons for future surgeries.

Blumberg Capital is an early-stage investment company. So Blumberg said she will always be able to choose from a steady stream of healthcare startups promising to harness data in new ways to benefit patients and healthcare professionals. The investment space is a bit different for later-stage startups. According to the report, later-stage digital health startups are using this market moment to reconsider valuations, cut expenses, and design their go-to-market strategies.

Some of these companies may need to adjust their expectations following large Series A or B transactions, which could mean selling shares at a lower price than they were sold in a previous funding round. . But that’s not true for all digital health startups that grew rapidly in their early years — Rock Health’s report noted that some of its own portfolio companies exceeded pre-market financial projections. large-margin pandemics.

One thing is certain, 2022 will not see as many startups enter public markets as last year. So far this year, no startups have gone public, compared to 23 releases in 2021.

Photo: aurielaki, Getty Images


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