Digital Health Funding Steadied in Q1 After a Year of Decline

Digital Health Funding Steadied in Q1 After a Year of Decline


Global funding for digital health companies finally stabilized in the first quarter of this year. The sector raised $3.4 billion in Q1, which is the same amount it raisedh during the last year’s Q4, per a new report from CB Insights.

Q1 of 2023 marks the first time the digital health world didn’t experience a quarter-over-quarter funding decline since Q4 of 2021. By holding steady, digital health companies defied the dwindling funding totals seen across all sectors raising money in the venture capital landscape, where funding dropped by 13% quarter-over-quarter.

There were 387 deals in the digital health sector in Q1, a slight increase from 383 in Q4 of last year. This trend also stood in contrast to what’s happening in the overall venture capital environment, which saw deals drop for the fourth quarter in a row.

About 68% of the venture capital poured into digital health companies in Q1 went to U.S.-based startups — they received $2.3 billion in funding. The quarter’s top 9 deals, which were worth a combined $1 billion, all involved American companies.

U.S.-based startups may have received most of the funds from Q1’s top deals, but European and Asian ones did better when it comes to deal size. The median deal size for American digital health companies so far in 2023 is $4.5 million, down from $5 million in 2022 and $6 million in 2021. Meanwhile, Asia’s year-to-date median deal size is now up to $4.3 million after being at $4 million for the past two years. Europe’s deal size has been steadily increasing since 2019, now reaching a year-to-date median of $3.1 million.

Across the global digital health sector, mega-rounds (those worth $100 million or more) continued to fall in Q1. There were only three of these rounds.

Mega-round funding fell 85% year-over-year in Q1, with these three deals representing just $575 million. Mega-rounds made up only 17% of digital health funding in Q1 — the lowest percentage since Q2 of 2019.

The largest mega-round belonged to Monogram Healthwhich raised $375 million. The Tennessee-based startup offers in-home care services for patients with chronic kidney disease. The other two rounds — both worth $100 million — were raised by Carbon Health and Kindbody. The former is a network of primary care and urgent care clinics, and the latter offers fertility benefits for employees.

Kindbody’s funding round took its valuation to $1.8 billion, making it the first new unicorn in the digital health space since Q2 of last year. The dearth of new unicorns is a trend seen across the broader venture capital landscape as well — there were only 13 unicorn births in Q1, which is the lowest count since Q1 of 2017.

The rate of M&A exits was the only major metric that was unequivocally on the rise for digital health startups in Q1. Global exits more than doubled quarter-over-quarter — from 15 in Q4 of 2022 to 29 in Q1. M&A exits surged in the digital health sector faster than in the broader venture capital world, which saw a quarter-of-quarter increase of less than 1% in Q1.

When only looking at the U.S., M&A exits more than tripled. The U.S. was home to two out of the three top M&A exits in Q1 — Eir Partners’ acquisition of pharmaceutical software company Gifthealth and Agilon Health’s acquisition of healthcare data platform MphRx.

Picture: Feodora Chiosea, Getty Images



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