The global digital health market, which was previously a favorite among venture capital investors, has seen a decline in funding. According to a report by CB Insights, the second quarter of 2023 witnessed the lowest funding level since Q3 2017, amounting to $3.4 billion. The total digital health funding for the first half of the year was $6.9 billion, which is only half of the previous year’s total. The number of deals was also at its lowest since Q2 2015.
The U.S. contributed to nearly two-thirds of the digital health funding in Q2, but this was an 80% decrease compared to Q1. The sectors that attracted the most interest from investors were care delivery and navigation technologies, with 152 deals amounting to $1.5 billion, followed by monitoring, imaging, and diagnostics technology with 77 deals and $700 million in investments.
Despite the decline in overall digital health funding, there’s a growing interest in artificial intelligence (AI) among investors and healthcare leaders. Alex Lennox-Miller, an analyst at CB Insights, highlighted that clinical support areas and diagnostic imaging remain the most promising AI applications. Additionally, innovative uses of AI for automating documentation are gaining traction. However, there’s still a need to improve the accuracy of these systems. Lennox-Miller also emphasized that generative AI will have a more significant role in digital health systems in the future.
Some notable U.S. equity deals in Q2 included:
- Adelade: A startup that uses data analytics to assist independent physicians’ offices in transitioning to value-based care models received $260 million in Series E funding.
- HeartFlow: A company that developed AI-powered software to map the heart’s coronary arteries using a 3D CT scan secured $215 million in Series F funding.
- Strive Health: A provider of value-based care for adults with chronic kidney disease received $166 million in Series C funding.
- Author Health: The company secured $115 million for its platform that offers care for Medicare Advantage patients with severe mental illnesses and substance-use disorders.
In conclusion, while there’s a decrease in digital health funding, AI continues to be a focal point of interest for investors, indicating its potential transformative impact on healthcare.