A brand new report launch by CB Insights discovered that traders are maybe lastly placing the brakes on the runaway sector that’s digital well being with funding declining precipitously within the first quarter of the 12 months. In Q1, international digital well being funding was $10.4 billion, a 36% lower from the earlier quarter the place $16.2 billion was invested. The primary-quarter funding complete additionally marked a 6-quarter low, in line with the report.
The quarter-on-quarter decline in digital well being funding was particularly stark contemplating that different sectors additionally skilled funding reductions however none the place as massive as that in digital well being — as an example, fintech and retail tech dropped by solely 18% and 11 % respectively from the earlier quarter.
The 36% discount in international digital well being funding was mirrored within the U.S. as effectively. After reaching an all-time excessive in This fall final 12 months, U.S.-based digital well being startups raised solely $7.2 billion in Q1 of 2022, a 37% decline. Firms with headquarters within the U.S. account for 69% of complete digital well being funding and half of all offers.
Firms elevating mega rounds — the place greater than 100 million is invested — encountered a difficult local weather. Within the first quarter, mega spherical funding was greater than halved to $4.4 billion, down from $9.2 billion in Q2, 2021.
Inside digital well being, the sub-sector that took an actual hit is psychological well being. Funding tumbled 60% to $792 million, from a whopping $1.97 billion in Q1, 2021. The primary-quarter quantity additionally mirrored the least funding that psychological well being startups have collectively acquired since This fall of 2020. Of the funding that did go into the sector, 84% went to startups based mostly in the US.
Maybe it’s not a shock that behavioral and psychological well being funding took such an enormous hit. Within the recently-concluded INVEST convention in Chicago, Michael Yang, managing companion of OMERS Ventures, stated on a panel dialogue that behavioral well being is essentially overfunded and founders are underneath large stress to hit metrics.
Digital therapeutics additionally took an enormous hit this previous quarter, bringing in simply $495 million within the first quarter of the 12 months in comparison with $1.04 billion in This fall of 2021, a drop of 53%.
The decline in telehealth was not as massive as in digital therapeutics or psychological well being. It skilled a 32% discount with corporations elevating a complete of $3.2 billion in Q1 2022 from 4.7 billion within the final quarter of 2021. Nonetheless, there have been extra offers on this quarter — 12% greater than in This fall, 2021. A lot of the $3.2 billion funding in telehealth —$2.5 billion of it — went to United States corporations. Europe clocked in with $311 million in telehealth funding, adopted by Asia with $304 million. Of these telehealth offers in Q1 of 2022, 52% went to early-stage corporations and 21% to mid-stage.
Nonetheless, not all areas inside digital well being suffered a decline this previous quarter. Specifically, funding for each scientific trials tech in addition to well being IT grew barely from This fall of final 12 months to Q1 of 2022. Scientific trials tech garnered $585 million within the first quarter, in contrast with $584 million in This fall of 2021. Well being IT introduced in $2.3 billion in Q1, 2022, up from $2.1 billion in This fall of final 12 months.
The primary quarter noticed six new unicorn corporations emerge, in contrast with 13 newly-minted unicorns within the fourth of quarter of 2021. Of these six, three have been in telehealth.
If the funding taps are flowing much less effectively within the non-public markets, within the public markets it virtually ran dry. The primary quarter of 2022 had simply 1 IPO, a 96% drop off from This fall of 2021, which had 23 IPOs. Paralleling this steep drop off was the scenario in SPAC offers: Q1 of 2022 had none whereas This fall of 2021 had 6. The report speculated the sharp lower in public exits could possibly be as a result of lackluster IPO returns final 12 months.
M&A for digital well being didn’t expertise the identical drop off, in line with the report. It has held regular at greater than 100 for the previous six quarters, peaking at 170 offers within the second quarter of 2021. Within the first quarter, it stood at 138.
Picture: champc, Getty Pictures; Charts: CB Insights
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