5 VCs on the election and digital health investing

Next month's presidential election is making digital health investors cautious. 

The election has caused many investors to predict a challenging funding environment for the rest of the year, but they are confident that 2025 will present new opportunities. The Federal Reserve's decision cut the benchmark rate by 0.5 percentage points at its Sept. 18 meeting, a growing demand from providers for artificial intelligence and a maturing slate of digital health companies led many venture capital leaders to view the market favorably.

Related: Whether Harris or Trump wins 2024 election, M&A challenges await

Here is how five venture capital investors see the rest of 2024 playing out. Responses have been edited for clarity and length.

Rebecca Mitchell, managing partner at venture capital firm Scrub Capital

Whenever there's ambiguity and unpredictability from a macroeconomic perspective, that is bad. People are expecting investors to slow down heading into the election. Regardless of the outcome, I expect things will get better afterwards only because the outcome will be clear and then you can make decisions accordingly. 

Steve Kraus, partner at venture capital firm Bessemer Venture Partners

The capital markets ecosystem around other venture-backed tech companies is much more mature and robust than it is in digital health. Lowering interest rates will get public market buyers back into investing in venture-backed and initial public offerings. After that happens, investment into the digital health companies will come. I don't know how long it is going to be—a couple months, six months or a year? I think we need to see those first crop of IPOs, which will probably be more software-as-a-service or financial technology companies. Those are going to be important bellwethers for the venture-backed markets in general. I think that's going to be important milestone for the digital health companies that are going to go public.

Bill Geary, co-founder and general partner of venture capital firm Flare Capital Partners

There's always election hesitancy, and it comes at a time in the fourth quarter when many young, emerging companies as well as legacy companies do a disproportionate share of their business. So, the fourth quarter is important as a year maker for most companies. I think this means there will be a little near-term choppiness but I think there is going to be more stability long-term. People just want to see what what's going to transpire in the election.

Lynne Chou O'Keefe, founder and managing partner at venture capital firm Define Ventures

This segment really didn't have real venture capital investment until almost 2019. When you look at us as a sector, we're still emerging. If you think about it, it's only been five years since that point. And as you think about just general venture math from when you invest in a company to when it exits, you're talking anywhere from seven-10 years for an exit. So, I think the early IPO window that we had back in 2020 and 2021 was like a very early crop of health tech companies. As the IPO window opens up this time around, we're going to see a greater level of maturity than we did the first time. 

Trey Bowles, managing director of venture capital accelerator TechStars physical health Fort Worth

At least on the early stage, investors are getting back in the game. I think at a later stage, it's a little harder because you got so many companies that took down rounds. But at an earlier stage, they don't have that history that they have to explain. They don't have those mistakes they potentially made with overspending. At the time, these weren't necessarily mistakes. I do think before we see a massive change in the numbers, we will need to see more of a rate cut, but this first rate cut is a good indicator we're moving the right direction.