Digital health companies are pulling in less funding, though sectors such as at-home care and generative artificial intelligence are still attracting investors.
The average deal size in the first half of the year dropped to $24.8 million, a $1.7 million decrease from the 2022 average, according to data from Rock Health, a research and digital health venture firm. About 41% of the deals were not publicly classified with a series or round label, possibly signifying valuation shortfalls or declines in investments from prior rounds.
Two-thirds of companies with unlabeled rounds last announced a round in 2021 or 2022, Rock Health found.
Some companies unable to meet investor growth expectations have few choices but to accept less money, experts said.
“It is far more common [in the current funding environment] to see digital health companies with slower growth than expected,” said Dr. Justin Norden, a partner at venture capital firm GSR Ventures.
“Founders are recognizing that it is a different landscape,” he said. “[They] are being transparent for what they need to do.”
The data are the latest indication of the digital health sector's slowing funding environment.
"It didn't surprise our team at all," said Adriana Krasniansky, Rock Health’s head of research. "As early as late 2021, we were noticing that companies were pulling up some of their fundraising timelines in order to make the most of the cash on the table."