Report: Well being tech funding drops as market ‘rebalances’

Well being tech firms within the U.S. and the European Union have raised about $23 billion thus far this 12 months, a downward shift because the market recovers from the large funding in 2021, based on a report by Silicon Valley Financial institution.

The report, which tallies funding by means of Sept. 30 this 12 months, famous the decline was significantly sharp within the third quarter, dropping 39% from Q2 and 67% from the peak of funding seen within the second quarter final 12 months.

Mega-rounds, or funding rounds price $100 million or extra, fell 40% in contrast with 2021, whereas the 12 months thus far has seen a 47% lower in new unicorns, startups valued at over $1 billion. 

In the meantime, the report discovered zero well being tech IPOs from venture-backed firms within the U.S. and EU thus far this 12 months, whereas efficiency of firms that went public in recent times trended downward.

However there was an uptick in merger and acquisition acquisition exercise, although it has tapered because the 12 months progressed. Whereas there have been 48 offers in Q1, there have been solely 30 within the third quarter. Median acquisition costs have been considerably down as buying firms tried to stability the lofty valuations seen over the previous few years. 

“We have moved from a growth-at-all-costs period to an period that emphasizes clear worth creation, whether or not it is by means of enhancing well being outcomes, entry or affordability. Funding has shifted into earlier phases the place valuations are corrected from final 12 months’s sky-high ranges,” the report’s authors wrote. “With a report quantity of dry powder accessible to healthtech startups, and mergers and acquisitions on the rise, there may be nonetheless an amazing alternative for healthtech firms to develop.”

Nevertheless, there have been different vibrant spots within the well being tech discipline thus far in 2022. Although funding has nonetheless slowed, psychological well being firms have truly seen median deal sizes and valuations improve. 

Curiosity in platform instruments addressing a number of psychological well being circumstances is rising, with platform firms incomes 69% of investments thus far this 12 months, up from 51% in 2021. The report notes the sector has seen extra firms providing culturally competent psychological healthcare.

“As MH care demand soars, we anticipate extra level options to broaden to platform to develop their affected person bases,” the report’s authors wrote. “Regardless of market saturation, level resolution valuations have risen in 2022. Their deal with single circumstances permits for high-quality, specialised healthcare, particularly for increased acuity MH problems like treatment-resistant despair, OCD, and so on. Curiously, level resolution median deal dimension in 2022 ($12M) is double platform’s ($6M).”

Alongside a development in female-founded well being tech firms, ladies’s well being startups have raised $877 million thus far in 2022. Although that tracks under final 12 months’s $1.4 billion, investments are 30% increased than the full-year funding in 2020.

Fertility and being pregnant care have been an enormous a part of the ladies’s well being market, making up 68% of funding. 

“The rise in investments regardless of the market’s broader downturn is promising for the WH trade,” the authors wrote. “As these firms develop and mature, they’ll scale to serve extra ladies and their numerous well being wants.”