Digital Well being’s Funding Rebound Is Going Nicely, Market Analysis Reveals

The enterprise capital market appears to be actually normalizing following the highs and lows of the pandemic, which is sweet information to the hundreds of healthcare startups on the market vying for funding {dollars}.

World enterprise funding totaled $65.7 billion within the second quarter of 2024, in accordance with a latest report from market intelligence agency CB Insights. 

The market analysis additionally confirmed that deal quantity is reducing whereas deal dimension is rising. This has resulted within the common enterprise capital deal dimension improve of 17%, now $14.4 million in comparison with the $12.3 million common deal dimension from final yr.

One other report — this one from Rock Health, a seed fund that helps startups working in digital Health — famous that this yr’s digital Health enterprise funding {dollars} are on tempo to exceed the totals from 2019 and 2023, which the report known as “useful comparators outdoors of the pandemic-fueled funding cycle from 2020 to 2022.”

Throughout the first half of this yr, U.S. digital Health startups raked in $5.7 billion throughout 266 offers. The sector’s year-end enterprise capital fundraising totals for 2019 and 2023 had been $8.2 billion and $10.7 billion, respectively.

A big majority of the offers that occurred within the first half of 2024 had been early-stage offers, which means they got here in the course of the seed, Sequence A or Sequence B rounds. These early-stage transactions accounted for 84% of all offers within the first half of the yr.

Sequence A exercise was particularly sturdy within the first half of 2024 — with the median deal dimension being $15 million, which is $3 million bigger than the median Sequence A deal dimension final yr. The robust Sequence A exercise was pushed by giant rounds by startups like Zephyr AI, which raised $111 million in March, and Allez Health, which raised $60 million in Could.

Rock Health’s report additionally famous that unlabeled rounds — people who don’t have a chosen letter like “Sequence B” or “Sequence C” — are starting to wane within the digital Health startup sector. Final yr noticed a large inflow of those offers, setting a brand new annual report with 44% of final yr’s digital Health fundraising offers being unlabeled. Within the first half of this yr, 40% of offers had been unlabeled.

“Q1 and Q2 2024 confirmed a decline in share of raises that had been unlabeled (47% and 33%, respectively) from a peak of 55% in This fall 2023. This waning might mark the start of our return to a ‘extra regular’ cadence of labeled raises, one thing we predicted for 2024,” the report stated.

IT’s additionally value noting that three digital Health firms exited the startup market within the second quarter of this yr — following 21 months with out a public exit. Distant fetal monitoring platform Nuvo exited by way of an SPAC merger in Could, and income cycle firm Waystar and precision diagnostics agency Tempus AI launched IPOs in June.

In an announcement despatched to MedCity Information, Keith Figlioli, LRVHealth’s managing associate, stated he discovered Rock Health’s newest information to be promising.

“We’re in an lively and regular market, which would be the new regular. Good firms will discover their option to strong progress, and capital shall be obtainable for these with confirmed, sturdy enterprise fashions and enticing unit economics. There was simply over $10 billion in new cash invested final yr, and this yr we’re on observe for the same quantity. The brand new regular will most likely hover round that greenback quantity for some time as investments stay regular. The indicators are encouraging on each the M&A and IPO entrance, however we’re nonetheless within the early phases,” he acknowledged.

Image: Feodora Chiosea, Getty Photographs