After the highs of 2021, investing in digital health has dropped off in 2022.
With $4 billion invested, digital health venture capital funding fell 39% from Q1 2022 to Q2 of this year, according to Digital Health Business & Technology’s new report. Funding decreased 48% year-over-year compared to $7.7 billion raised across 195 deals during Q2 2021. Venture capital funding in first half of 2022 came to $10.6 billion, a 29% decrease compared to the $14.9 billion raised in first half of 2021.
Here are five additional items from the Digital Health Funding and M&A: First Half 2022 Report.
For a complete look at every funding deal and all M&A activity from Q2 2022, buy the complete report.
1. Consumer-centric sectors struggled
Consumer-facing companies, comprised of companies focused on telehealth, mobile and personal health, scheduling, rating and comparison shopping, and social health companies—raised $1.4 billion across 89 deals in Q2. Each of those totals dropped significantly when compared to Q2 2021 when there was $4.1 billion in total funding across 129 deals. That’s a 71% year-over-year decrease. For personal health, year-over-year funding decreased 84% in Q2 2022 compared to $1.3 billion raised across 16 deals in Q2 2021.
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2. Certain sub-sectors showed resilience.
While digital health funding endures a correction, certain sub-sectors were more resilient than others. As many health systems struggle with labor shortages and hiring, 50% of investments were to businesses that drive efficiency, including those focused on clinical decision support, data analytics and practice management. Even with the slowdown, 2022 is on pace to end up as the second-best year for venture capital funding barring a severe downturn in the second half of the year.
3. IPO activity came to a standstill.
There were no IPOs in the first half of 2022, compared to 12 last year. While experts say some of the downturn can be pinned on broader economic factors, many predict it will persist throughout 2022. Further, the performance of public companies did little to instill confidence. Nearly all lost value through the first half. Without any IPO activity in Q2 2022, announced debt and public market financing raised by digital health companies amounted to $154 million across five deals in Q2 2022, compared to $3.4 billion raised across 11 deals in Q2 2021
Read more: Digital health IPOs: Here yesterday, gone today
4. Deals remain concentrated on the coasts.
Digital health deals and revenue remain overwhelmingly concentrated in coastal metropolitan areas. In Q2, more than half of the total dollars secured were routed to companies in California ($1.4 billion), Massachusetts ($651 million) and New York ($559 million). The highest ranked non-costal state was Texas, which totaled $78 million across three deals in Q2 funding.
5. Biggest deals of 2022—thus far
The top venture capital deals in first half 2022 were $549 million raised by Doctolib, followed by TigerConnect and Biofourmis with $300 million each, Lyra Health with $235 million, and DNAnexus, Alto Pharmacy, and Transcarent raised $200 million each. Biofourmis was the only one that happened in Q2 and that was in April.
Read more: Biofourmis CEO on $300 million funding round, reaching ‘unicorn status’
