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Digital health deal value hit a new low in Q2

Aaron Weitzman
Illustration of a doctor's bag with stethoscope featuring a computer mouse at the end

Illustration: Sarah Grillo/Axios

Digital health deal value continues to sink, falling from $1.2 billion in Q1 to $900 million in the second quarter of 2023, per a recent report from PitchBook.

Why it matters: The number of venture capital deals quarter-over-quarter stayed the same, indicating waning investor confidence in the sector.

By the numbers: While both Q1 and Q2 saw 73 VC deals, overall deal value dropped 29.5% quarter-over-quarter.

  • Deal value in the second quarter of 2022 stood at $1.7 billion.
  • The two digital health categories receiving the most funding this year are teletherapy and behavioral health, which raked in $377.6 million, and care coordination and navigation, which took in $478.8 million.
  • The median deal size of angel and seed deals rose to a multiyear high of $5.4 million.
  • Late-stage and venture-growth VC deal sizes, on the other hand, dipped, with median deals of $6.4 million and $15.1 million, respectively, in the first half of the year.

Between the lines: Most deals being completed in today's market are weighed toward structures with existing investors, the report notes.

  • Additionally, digital health has seen greater rates of debt financing and rounds with undisclosed valuations.
  • A reduced appetite for late-stage deals, as exit outlooks still remain murky, and less interest in unprofitable startups are also weighing on the sector.

What's next: With the number of deals down across all stages, digital health this year is on track to have "at least 25% fewer deals than 2022," the report says.

Yes, but: It's not all doom and gloom, as tech-enabled care and telehealth platforms have recently picked up funding momentum.

  • "While we previously wrote about the fragmentation and oversaturation of general telehealth services, there has been a reemergence of investor interest in the space driven by a desire to link accessible primary care to chronic condition management," writes Aaron DeGagne, an emerging technology analyst at PitchBook.

The bottom line: "The current reality is that digital health funding remains in a down trend, and we don't expect a material uptick in funding for at least the next several quarters," DeGagne writes.

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