Are health tech opportunities being squandered?

A recent investor rating reveals a 5x decline in funding for health technology. The market appears to be experiencing some significant challenges following a massive pandemic-driven boom in digital health investing that we observed in 2021. 

Key points:

  • Health tech funding totalled $2.2 billion in the third quarter of 2022, a dramatic decrease from $11 billion in the second quarter of 2022. 
  • According to the Health Tech 50 study, the investor distribution by deal stage type in the digital health sector has remained moderately altered. 
  • In 2022, the largest investment activity was seen in digital health firms focusing on complicated diseases such as cancer and mental illness.

The amount of money raised for health technology in the third quarter of 2022 was $2.2 billion, which was much less than the $11 billion raised in the second quarter and the least amount since 2019. There is no doubt that the funding landscape for health technology will be very different in 2022 than it was in 2018.

But why?

According to a recent Health Tech 50 report published by Kilo Health and Galen Growth, the sharp loss in deal value was accompanied by a decline in the total number of unique investor transactions, which fell by 35 per cent in Q2 2022 as compared to 2021.

It’s important to note that the slowdown wasn’t exclusive to the digital health industry. According to Crunchbase, global venture capital reached $160 billion in Q1 2022, a 13 per cent decrease from the amount raised in Q4 2021.

The good news is that, though the pace of investments has dropped, VC funding for healthcare companies is still ahead of where it was back in 2020. And while it’s true that increased interest in digital health has cooled off, health tech startups remain a focus for investors – even despite the fact that the dynamics of the market have shifted.

Investors that are standing behind the best deals in health tech 

In 2022, a few mega-rounds dominated total funding for the sector, including kidney care platform Somatus’ $325 million series E. Freenome (an early cancer detection business) raised $290 million in a series E financing. 

Despite the fact that the health tech sector has been declining this year, the investment landscape remains healthy and full of opportunity. Some investors are making major splashes in this attractive industry, according to the Health Tech 50 rating.

The rankings were determined using a number of measures, including direct parameters (such as the number of portfolio firms and exits in the last 18 months) and indirect indicators (brand awareness score, public score, and more).

Here are the top most prominent funds on the list; Khosla Ventures (Early Stage), General Catalyst (Growth), Google Ventures (Corporate) or MTIP (Public’s Favourite).

Australian HealthTech market and investment

Over 16 healthcare companies are listed in Australia, with a market value of more than $1 billion. CSL, Cochlear, Sonic Healthcare, Fisher & Paykel, Ramsay Health, and ResMed are among the companies worth $10 billion or more. 

Furthermore, the following five Australian healthtech businesses are considered to be valued at more than $100 million: HealthEngine, HotDoc, Eucalyptus, Harrison.ai, and Seer Medical. According to Ben Armstrong, founder of Archangel Ventures, one of the most difficult areas to succeed in is healthtech.

This is due to customer behaviour, the business environment, and the legislative system designed to protect customers from physical harm. See the full ranking and download the report here: healthtech50.com 

About Health Tech 50 

Hosted by Kilo Health in partnership with Galen Growth, Health Tech 50 is a platform that was created to acknowledge forward-looking VCs allocating capital to speed up the transition beyond traditional healthcare.

Learn more at healthtech50.com.

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