Digital health venture funding hit the skids in the first quarter as the funding market slowed from 2021’s breakneck speed. Investment activity remained at near historic highs but a fast start to the year was followed by a sharp correction, as investors grew cautious due to wider market volatility and the lackluster performance of public digital health companies and SPAC vehicles.
Global venture capital funding contracted by 13% in the first quarter however digital health in particular felt the headwinds of market volatility, concerns around global energy supply, supply chain disruptions and the continued presence of Covid-19 variants around the world. This contraction must be seen in the context of 2021’s bumper year for digital health which saw more capital deployed than the five years 2013-2017 combined. Many of the largest deals to complete in the US market focused on clinical workflow, with standout deals also seen in wellness, patient empowerment and population health.
French startup Doctolib’s $549M funding round (valuing it at $6.4B) was the most eye-catching digital health deal of the quarter. The deal makes Doctolib the highest valued French startup across all sectors. In the US the value-based kidney care platform Somatus raised $325M as it continues its mission to reduce the ongoing cost of managing chronic kidney disease and preventing instances of kidney failure. Another significant factor in the Q1 slowdown is undoubtedly the lamentable performance of public digital health stocks. Rock Health’s Digital Health Index dropped 38% between Q3 2021 and close of Q1 2022. Likewise startups that utilized SPACs to list fared poorly over the same period with the average stock price dropping 57%, according to Rock Health.
$24.8B of Impact Venture Capital in Q1 2022, focused on Climate, Education and Health Technology on-pace for $100B full year trend.
Climate Tech outpaced Health Tech VC in Q1, slowing down for a longer term average growth of around 33% and on-par with EdTech.