Bubble Bursts for Digital Health: Economic Woes, High Valuations Weigh Down Funding in the First Half of 2022

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ARTICLE SUMMARY:

Recent digital health funding and exit data clearly mark a return to more historical norms as the frothy atmosphere that prevailed in 2021 gives way to more circumspection, bringing the sector back down to earth.

After attracting record investments in 2021, digital health start-ups face a reckoning in 2022 as concerns about the global economy and frothy valuations, among other things, dampen investor enthusiasm. (See “Digital Health Deals Soar in the First Half of 2021,” MedTech Strategist, August 9, 2021.)

According to CB Insights’ most recent State of Digital Health report, global funding for digital health companies declined for the second consecutive quarter in Q2 2022, falling 32% from Q1 and dropping 58% from the all-time high reached in Q2 2021. The downturn impacted nearly all digital health categories, the authors said, and “mirrored the broader downtrend in funding for all private companies” (see Figures 1 and 2).

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