Digital health startups raised $5.7 billion in the first half of 2024, slightly less than the $6.1 billion in the same period in 2023, according to venture and advisory firm Rock Health.
But more checks are being written, and if the pace keeps up, this year’s funding could exceed 2023 and 2019 — the years bookending the pandemic-era fundraising frenzy, according to Rock Health’s analysis. There were 266 digital health deals in the first half of this year, compared with 244 a year prior.
Adriana Krasniansky“It’s promising that 2024 had a strong start in terms of funding dollars and deal count. It signals that there’s more of an alignment between investors and founders and that there’s energy and excitement about the solutions coming out of digital health this year,” Adriana Krasniansky, Rock Health’s head of research, told Endpoints News in an interview.
Digital health has faced several difficult quarters as interest rates have climbed, VC checks dried up and startups resorted to tough cost-saving measures like layoffs. Some have been forced to shut down or sell.
But there are now more signs of a fresh start. According to the analysis, 84% of funding for labeled rounds went to Seed, Series A and Series B stage companies in the first half of the year. Mental health was the most funded clinical condition, and about a third of dollars invested in digital health went to startups claiming to leverage AI.
Meanwhile, the percentage of unlabeled deals — meaning they weren’t categorized as a traditional Series A or B, for example — decreased over the last few quarters to 33% in the second quarter of 2024 from 55% in the fourth quarter of 2023. Companies sometimes raise unlabeled funding because they need cash but aren’t ready to meet the benchmarks of the next labeled raise, Krasniansky said. Unlabeled deals were rare at the height of the pandemic but shot up in 2023 as companies struggled to stay afloat.
The fact that they appear to be tapering off is a positive sign. “Founders are comfortable going out and raising at prices or valuations that investors feel represent the potential in the market,” Krasniansky said.
Digital health also saw three companies go public after what Rock Health said was a 21-month dry spell. Those included remote monitoring company Nuvo, payments company Waystar, and genomics company Tempus AI.
It remains to be seen if more startups will test the IPO waters this year, which could be even riskier ahead of the upcoming presidential election and questions about the future of US monetary, tax and regulatory policies.