While the worst of the funding slump for digital health startups since the lofty highs of the pandemic seems to be drawing to an end, the uptick may be gradual.
Venture investors poured $1.5 billion into digital health startups across 112 deals over the second quarter of 2024, according to PitchBook’s Q2 2024 Digital Health Report. Though funding levels have stayed pretty consistent since the second quarter of 2022, PitchBook’s senior healthcare analyst Aaron DeGagne told Endpoints News activity looks like it’s going to pick up soon.
Aaron DeGagneThe past summer saw some large deals for venture-backed startups, including Talkiatry’s $130 million Series C, Sword Health’s $130 million late-stage round and Grow Therapy’s $88 million Series C raise. Earlier-stage startups have also seen a similar uptick in deals this year. Plus, the Federal Reserve’s interest rate cut this month lowers the cost of borrowing, which incentivizes investors to spend.
But the effect will be gradual. It could take a while for the effects of the interest rate cut to trickle down, and some investors may wait for a more stable environment after the election this fall to do deals.
“It does seem overall like we’re turning the corner,” DeGagne said. “Looking ahead to 2024, maybe we could see some increase in activity.”
Digital health startups also tend to wait until the JP Morgan conference in January to broadcast big announcements, and multiple startups are also thinking of going public by the end of 2025, he added.
Though the worst is over, he predicts the next few quarters to climb up slowly and steadily. The pace won’t change until some major IPOs happen, he said.
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