TLDR:
– Digital health startups saw more deal volume but lower check sizes in Q1 2024
– AI-based companies attracted the most investment, with $1.1 billion raised across 45 deals
Rock Health’s analysis of Q1 2024 funding for U.S. digital health startups revealed that while deal volume increased, check sizes decreased compared to previous years. The average check size was $20.6 million, significantly lower than the $3.6 billion raised in the first quarter of 2023. Despite this, 133 deals were closed in Q1, marking the highest deal volume in the past six quarters. The researchers also pointed out a shift in investor focus towards AI-based companies, with $1.1 billion raised by 45 deals in this sector. This trend indicates a growing interest in startups that can demonstrate strong outcomes and value for investment in the digital health space.
In addition to creative financing measures, such as unlabeled rounds, digital health startups are facing greater scrutiny on clinical outcomes and value-for-investment. Investors are seeking companies with strong outcomes data, pushing startups to showcase efficacy early in their fundraising conversations. The research also highlighted the impact of stock delistings on the publicly-traded cohort of digital health companies, signaling a recalibration of expectations for startups aiming for a public exit. Despite these challenges, the evolving landscape presents an opportunity for the sector to mature and adapt to a more robust and sustainable market environment.
