Digital health leaders predict more stabilized funding in 2023

Leaders in the digital health space told MobiHealthNews their predictions about investors’ priorities in the coming year and what companies will need to watch out for.  

Following 2021’s expansive investments and the decrease in funding in 2022, alongside significant layoffs, stakeholders expect funders to be more selective in 2023 – scrutinizing companies’ business models and considering whether they’ve demonstrated they can improve patient outcomes.

Mark Luck Olson, CEO of RecoveryOne

“A tightening capital market will punish those healthcare disruptors that grew at all costs and failed to maintain basic financial discipline. New venture investment will disproportionately go toward players that have established product-market fit, compelling outcome evidence, strong EBITDA margins, and have grown enough to have line-of-sight to profitability.

“Employers and health plans alike will rationalize their portfolio of digital health solutions, pruning those that fail to generate sufficient engagement, or who can only be delivered as stand-alone, monolithic solutions.”

Ellen Rudy, vice president of health and social impact at Papa 

“We’ll continue to see more of an appetite for solutions that address nonclinical drivers in corresponding proportion. Data is needed — and increasingly available — to show which models work. However, because payers are using multiple vendors to address social determinants of health, there’s a need for industry alignment on validation and measurement. Attribution is challenging, but the digital health startups that can prove they’re driving improved outcomes and lowering the cost of care will be the ones that continue to see interest from investors.”

Russell Glass, CEO of Headspace Health

“While I don’t see the market rebounding overnight (or even in the first few months of 2023), I do think we’ll see a leveling out in the next year or so. However, even with a more stable market, I still see investors paying close attention to companies with more comprehensive, cost-effective solutions, [and] who can prove both solid unit economics and their impact on patient outcomes.”

Corey McCann, president and CEO of Pear Therapeutics

“I believe funding in the digital health space will continue to be tightly correlated to interest rates. The fundamentals for digital health are sound, but all growth equities are pressured as cash flows into fixed income.”

Myoung Cha, chief strategy officer and president of home-based care at Carbon Health

“It will be a great time to start a company, and I expect earlier-stage funding to be quite active. Later-stage capital will continue to be hard to come by and expensive.”

Paymon Farazi, chief product officer at Signify Health

“We’ll continue to see an increased emphasis on digital connectivity, particularly methods to help primary care providers extend their reach beyond brick-and-mortar offices. We’ll see care become more accessible and proactive as patients and providers embrace many of the technologies and services driving better preventive care. This will translate into more funding for tech-enabled healthcare in the home.

“We also will see more services close gaps, whether related to medications, specialty care, social services or other needs identified during the care journey. Providers and payers will be investing in data capture and workflow support to facilitate connections to lead to effective, consistent care management.

“At the same time, we’ll start to see the scaling of these methods that truly work — in other words, produce strong clinical outcomes — and the demise of those that don’t.”

Ankit Gupta, founder and CEO of Bicycle Health

“Speculative investing is going to pull back, and the companies that get funded next year will be the ones that demonstrate an ability to attract new patients, get contracts with payers and other strategic partners, and generate positive, evidence-based clinical outcomes.

“Mergers and acquisitions will also be a bigger factor in the digital health landscape next year. In markets with considerable competition, expect companies to merge to consolidate resources and increase market share. With an ever-competitive market, expect consolidation in some of the crowded spaces like digital therapeutics and telehealth.” 

Florian Geier, vice president and head of strategy and pharma sales at Level Ex

“Access to funding will most likely remain a challenge in 2023, with layoffs at big tech companies just one indicator of what might be coming. However, if we have learned anything from previous economic slowdowns, healthcare, and consequently health tech, typically has the edge over consumer, entertainment, travel or other industries. The industry will be affected much less.

“One advantage that may result is the finding and acquiring of talent. In the last decade, securing top tech talent has been difficult because healthcare startups and scale-ups competed with large tech companies that could pay exorbitant salaries for top candidates. With strains on budgets and a number of layoffs at big companies, the pool of talent is broader, giving smaller companies a better chance to find and hire top tech talent. There is a significant difference in productivity amongst top tech talent, which may give digital health startups an edge amid potential consolidation within the industry and come out stronger at the other end.” 

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