How the 2022 funding environment affected digital health startups

MobiHealthNews spoke with several digital health stakeholders about 2022’s funding environment and how it affected digital health startups.

Investments in 2022 decreased drastically compared to the swells of financial capital raised in 2021, and that lack of funding forced companies to rethink their business models.

Read digital health execs’ insights on how this year’s decreased funding forced layoffs, business model redesigns and an increased focus on company value.

Dr. Jon Bloom, cofounder and CEO of Podimetrics 

“The funding environment for digital health startups in 2022 was, well, rough. As an industry, we went from being a beacon of innovative hope amid the pandemic to an unintentional harbinger of bloated valuations and a destroyer of shareholder value.” 

Dr. Jennifer Schneider, cofounder and CEO of Homeward

“The current market dynamics have forced entrepreneurs to focus clearly on what truly matters for the business and the industry more broadly. While the recent widespread layoffs have certainly been unfortunate, it has also caused a reset in the talent market, providing opportunities for new businesses to hire world-class talent that may not have been previously accessible.”

Dan Trigub, cofounder and CEO of MedArrive

“This year’s funding environment quickly separated the ‘good’ from the ‘bad,’ meaning businesses built with poor unit economics on day one will not survive. It also forced companies to explore other funding alternatives like venture debt or taking down rounds. Founders and executive teams leaned into being more diligent with capital and planned for the worst.”

Corey McCann, president and CEO of Pear Therapeutics

“We were all forced to adapt quickly. Spend to grow was replaced by grow to spend. We’ve all been forced to focus on scaling our most core business.” 

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

“It has been brutal for mid-to-late-stage digital health startups, and we have seen a lot of it play out with restructurings, layoffs, and even bankruptcies and shutdowns. There is still a lot more to come in 2023 as the funding environment is unlikely to improve materially next year. “

Russell Glass, CEO of Headspace Health

“The slowing of digital health funding this year accelerated merger and acquisition activity, and this trend will continue in 2023. The mental health space, in particular, experienced a massive influx of entrepreneurs building digital mental health solutions amid the pandemic. It’s inspiring to see so much attention and effort being put into fixing the mental health crisis, but there is now far more than the market can sustain. We’ll continue to see these founders come together through consolidation to elevate and expand their offerings to remain competitive.” 

Christopher Lis, managing director of global healthcare intelligence at J.D. Power

“The drop in funding seems to be more in response to macroeconomic forces on the market overall instead of disinterest in digital/virtual health ventures. While there was a drop in overall funding, the number of deals being made only fell by about 14%. Many investors and organizations are looking to make the healthcare space more advanced and efficient, and that will continue in the years ahead.”

Vijay Ravindran, CEO of Floreo

“This year’s funding environment is pushing startups to raise what they need, accept valuations in lower ranges and more urgently think about revenue streams ahead of regulatory approvals and bills such as the prescription digital therapeutics legislation on the Hill. Companies have to assume it will be harder to raise in 2023 and that fundamentals around market fit will be more highly prized.” 

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