If investment momentum continues, this year could surpass the comparable non-pandemic end-of-year totals of 2019 and 2023 ($8.2 billion and $10.7 billion, respectively), it said. Rock Health Digital Health Funding Report, H1 2024 It was released this week.
U.S. digital health startups raised $5.7 billion across 266 deals in the first half of 2024.
Seed, Series A, and Series B funding made up 84% of investments, with Series A funding being the most prevalent.
Of Series A funding, 38% went to startups leveraging artificial intelligence, and 34% of total digital health funding in the first half went to AI-enabled companies.
The increase in unlabeled deals will continue from early 2023 through the first half of 2024, with 40% of the first half, or 107 deals, being unlabeled compared to 44% in 2023.
The number of unlabelled transactions has been gradually increasing since 2019, from 4% in 2019 to 7% in 2020, 19% in 2021 and 22% in 2022.
According to the report, unlabeled deals can occur when “startups need funding but don’t meet the criteria for the next round of labeled funding or are looking to put off difficult conversations like valuation.”
Unlabeled pay raises have declined in 2024, dropping from 47% in the first quarter of this year to 33% in the second quarter. Rock Health Previously predicted It will occur.
Topping the list of funding by value proposition were digital health companies focused on treating disease, totaling $1.1 billion, while mental health topped the list of most-funded clinical indications with $682 million raised.
The first half of 2024 is expected to see exits by three digital health companies, including Nasdaq and New York Stock Exchange listed companies: revenue cycle management company Waystar, remote pregnancy monitoring company Nuvo, and AI-powered data company Tempus AI.
The three companies’ exit marks the first in the digital health sector in 21 months.
While the number of acquisitions of digital health companies by digital health companies has fallen from 83 in all of 2023 to 34 in the first half of 2024, PE firms have acquired 10 digital health startups so far this year, more than the full year of 2023 and on track to exceed 2021 and 2022 combined.
“The digital health sector continues to demonstrate resilience and adaptability. Funding momentum (especially at an early stage) and a decline in transitional rounds such as unlabeled rounds suggest a return to more ‘normal’ and sustainable venture patterns,” the report authors wrote.
“The first half of 2024 proves that digital health founders and investors have their eye on the bottom line, giving us confidence in what lies ahead.”
