Dive Brief:

• Global digital health funding and deal count in the second quarter reached their lowest levels in years, as startups raised $3.4 billion across 348 deals, according to a report by CB Insights. 
• Funding fell for the sixth straight quarter, reaching its lowest level since the third quarter of 2017. Deals also hit a record low since the second quarter of 2015.
• But mega-rounds increased in both deal number and funding amount for the first time since the end of 2021. The rounds, which are worth $100 million or more, made up more than a fourth of the sector’s total funding in the second quarter.

Dive Insight:

Digital health companies raked in record-breaking amounts of cash in the midst of the COVID-19 pandemic in 2021, quickly eclipsing the previous year.

But funding dried up over the course of 2022, and investment has held relatively flat since the end of the year.

Global digital health funding declined 3% from the first quarter this year — though that’s less severe than in the broader venture market, where funding fell 13% sequentially, according to CB Insights.

Digital health exits via mergers and acquisitions also declined, with only 35 in the second quarter compared with 56 in the first quarter. There was only one IPO in the second quarter, and zero deals with special purpose acquisition companies, once a popular method of public exit for digital health startups during the COVID-19 boom.

Mega-rounds made up a large chunk of overall digital health funding in the quarter, reaching $906 million across five deals.

The largest was mega-round went to Aledade, a company that works with primary care providers to set up accountable care organizations, which raised $260 million in June.

Almost two-thirds of deals in the digital health space are early-stage, though those check sizes are getting larger, CB Insights found. The median round size has grown 4% in 2023 so far compared with the entirety of last year.

However, median sizes for mid- and late-stage deals have fallen this year, as have deal sizes across all investor types, CB Insights found.