AI continues to dominate digital health funding, but investors and health systems are demanding proof that these tools actually save money — and quickly. AI startups without clear, measurable ROI are finding it harder to stand out, explained Vig Chandramouli, partner at Oak HC/FT.
Investors, health systems and payers have grown more selective about AI startups in recent years, according to a panel of experts speaking at MedCity News’ INVEST Digital Health conference. Customers and investors alike are now demanding clear evidence of ROI before committing to deals or partnerships.
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Digital health startups across the globe raised $5 billion during the first quarter of this year — which is the highest quarterly investment total the space has seen since the second quarter of 2022.
This year, venture capitalists in the digital health landscape have many more quality investment opportunities than they did in the past couple years, according to Oak HC/FT Partner Billy Deitch. He noted that many startups have been preserving the capital over the past two years with the plan to raise funds in 2025.
Providence spun off its venture capital arm and renamed it Allumia Ventures. The newly independent venture capital firm also recently closed its third fund, in which Providence invested $150 million. Allumia is looking to grow the fund by inviting 3-5 other health systems to be limited partner investors.
This year has seen a slight decline in digital health funding, but investors are still optimistic about the landscape. In 2024, investors poured millions into startups selling AI-powered healthcare tools, and this is likely to remain true for years to come.
In a landscape where complexity has long been the norm, the power of one lies not just in unification, but in intelligence and automation.
During a panel discussion at MedCity News’ INVEST Digital Health conference in Dallas, three venture capital investors shared some of the questions they ask when getting pitched by digital health startups.
Create Health Ventures announced the close of its inaugural $21 million fund, which is focused on technology for payers. This is because payers are “the lynchpin” for the types of change that the fund wants to see, such as better care access and improved population health outcomes, Managing Partner Amit Aysola said.
Digital health investors agree that the market is settling into a steady investment pace, as well as returning to reasonable valuations. Only time will tell if this can bolster the tepid rate of exit activity in the sector.
Here is a list of some of the most notable funding round announcements that took place this March in the provider technology space.
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During a recent panel, Flare Capital Partners' Michael Greeley and Mount Sinai's Robbie Freeman shared some attributes that they think stand out among digital health startups that have found success in today's environment.
At ViVE, investors and health system executives shared their biggest pet peeves when it comes to pitches from digital health startups.
This year, industry experts think that some digital health startups will have to confront their challenges more head-on than they did in 2023. Some companies may need to do things like fundraise at a lower valuation, explore opportunities for an acquisition or exit or, in some cases, consider the possibility of shutting down operations.
This year's digital health fundraising environment requires startups to focus more on their unit economics and pathway to profitability, according to Ian Wijaya, managing director at Lazard. He predicted that the ability to achieve profitability will be much more important in 2024 than it has been in the past four years or so.
In 2023, digital health fundraising took on a bit of a different shape, according to a new Rock Health report. Startups tried out some creative ways to keep their businesses afloat — including series extension rounds, unlabeled fundraises and silent deals from existing investors.