There’s a comeback brewing for digital health, with Rock Health’s latest funding report showing that the sector is officially on track to beat last year’s investment total.
US digital health startups raised $5.7 billion across 266 rounds in the first half of 2024, setting a pace that could surpass 2023’s full-year total of $10.7 billion.
Most of the excitement came from early-stage startups. Seed, Series A, and Series B raises accounted for 84% of labeled rounds in H1. The median size of a Series A was $15M (up $3M from last year), driven by big showings from companies like Hippocratic AI and Fabric.
- Rock Health pointed out that larger Series As have helped AI startups manage costs for training models and acquiring datasets, while also helping others make well-timed M&A (Ex. Fabric’s acquisition of MeMD from Walmart).
Unlabeled rounds started to wane as fewer companies pushed off a valuation haircut or delayed a labeled raise due to not meeting necessary benchmarks. Just 33% of Q2 2024 rounds were unlabeled, down from 47% in Q1 and 55% in Q4 2023.
- This could mark the beginning of a return to a more normal cadence of labeled raises, which Rock Health predicted would be in the cards for 2024.
The most funded value proposition in H1 went to “treatment of disease,” thanks in part to Foodsmart’s $200M raise feeding the $1.1B total.
- Mental health retained its usual position as the most funded clinical indication, raising $700M as companies like Talkiatry and Brightside managed to attract more investor attention than the surging weight management segment ($300M).
The first half saw three public exits for digital health companies, ending a 21 month drought with stock market debuts for Nuvo (remote fetal monitoring), Tempus AI (precision diagnostics), and Waystar (revenue cycle management).
- Among players still gearing up for an IPO, fewer companies were rounding out their offerings by acquiring the missing pieces, which was chalked up to companies wanting to be conservative with their runway. H1 2024 clocked in at 34 digital health acquisitions, well below half of 2023’s full-year total (83).
The Takeaway
Resilience seems to be leading to brilliance for digital health founders, with overall funding momentum and fewer transition measures (AKA unlabeled rounds) suggesting the “new normal” is upon us. Although a presidential election and decisions around telehealth flexibilities will have a huge impact on the rest of the year, most signs are pointing toward H2 playing out just as well as the first half.
