Despite the changes and uncertainty rippling across the entire venture-backed startup ecosystem, the digital health sector saw its best first quarter since analysts began tracking its performance more than a decade ago, logging $3.1 billion across 107 deals, according to Rock Health. StartUp Health put the figure even higher, reporting $4.5 billion raised in health innovation funding.
But these record-breaking numbers are not expected to hold up for the rest of 2020, researchers said. Supply chain disruptions, market upheaval, hiring slowdowns and reduced growth projections are roiling the healthcare sector, and 67% of digital health investors surveyed by Rock Health say startups will likely have a tougher-than-usual time raising capital this year.
A strong start followed quickly by a pullback aligns with larger trends from the wider startup ecosystem, where investors in January backed a record 126 privately held companies headquartered in the Silicon Valley before cooling down to 60 in February and 44 in March, according to Fenwick’s Silicon Valley Venture Capital Flash Report on investment activity in the first quarter of this year.
But even with all of the economic uncertainties the pandemic has brought, digital health—which saw $8.2 billion in investment in 2018 and $7.4 billion last year—is expected to remain strong as the country’s healthcare needs change and as patient-consumers become ever more comfortable engaging with digital health technologies going forward.