The digital health sector faced significant challenges in 2022, with U.S. funding totaling $15.3B, down from $29.3B in 2021. This decline signals the end of a COVID-19 investment boom, influenced by macroeconomic factors like inflation and interest rate hikes. Key trends included a shift away from late-stage mega-deals, with only 35 startups raising over $100M compared to 88 in 2021. Investors increasingly favored early-stage companies with strong financials, while D2C startups struggled due to rising customer acquisition costs and reduced consumer spending. Health systems focused on operational efficiency amid financial pressures, leveraging technology for workflow improvements and expanding alternative care models. Despite a tumultuous year, experts predict a recalibration towards sustainable growth in 2023, emphasizing the importance of resilience and strategic investments in technology infrastructure.
| name | description | change | 10-year | driving-force | relevancy |
|---|---|---|---|---|---|
| Shift from Unicorns to Strong Horses | Investors prefer startups with sustainable growth over high-valuation unicorns. | Investment focus is shifting from inflated valuations to stable, grounded financials. | Future investments will prioritize stable startups, leading to a healthier growth environment in digital health. | Market corrections demand more realistic valuations and sustainable business models in digital health. | 4 |
| Increased Focus on Operational Efficiency | Health systems are prioritizing solutions that enhance operational efficiency. | Healthcare organizations are moving from growth-focused strategies to efficiency-driven models. | Healthcare will increasingly rely on operational efficiency, impacting service delivery and costs. | Rising operational costs and staffing crises push health systems to seek efficiency solutions. | 5 |
| Decline of D2C Startups | D2C digital health startups faced significant challenges in 2022. | D2C models are under pressure, with a shift towards B2B strategies for growth. | Digital health may see fewer D2C players, with more companies embracing B2B or hybrid models. | Economic pressures and high customer acquisition costs are forcing D2C startups to pivot. | 4 |
| Big Tech’s Healthcare Reorientation | Big Tech companies are refocusing their healthcare initiatives on core competencies. | Shift from ambitious healthcare innovations to grounded approaches using existing expertise. | Big Tech will play a more integrated role in healthcare, focusing on operational improvements. | Economic pressures compel Big Tech to leverage existing strengths rather than pursue broad disruption. | 4 |
| Potential Rise of Hospital-at-Home Models | Increased investment in hospital-at-home initiatives by health systems. | Healthcare delivery is shifting from inpatient to outpatient, leveraging at-home care. | Hospital-at-home models will become standard, reshaping patient care and health system operations. | Costs and operational pressures drive health systems to explore alternative care delivery models. | 5 |
| Increased Investment in Early-Stage Startups | Investors are shifting focus from late-stage to early-stage digital health companies. | A decline in funding for late-stage companies, with a surge in early-stage investments. | Early-stage startups will dominate funding landscapes, fostering innovation at the ground level. | Investor caution and a desire for lower-risk opportunities drive early-stage investments. | 4 |
| name | description | relevancy |
|---|---|---|
| Economic Downturn Impact on Digital Health | The potential for recession and ongoing inflation could further reduce funding for digital health startups, leading to market instability. | 5 |
| Investor Caution in Late-Stage Funding | A trend of reluctance from investors to fund late-stage digital health companies may lead to a decrease in innovation and growth in the sector. | 4 |
| Valuation Risks for Startups | Early-stage digital health startups may face inflated valuations that could lead to down rounds, putting their survival at risk. | 4 |
| Increased Operational Costs | Rising staffing costs and inflation are squeezing health system margins, potentially leading to reduced care access and quality. | 5 |
| Retention of Talent in Healthcare | Burnout and retirement among healthcare professionals could exacerbate staffing crises and impact patient care quality. | 4 |
| Market Viability of D2C Models | The decline in D2C healthcare companies may result from economic pressures, risking their viability and leading to closures or acquisitions. | 5 |
| Competition in Healthcare Delivery | The entry of retail giants into healthcare could increase competitive pressure on traditional health systems, affecting their market share. | 4 |
| Sustainability of Innovation Investment | The shift towards prioritizing short-term financial health over long-term innovation may stifle advancements in healthcare technology. | 4 |
| Potential Failure of Unicorn Startups | Many digital health unicorns may face acquisitions or down rounds as cash reserves dwindle, impacting innovation and competition. | 5 |
| Adverse Effects of Consumer Spending Cuts | Ongoing economic challenges may lead consumers to further reduce healthcare spending, adversely affecting digital health startups’ revenues. | 4 |
| name | description | relevancy |
|---|---|---|
| Funding Cycle Recalibration | Investors are shifting focus from high-risk unicorns to more sustainable, grounded startups, indicating a recalibration in funding strategies. | 5 |
| Increased Emphasis on Operational Efficiency | Healthcare organizations are prioritizing immediate operational efficiency gains, investing in software solutions to streamline processes amid financial pressures. | 4 |
| Shift from D2C to B2B Models | D2C startups are diversifying into B2B to enhance revenue potential as consumer spending tightens due to economic pressures. | 4 |
| Focus on Early-Stage Investments | Venture capital is increasingly directed towards early-stage startups rather than late-stage companies, indicating a shift in investor strategy. | 5 |
| Acquisition of ‘Fallen’ Unicorns | Struggling unicorns may seek acquisition deals as cash reserves dwindle, marking a trend towards consolidation in the digital health space. | 4 |
| Long-Term Partnerships for Innovation | Health systems are forming long-term partnerships with tech firms to implement innovative solutions, signaling a trend toward collaborative innovation. | 4 |
| Big Tech’s Strategic Reorientation | Big Tech companies are reorienting their healthcare initiatives to leverage existing expertise rather than attempting disruptive innovations. | 5 |
| Macro-Economic Adaptation in Startups | Startups are adapting to macroeconomic challenges by enhancing operational efficiency and adjusting customer acquisition strategies. | 4 |
| name | description | relevancy |
|---|---|---|
| Digital Health Solutions | Technologies aimed at improving healthcare delivery through digital means, including telehealth and health monitoring apps. | 5 |
| AI in Healthcare | Artificial intelligence applications for managing patient data, optimizing workflows, and enhancing clinical decision-making. | 5 |
| Hospital-at-Home Models | A care delivery model designed to provide hospital-level care at home, improving patient convenience and resource utilization. | 4 |
| Nonclinical Workflow Solutions | Technologies that enhance operational efficiency in healthcare settings, reducing admin burdens and improving provider experience. | 4 |
| Remote Patient Monitoring | Technologies enabling continuous monitoring of patients’ health data outside traditional clinical settings, enhancing chronic disease management. | 4 |
| Two-Sided Marketplaces in Healthcare | Platforms that connect patients with healthcare providers, facilitating access to telehealth services and improving consumer engagement. | 4 |
| Data Infrastructure and Analytics | Emerging technologies focused on healthcare data management and analysis to enable better decision-making and operational efficiency. | 4 |
| name | description | relevancy |
|---|---|---|
| Recalibration of Digital Health Funding | The digital health sector is shifting towards a more sustainable investment model as the COVID-era boom subsides. | 5 |
| Investor Preference Shift | Investors are increasingly favoring early-stage companies over late-stage unicorns due to economic uncertainty and inflated valuations. | 5 |
| Operational Efficiency Focus | Healthcare organizations are prioritizing operational efficiency gains amidst rising costs and staffing challenges. | 4 |
| Big Tech’s Healthcare Strategy | Big Tech companies are adjusting their healthcare strategies, focusing on areas where they have existing expertise rather than attempting broad disruption. | 4 |
| Challenges for D2C Startups | Direct-to-consumer digital health companies face macroeconomic pressures, leading to increased customer acquisition costs and reduced market penetration. | 5 |
| M&A Activity Among Unicorns | Fallen unicorns may pursue mergers and acquisitions as a strategy to survive a challenging funding environment. | 3 |
| Transition to Hospital-at-Home Models | Health systems are increasingly exploring hospital-at-home initiatives to improve care delivery and reduce operational burdens. | 4 |
| Diversification of Revenue Streams | Health systems are seeking new revenue opportunities through partnerships and venture capital investments in digital health startups. | 4 |
| Market Volatility and Investment Cycles | The digital health market is experiencing cyclical investment patterns, with a potential downturn affecting funding and growth trajectories. | 5 |
| Patient Care Accessibility | The rise of retail health giants poses competition for traditional health systems, prompting innovation in care delivery models. | 4 |