Digital health fundings seem to be cooling off after a blazing hot Q3

A Q4 progress report from CB Insights predicts a drop-off in investment between the quarters, for digital health and the broader healthcare startup ecosystem alike.
By Dave Muoio
12:31 pm
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Digital health funding in the final quarter of 2020 may not reach the staggering heights of the preceding quarter, but the final few weeks of raises are still projected to edge out the investments of Q4 2019, according to a report from CB Insights.

WHAT'S THE IMPACT

Based on equity financing reported through Nov. 17, the industry analyst's preview report pegs worldwide digital health fundings to land at 372 deals totaling roughly $5.54 billion by the end of the fourth quarter. This would fall substantially lower than the 505 deals and $8.44 billion CB Insights logged for Q3, but still a hair higher than the $4.96 billion (from 457 deals) in Q4 2019.

While the drop from Q3 to Q4 is substantial for digital health, the decline is lessened (but still present) across the broader healthcare funding landscape. Per the report's projections, global healthcare funding is expected to decline from $22.35 billion to $19.58 billion between the quarters. CB Insights also highlighted a potential shift in the types of deals being cut, with fewer angel, seed, Series A and convertible note rounds anticipated in Q4 than during any quarter prior.

"At the current pace, funding and deal activity in both global healthcare and digital health are projected to decline from the previous quarter’s record highs," CB Insights wrote in the preview report. "As we saw in Q3’20, late-stage deals continue to make up a larger deal share than it had in previous quarters. Simultaneously, early-stage deals currently have a lower proportion of total equity deals at 46% compared to the 51% we saw Q3’20."

THE LARGER TREND

Funding for digital health startups has been on a breakneck pace throughout 2020, but the third quarter in particular was an unprecedented standout for those seeking new funds in COVID-19-impacted sectors of the industry such as on-demand healthcare services or digital-enabled fitness platforms. However, CB Insights' latest report suggests that digital health investors are backing down a bit from the Q3 frenzy.

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