Digital health dealmaking slowed down significantly in Q3’23. Deals dropped by a third to reach their lowest count in nearly a decade. Meanwhile, funding fell by 14% QoQ to hit $3B — its lowest level since 2016.

Despite the drops, median early-stage deal size has remained relatively steady in 2023 so far. Additionally, Q3’23 saw $100M+ mega-round count tick up to 6.

Using CB Insights data, we highlight key takeaways from our State of Digital Health Q3’23 Report, including:

1. Global digital health funding and deals drop to multi-year lows.
2. Care delivery & navigation tech companies lead in deals and funding in Q3’23.
3. The United States watches digital health funding and deals fall to their lowest levels in years.
4. The size of early-stage digital health deals remains stable relative to mid- and late-stage deals in Q3’23.
5. $100M+ digital health mega-rounds account for their largest share of quarterly funding since Q2’22.

Let’s dive in.

Global digital health funding dropped 14% QoQ to hit $3B in Q3’23. This marked digital health’s lowest quarterly funding level since 2016.

The drop ran counter to broader venture funding, which increased by 11% QoQ in Q3’23.

Meanwhile, digital health deals fell by a third QoQ to reach their lowest count in nearly a decade. The broader venture market saw an 11% decline in deal count over the same period.

General Catalyst and Samsung NEXT each invested in 4 digital health startups in Q3’23, more than any other investors.

Care delivery and navigation tech companies accounted for 43% of funding and deals in Q3’23 — down just one percentage point from the previous quarter. Five of Q3’23’s top deals went to companies in the care delivery and navigation tech category.

Additional category highlights include:

• Drug R&D tech saw the largest deal in Q3’23 — Generate Biomedicines‘ $273M Series C round. As a result, this category experienced a 150% increase in funding QoQ.
• Seven of the quarter’s top digital health deals went to AI-enabled startups. This included 1 care delivery and navigation tech startup, 3 drug R&D tech startups, and 3 monitoring, imaging, and diagnostics tech startups.

Mirroring the broader digital health space, the United States saw funding decline by 14% QoQ to hit its lowest quarterly level since 2016. Additionally, the US saw deal count fall back to 2013 levels. Despite these drops, the US saw the majority of global digital health funding (63%) and deals (52%) in Q3’23.

Unlike the US, Asia and Europe saw digital health funding increase from Q2’23 to Q3’23. Although, both regions saw deals decrease over the same period.

Despite the decline in digital health funding and deals, overall median deal size is only down 5% in 2023 YTD vs. 2022. This relative stability is partly linked to early-stage deals — they comprise 64% of deals and have watched median deal size slip by just $0.1M (or 4%) so far this year.

Average deal size, on the other hand, has fallen 19% in 2023 so far. This drop has been driven in part by deflated mid- and late-stage deal sizes — both groups have experienced a double-digit percentage decline in median deal size this year.

Although digital health mega-round funding remained flat at $0.9B QoQ in Q3’23, mega-round funding share increased to a 5-quarter high (29%).

The number of digital health mega-rounds also rose, ticking up from 5 in Q2’23 to 6 in Q3’23.

However, mega-round count is still down significantly from 2021’s lofty totals. In fact, digital health saw more mega-rounds per quarter in 2021 than it has seen in total so far this year.

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