In the third quarter of 2024, the global digital health funding landscape experienced a significant shift, with a notable drop of 23% QoQ, totaling $3.3 billion. This downturn marked the lowest quarterly funding level since 2017, contrasting with the broader venture funding market. (1)
In the third quarter of 2024, the global digital health funding landscape experienced a significant shift, with a notable drop of 23% QoQ (Quarter over Quarter), totaling $3.3 billion. This downturn marked the lowest quarterly funding level since 2017, in contrast to the broader venture funding market.
The United States witnessed a QoQ downgrade in digital health funding up to 52%, but it is still a pivotal player. However, this decline brought US digital health funding to its lowest level since 2014, accompanied by the fewest deals in a quarter since 2013.
Globally, digital health deals experienced a notable 23% drop QoQ, reaching 1,225, the lowest count in nearly a decade. Nevertheless, digital health mega-round deals, those exceeding $100 million, decreased from those in Q2, totaling 7 in Q3 ’24.
Notably, the largest M&A deal in Q3, a $525 million funding, went to Truepil for their LetsGetChecked. Despite the decline in overall funding, the median increased by 39% YoY to reach $5.3M — a new record.
Average deal size witnessed a 51% increase in 2024 YTD, influenced by concentration of larger sums on fewer but later-stage ventures. (1, 2)
The new climate of investment in Q3’24
Before delving further into the new trends, it’s important to define a key term in this sector: ‘digital health unicorns.’ These are digital health technology companies, maybe even early-stage healthcare startups, in the digital health sector valued at over $1 billion. They represent significant players in the industry, often driving innovation and attracting substantial investment.
Several factors contribute to the diminished funding environment, and they are all interconnected. The prospect of a sluggish economy and the onset of elevated interest rates have adversely affected the capacity of venture funds to secure capital, resulting in a decline in funding for startup ventures.
The diminished valuations of health tech startups and a lack of robust IPO activity have not only diminished the overall value of funds’ portfolios but also postponed returns to limited partners (LPs), fundamentally restricting the capital available for fresh investments.
These circumstances have cultivated a more cautious mindset among investors, especially those in generalist and crossover funds, leading to a reduction in the number of deals and more stringent negotiations on deal terms. This collective impact further exacerbates the downward trend in funding cycles.
The startup fundraising environment has had its job cut out for it. Since startups can usually have a more volatile growth period and given investors’ rising hesitation on how to handle many aspects of funding, unicorn tech startups are having a difficult time with the “next phase” in their development. The ones suffering the most from this period of diluted funding are startups in the early to mid-stages of their business.
Some experts even suggest that the field for such enterprises, especially for mid-stage companies, has changed so much that it is like playing an altogether different sport from the one they are used to. (1)
How does the focus shift?
In the digital health sector, funding has increased by 3% following two years of decline. It now stands at 15.6 billion.
Digital health unicorns and startups are adapting to the changing economic landscape and reduced funding in several ways. One of the key strategies has been to shift focus towards areas that are attracting more investment under the current market conditions.
There has been a significant shift in funding away from pandemic-era focuses like on-demand healthcare toward sectors like disease treatment, value-based care, and nonclinical workflow. This realignment of funding priorities reflects a broader trend in the digital health sector to adapt to changing investor interests and market needs.
Furthermore, digital health tech companies are navigating difficult conversations around valuation adjustments and ownership dilution in response to the challenging economic environment. The need to tackle transitions head-on, even if it means facing down rounds, is critical for these companies. This pragmatic approach to the current market realities, including simpler deal terms and incentivizing operating teams, is essential for survival and growth in a more financially constrained environment.
The pandemic initially brought a surge in digital health innovation and investments in 2020 and 2021, fueled by government stimulus and regulatory clarity. However, the subsequent years saw mounting economic challenges, such as inflation, tightening monetary policy, and global conflicts affecting nearly every economic sector, including digital health. As a result, U.S.-based digital health startups experienced a significant drop in funding in 2022, just over half of the record-breaking amounts raised in 2021.
Adapting to these economic changes, digital health companies are also exploring new business models and strategies. Some are focusing on enabling value-based care arrangements, taking on risk themselves, or developing solutions for high-cost therapeutic areas like mental health and kidney care.
These strategic shifts are driven by the evolving healthcare landscape and the need to offer sustainable, cost-effective solutions to healthcare challenges. (1,2)
How do the unicorns handle the changes?
Several digital health unicorn companies are making significant strides in enabling value-based care arrangements, taking on risks themselves, or developing solutions for therapeutic areas like maternal care and streamlining healthcare documentation processes.
Function technology
Function Technology, based in China, is a company specializing in technological innovations. It operates from the Zhongguancun area in Beijing – a region often referred to as China’s Silicon Valley due to its dense concentration of tech enterprises and research institutions.
The company has been involved in various projects, including collaborations facilitated by the China International Technology Transfer Center (CITTC).
Function Technology’s endeavors align with China’s broader strategy to enhance its technological capabilities. This strategy is supported by entities such as the National Fund for Technology Transfer and Commercialisation (NFTTC), a state-owned investment fund established in 2011 to facilitate the commercialization of scientific findings and new technologies.
Companies like Function Technology contribute to the nation’s advancements in sectors such as artificial intelligence, robotics, and information technology, thereby reinforcing China’s position in the global technology arena.
Scribenote
Scribenote is an AI-powered medical unicorn designed to assist veterinarians by streamlining their documentation processes. It captures conversations during appointments and automatically generates accurate medical records, allowing veterinarians to focus more on patient care and less on paperwork.
Founded in 2019 by Ryan Gallagher, his sister Dr. Katie Gallagher, and co-founders Alina Pavel and Emily Merry, Scribenote aims to improve the work-life balance of veterinary professionals.
In September 2024, the company secured $8.2 million in seed funding led by Andreessen Horowitz, with Inovia Capital and Velocity Fund participation. Since its inception, Scribenote has automated over 1.5 million medical records, saving veterinarians up to two hours per day.
Pomelo care
Pomelo Care is a virtual medical practice dedicated to enhancing maternal and newborn health. Established in 2021, it offers personalized, 24/7 care from preconception through an infant’s first year.
Their team comprises clinicians, technologists, and operators passionate about improving family outcomes. In June 2024, Pomelo secured $46 million in Series B financing, bringing total funding to $79 million.
They collaborate with health plans and employers to provide services at no out-of-pocket cost, covering over 3 million people across 46 states.
The regions of digital health unicorns
The three main regions that take the biggest parts in digital health funding worldwide are the US, Europe, and Asia.
In the current state of Q3, the US is in the lead when it comes to deal share, even taking into account the 9% drop compared to Q2. Europe is in second place with a 3% rise, while Asia is in third with a 7% raise. An important part of funding deals for digital health companies is mega-round deals, which account for 30% of digital health funding in the entire quarter.
A “mega-round” in venture capital funding refers to a startup’s fundraising round of $100 million or more. These rounds have become increasingly common, especially in the U.S. tech startup sector, and comprise a significant portion of overall venture capital funding.
The term indicates a trend toward startups raising larger amounts of capital in single funding rounds, which is a shift from smaller, more frequent rounds of fundraising. Mega-rounds have been particularly influential in driving the overall value of venture capital deals upwards, reflecting the growing scale and ambition of tech startups.
In the third quarter of 2024, the United States secured three mega-round deals in the digital health sector, while Europe and Asia each recorded their first such deals in 2023. These substantial investments are pivotal for the sector, as evidenced by the fact that the three U.S. deals alone accounted for $0.5 billion of the total funding capital.
The largest deal of the quarter was a $200 million Series C funding round by Flo Health, representing a significant portion of the total funding.
Among the top unicorns by valuation in Q3 2024 were:
- SpaceX (U.S.): $350 billion valuation.
- OpenAI (U.S.): $157 billion valuation.
- Stripe (U.S. and Ireland): $91.5 billion valuation.
- Shein (China): $66 billion valuation.
- Databricks (U.S.): $62 billion valuation.
- Epic Games (U.S.): $31.5 billion valuation. (3)
To better understand why the United States is a significant hub for digital health funding, consider that as of November 2024, there were over 60 privately held healthcare unicorns globally. While specific regional distributions were not detailed in the available sources, the emergence of two new digital health unicorns in Europe during Q3 2024 suggests a growing presence in that region.
This indicates that the U.S. continues to maintain a substantial share of digital health unicorns, reflecting its leading role in global digital health funding.
There have been no new unicorns for the past two quarters, however. This is mostly due to the digital health sector experiencing explosive growth over recent years, especially fueled by the COVID-19 pandemic. This rapid expansion has led to a market saturation point, where the influx of new, groundbreaking startups capable of reaching unicorn status has temporarily slowed.
Additionally, as the digital health sector matures, the rate of new, disruptive entrants achieving rapid growth might naturally decline. Instead, there may be a focus on scaling existing solutions and technologies that have proven effective. (2)
The United States
The digital health funding in QoQ in the US has dropped 14% to reach $1.9 billion – as low as the levels from 2016. Even though the funding has significantly dropped in comparison to previous years, there have been many deals made, especially in the US.
Devoted Health is a forward-thinking digital health unicorn based in the United States with a value of $12.9 billion. The company is dedicated to transforming health care for older Americans through innovative Medicare Advantage plans.
It uses advanced technology and data-driven insights to simplify care and improve patient outcomes. Devoted Health is built on a commitment to quality and compassion, ensuring that every member receives personalized attention. Their approach has attracted significant investor interest, marking them as a standout in the digital health space.
There have been other big deals made by US unicorns. Ro, for example, is a health tech unicorn based in the United States that focuses on transforming healthcare through telemedicine and digital platforms. Specializing in men’s health, sexual health, and mental wellness, Ro provides online consultations, prescriptions, and ongoing care through its easy-to-use digital services.
The company aims to make healthcare more accessible and convenient, removing barriers like long wait times and in-person visits. With a strong emphasis on privacy and personalized care, Ro has attracted considerable investment and is reshaping the future of healthcare delivery.
Some of the top companies work directly with some of the top investors in the digital health field, which include General Catalyst, with 25 deals they made in 2024. It is a US-based venture capital firm that focuses on investments across various stages, including seed-stage, early-stage, later-stage, and growth-stage companies. They have recently expanded their horizons to investing in European and Indian startups as well.
The two main regions in the US where digital health unicorns thrive are Silicon Valley and New York. For Silicon Valley, digital health deals increased 39% QoQ, reaching $0.4 billion in funding, while for New York, funding halved to $0.2 billion from last quarter. The biggest deal in the Valley was made by RapidAI for $75 million, while K Health accounted for New York’s biggest deal of $59 million this quarter.
Asia
In Asia Pacific (APAC), the digital health sector experienced a 19% decline in digital health funding. It was the third most significant region for digital health funding globally, with $2 billion raised across 244 deals in 2024. The top funded therapeutic areas were oncology, geriatrics, and neurology.
Among the top equity deals in Asia during this quarter, one of the notable and biggest health tech companies, the biggest for the year in the region, was PharmEasy, which secured $216 million in funding. The company is an Indian health tech company that works as an online pharmacy and doctor consult at any time.
The top investor in Asia is Qiming Venture Partners, with six companies that it has its focus on. This investor is a venture capital firm based in China. Their investment focus spans multiple industries, reflecting the diverse nature of the emerging and evolving market. Last year’s biggest investor, KB Investment, had 5 deals in 2024. (4)
Europe
In 2024, Europe became a driving force in digital health, recording a 27% year-over-year growth in funding. The region outpaced global funding recovery, contributing $4.8 billion to the $25.1 billion worldwide total. Investor confidence and a maturing market contributed to this success, alongside the growing importance of AI-driven healthcare solutions.
Public-private partnerships also provided significant support, enabling European ventures to attract investments focused on scalable, innovative solutions. The most active investors were Bpifrance, Octopus Ventures, Khosla Ventures, Wellington Partners, and Cathay Innovation.
A major catalyst for this funding surge was the rise of mega-deals, with transactions valued at $100 million or more accounting for 37% of global investments in digital health. Notable European deals included Flo Health’s $200 million round, Caresyntax’s $180 million, and Alan’s $193 million Series F.
These mega-deals highlight the increasing investor interest in established ventures with proven scalability. As a result, the European digital health market has become a key area for investment and growth. (5)
Conclusion
Digital health unicorns are shaping the future of healthcare with innovative solutions that bridge technology and patient care. Their ability to attract large investments reflects the growing demand for scalable, impactful healthcare technologies. Despite the current funding challenges, the sector shows resilience through strategic adaptation and regional growth variations, particularly in Europe.
As the market matures, successful companies will likely be those demonstrating clear value propositions, sustainable business models, and the ability to navigate an increasingly selective investment landscape. The evolution of digital health continues, with opportunities for innovation in disease treatment, value-based care, and workflow optimization.
The transformation of healthcare through digital means is advancing steadily, driven by companies that effectively combine technological advancement with measurable health outcomes. Though the explosive pandemic-era growth has subsided, the fundamental shift toward digital health solutions remains strong and continues to evolve.
Sources
- https://www.cbinsights.com/research/report/digital-health-trends-q3-2024/
- https://www.cbinsights.com/research/report/digital-health-trends-2024/
- https://www.beckershospitalreview.com/digital-health/7-highest-valued-digital-health-unicorns.html
- https://www.galengrowth.com/2024-digital-health-funding-in-asia-pacific-a-snapshot/
- https://www.galengrowth.com/2024-europe-digital-health-funding-propelled-to-record-highs-by-mega-deals-and-ai/
Delyan Stoyanov, co-founder of XTATIC Health, combines his background in medical education with specialized expertise in medical copywriting and marketing.
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