Health IT funding and investment trends in the last 12 months and potential future trends in 2024

Exec Summary:

Health IT funding and investment has seen a mixed bag in the last 12 months. On the one hand, there has been a decline in the number of deals and the total amount of funding raised. On the other hand, there is still strong interest from investors in certain areas of health IT, such as artificial intelligence (AI), telehealth, and digital therapeutics.

According to Rock Health, a VC firm that tracks digital health funding, total funding in the first half of 2023 was $6.1 billion, down from $8.4 billion in the first half of 2022. The number of deals also declined, from 244 in the first half of 2022 to 222 in the first half of 2023.

However, there were some bright spots in the data. For example, funding for AI-powered health IT companies increased by 30% in the first half of 2023 compared to the same period in 2022. Funding for telehealth companies also remained strong, with $1.9 billion invested in the first half of 2023.

Overall, the health IT funding landscape is still relatively healthy, but there are signs that investors are becoming more cautious. This is likely due to a number of factors, including rising interest rates, inflation, and the potential for a recession.

Here are some of the key health IT funding and investment trends in the last 12 months:

• Increased investment in AI-powered health IT: AI is being used to develop a wide range of health IT solutions, including new drugs and treatments, diagnostic tools, and patient care systems. Investors are increasingly interested in AI-powered health IT companies, as they see the potential for these companies to revolutionize the healthcare industry.
• Continued growth of telehealth funding: Telehealth has become increasingly popular in recent years, and the COVID-19 pandemic has accelerated this trend. Telehealth allows patients to receive medical care remotely, through video conferencing or other technologies. Investors are still bullish on telehealth, as they see the potential for this technology to make healthcare more accessible and affordable.
• Rising interest in digital therapeutics: Digital therapeutics are software-based applications that are designed to prevent, manage, or treat a medical condition. Digital therapeutics are still in their early stages of development, but they have the potential to revolutionize the way healthcare is delivered. Investors are increasingly interested in digital therapeutic companies, as they see the potential for these companies to develop new and innovative treatments for a variety of diseases.

Despite the decline in overall funding in the first half of 2023, there are still a number of factors that are driving investment in health IT. These factors include:

• The aging population: The world's population is aging, and this is putting a strain on healthcare systems around the globe. Health IT can help to improve the efficiency and effectiveness of healthcare delivery, which is essential for meeting the needs of an aging population.
• The rise of chronic diseases: Chronic diseases, such as diabetes and heart disease, are on the rise globally. Health IT can help to manage and treat chronic diseases, which can improve patient outcomes and reduce costs.
• The increasing demand for value-based care: Healthcare systems are increasingly moving towards value-based care, which focuses on paying for outcomes rather than services. Health IT can help to improve the quality and efficiency of care, which is essential for delivering value-based care.

Overall, the health IT funding and investment landscape is still relatively healthy, and there are a number of factors that are driving investment in this sector.

However, investors are becoming more cautious, and it is likely that we will see a decline in the number of deals and the total amount of funding raised in the near term.

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Health IT funding and investment landscape

The health IT funding and investment landscape has been relatively active in the last 12 months, despite some macroeconomic challenges. According to Rock Health, digital health funding in the first half of 2023 reached $6.1 billion, slightly below the record-breaking levels of 2021 but still above pre-pandemic levels.

Investors continue to be drawn to the health IT sector by a number of factors, including:

• The aging population and the increasing prevalence of chronic diseases, which are driving demand for new and innovative healthcare solutions.
• The increasing adoption of digital technologies by healthcare providers and patients.
• The government's focus on promoting the use of health IT to improve healthcare quality and efficiency.

However, there are also some challenges facing the health IT sector, such as:

• The regulatory burden, which can make it difficult for new companies to enter the market.
• The reimbursement landscape, which can be complex and challenging for health IT companies to navigate.
• The increasing competition from both established and new entrants to the market.

Despite these challenges, the health IT sector remains attractive to investors, and we can expect to see continued investment in this space in the coming months and years.

Some of the key trends in health IT funding and investment in the last 12 months include:

• Increased investment in early-stage companies: Investors are increasingly investing in early-stage health IT companies, which are developing new and innovative solutions to address healthcare challenges.
• Growing interest in specific health IT sectors: Investors are showing particular interest in certain health IT sectors, such as telehealth, mental health, and artificial intelligence (AI).
• Increased investment from non-traditional investors: In addition to traditional venture capital firms, we are seeing more investment in health IT from non-traditional investors, such as strategic investors and private equity firms.

Overall, the health IT funding and investment landscape is positive, with investors continuing to be drawn to the sector by the long-term growth potential.

However, there are some challenges facing the sector, such as the regulatory burden and the reimbursement landscape. Investors are increasingly investing in early-stage companies and specific health IT sectors, and we are seeing more investment from non-traditional investors.

Funding for AI-powered health IT companies

Funding for AI-powered health IT companies has remained strong in the last 12 months, despite a decline in overall health IT funding. According to Rock Health, a VC firm that tracks digital health funding, total funding for AI-powered health IT companies increased by 30% in the first half of 2023 compared to the same period in 2022.

Here are some examples of AI-powered health IT companies that have raised significant funding in the last 12 months:

• Viz.ai : Viz.ai raised $100 million in Series D funding in September 2023. The company develops AI-powered software that helps hospitals to detect and respond to strokes more quickly.
• Hyro: Hyro raised $35 million in Series A funding in May 2023. The company develops an AI-powered platform that helps healthcare organizations to automate their call centers.
• Lucem Health: Lucem Health raised $7.7 million in Series A funding in March 2023. The company develops AI-powered software that helps healthcare providers to detect diseases earlier and optimize care delivery.

These are just a few examples of the many AI-powered health IT companies that have raised significant funding in the last 12 months. The strong interest from investors in this sector is a testament to the potential of AI to revolutionize the healthcare industry.

There are a number of factors that are driving investment in AI-powered health IT companies. These factors include:

• The increasing availability of data: The healthcare industry is generating a massive amount of data, and this data is essential for training and developing AI algorithms. As the amount of data available continues to grow, we can expect to see even more innovation in the AI-powered health IT space.
• The need for improved efficiency and effectiveness: Healthcare systems around the globe are facing a number of challenges, including rising costs and a shortage of healthcare workers. AI can help to improve the efficiency and effectiveness of healthcare delivery, which is essential for addressing these challenges.
• The growing demand for value-based care: Healthcare systems are increasingly moving towards value-based care, which focuses on paying for outcomes rather than services. AI can help to improve the quality and efficiency of care, which is essential for delivering value-based care.

Overall, the funding landscape for AI-powered health IT companies is very positive. Investors are bullish on this sector, and there is a lot of excitement about the potential of AI to improve healthcare delivery and outcomes.

Final Thoughts:

Health IT funding and investment trends in 2024 are expected to be similar to those in 2023, with a focus on AI-powered health IT, telehealth, and digital therapeutics.

However, there are a few factors that could impact funding and investment trends in 2024, including:

• The global economic climate: If the global economy enters a recession, it could lead to a decline in overall health IT funding and investment. However, AI-powered health IT, telehealth, and digital therapeutics are all areas that are still expected to attract investment, even in a recession.
• Government regulation: Governments around the globe are increasingly regulating the healthcare industry, and this could impact funding and investment in health IT. For example, governments may impose new regulations on AI-powered health IT companies or telehealth companies.
• The rise of new technologies: New technologies, such as blockchain and the Internet of Things (IoT), are emerging that could have a major impact on the healthcare industry. If these technologies become more widely adopted, they could lead to new investment opportunities in health IT.

Overall, the health IT funding and investment landscape is expected to remain strong in 2024, with a focus on AI-powered health IT, telehealth, and digital therapeutics.

However, there are a few factors that could impact funding and investment trends, such as the global economic climate, government regulation, and the rise of new technologies.

Here are some specific predictions for health IT funding and investment trends in 2024:

• Increased investment in AI-powered health IT: AI is expected to have a major impact on the healthcare industry in the coming years, and investors are increasingly interested in AI-powered health IT companies. As AI algorithms become more sophisticated and the amount of available data continues to grow, we can expect to see even more investment in AI-powered health IT companies in 2024.
• Continued growth of telehealth funding: Telehealth has become increasingly popular in recent years, and the COVID-19 pandemic has accelerated this trend. Investors are still bullish on telehealth, as they see the potential for this technology to make healthcare more accessible and affordable. Funding for telehealth companies is expected to remain strong in 2024.
• Rising interest in digital therapeutics: Digital therapeutics are still in their early stages of development, but they have the potential to revolutionize the way healthcare is delivered. Investors are increasingly interested in digital therapeutic companies, as they see the potential for these companies to develop new and innovative treatments for a variety of diseases. Funding for digital therapeutic companies is expected to increase in 2024.
• More investment in health IT companies that focus on value-based care: Healthcare systems around the globe are increasingly moving towards value-based care, which focuses on paying for outcomes rather than services. Investors are looking to invest in health IT companies that can help healthcare organizations to deliver value-based care. Funding for health IT companies that focus on value-based care is expected to increase in 2024.

Overall, the health IT funding and investment landscape is expected to remain strong in 2024, with a focus on AI-powered health IT, telehealth, digital therapeutics, and health IT companies that focus on value-based care.

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HealthTech M&A Newsletter from Nelson Advisors - Market Insights & Analysis for Founders & Investors. Subscribe today! https://lnkd.in/e5hTp_xb

HealthTech M&A Advisory by Founders for Founders, Owners & Investors. Buy Side, Sell Side, Growth and Strategy mandates - Email [email protected]

HealthTech Thought Leadership from Nelson Advisors - Industry Insights & Analysis for Founders, Owners & Investors. Visit https://www.healthcare.digital

Original Source - https://www.healthcare.digital/single-post/health-it-funding-and-investment-trends-in-the-last-12-months-and-potential-future-trends-in-2024