Digital health startups based in the U.S. concluded 2023 with a fundraising total of $10.7 billion across 492 deals, marking the lowest annual fundraising amount the sector has experienced since 2019, as reported by Rock Health.
However, last year’s low total doesn’t fully illustrate the extent of the situation. Digital health fundraising in 2023 was characterised by startups exploring innovative tactics to keep their businesses afloat, including series extension rounds, unlabeled fundraises, and silent deals from existing investors.
Traditionally, venture-backed companies strive to raise capital every 12-18 months. However, financial pressures have led to changes to this timeline. In fact, Rock Health found that 81% of active U.S.-based digital health startups that finalized a labeled fundraising round in 2021 or earlier did not manage to raise another labeled round by the end of 2023.
As pointed out by Rock Health, startup companies in 2023 were seen to undergo extension rounds in Series A and B. Notable instances include Mantra Health’s Series A extension in March, Heard Technologies’ Series A extension in June, CarePredict’s Series A extension in July, Keona Health’s Series A extension in August, and Genome Insight’s Series B extension in November.
Furthermore, Rock Health reported that a significant percentage of the digital health fundraising deals in 2023 were unlabeled and that silent rounds, in which a startup quietly seeks capital from its existing investors, were a prevalent trend in 2023.
These varied funding strategies offer valuable lifelines for these businesses, especially during financially tight periods. However, each comes with its own set of risks and potentially disadvantaged, emphasizing a pressing need for effective fundraising strategies within the digital health startup industry.