Rock: Q1 2022 U.S. digital health funding hits $6.0B across 183 deals

Supply chain and energy disruptions, market corrections, and the Russian invasion of Ukraine are new variables entering public and venture funding equations.

Rock Health Q1 2022 graph

Last year was amazing and a breakthrough year in digital health funding and we’re not sure it will be repeating this year. For starters, companies and VCs have new puzzles in their equations to deal with — namely supply chain and energy disruptions, market corrections, and the Russian invasion of Ukraine.

Still, U.S. digital health funding closed with $6.0 billion raised across 183 deals, with an average deal size of $32.8M. That’s lower than blockbuster Q4 2021 ($7.3B) and the twelve month quarterly average of $7.1B. However, it is important to add that Q1 isn’t usually the biggest period for funding.

Of the total amount, $3B was raised in January 2022, $1.4B in February and $1.6B in March.

Some of the highlights you need to know:

  • From the beginning of Q3 2021 (July 1, 2021) to the close of Q1 2022 (March 31, 2022), the Rock Health Digital Health Index (RHDHI), the composite of publicly traded digital health securities, tumbled 38%, far below the S&P 500’s 5% dip over that same time period. RHDHI’s performance also deviated from other healthcare industry indices, such as S&P 500 Health Care (SP500-35) — which beat the S&P 500 over this time period — or Nasdaq Biotech Index (NBI).
  • It is suggested that digital health’s SPAC class exerted downward pressure on overall RHDHI performance.
  • Several companies from digital health’s blessing raised mega Series D+ deals in Q1 2022, including TigerConnect ($300M), Lyra ($235M), Alto Pharmacy ($200M), Omada Health ($192M), and Ro ($150M).
  • Continued Series D+ activity might indicate that some companies are delaying their exits until public market conditions stabilize, or may be recalibrating away from SPAC exit roadmaps and possibly moving toward IPO pathways, which tend to take more time.
  • Funding for digital health startups catalyzing R&D in biopharma and medtech ($1.0B) dropped slightly to second place this quarter, while funding for startups augmenting clinical workflow ($888M) rose eight spots to third place. This category includes several players that reduce or offload clinician tasks-think medical transcription (DeepScribe, $30M), complex care workflow (Memora Health, $40M), or clinical surveillance (Decisio, $18.5M).
  • In terms of clinical focus area, startups offering mental healthcare kept the top spot with $1.0B, bolstered by employer-focused Lyra Health’s Series F ($235M) and Omada Health’s Series E ($192M).
  • Funding for startups supporting reproductive and maternal health ($424M) reentered the top six for the first time since 2019.
  • While Q1 2022’s investment distribution deviates from some of 2021’s patterns, funding numbers in each category are still too small to signal yearly trend shifts.

The rise-and-fall of COVID variants, energy shocks, and inflation numbers signal choppy waters for digital health investors, and Q1’s somewhat restrained funding numbers may reflect investor caution. So, we’re hoping for an even better Q2.