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The number of digital health deals are on track to decrease for the first time
The digital health space set a record for funding the last two years in a row, when the roughly $8.1 billion invested in digital health startups in 2018, which trounced the previous record of $5.7 billion set in 2017. For the first half of 2019 it looked like we were on track for another record breaking year, but that is probably no longer be the case.
While there was $4.2 billion invested in digital health over the first six months of this year, investing took a big dip in the third quarter, according to a report out from Rock Health, with $1.3 billion invested in digital health companies.
As such, the space is now on track to see $7.3 billion invested in total for 2019; while that would still be the second highest number ever, and a 28 percent increase over the amount invested in 2017, it will also mean the amount of funding is down nearly 10 percent from 2018.
Perhaps more concerning for the digital health space, though, is that Rock Health also expects a decrease in deals of between 5 and 10 percent from last year, giving 2019 around 349 deals in total; this would be the first time the number of deals in the digital health space decreased since at least 2011.
Ultimately, these numbers will result in the average deal size falling roughly 4 percent from 2018, though it will still be 32 higher than it was in 2017.
Behavioral and women's health are thriving
Even as the digital health space is perhaps starting to slow down, or at least balance out after years of growth, not all the news is bad. In fact, two verticals in particular are starting to thrive.
The first is behavioral health, which has seen 16 companies raise a total of $416 million so far this year, for an average deal size of $26 million, up 73 percent from 2018. It's also a space that's maturing, as 40 percent of deals in behavioral health have been Series B or later since 2016.
Some of the companies that raised funding this year have included telebehavioral health platform Talkspace, which raised $50 million; behavioral primary care company Quartet, which raised $60 million; Pear Therapeutics, a prescription digital therapeutics company, which raised $64 million; and meditation app Calm, which raised $88 million and was valued at $1 billion.
The other space that's having a moment right now is women's health, which raised $177 million across 10 deals in Q3.
Funding for the space increased more than 8x from 2014 to 2018, which Rock Health points out was also the first year that saw 30 percent of women’s health deals be a Series B round or later.
Some of the companies that raised funding this year so far include Cleo, a parenthood transition startup, which raised $27.5 million; online prescription delivery company The Pill Clib, which raised $51 million; and Nurx, an on-demand birth control delivery company that prescribes contraceptives through its app, which raised $52 million.
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