How Digital Health Brands Can Succeed in Today’s Challenging Market (Part 1 of 2)

By Dan Martin

2020-2022 were boom years in digital health. Interest rates were low, valuations were up, and VC dollars were flowing heavily into digital health companies. During those three years, according to Rock Health, digital health companies raised a whopping total of $58.6B in venture capital ($14.1B in 2020, $29.2B in 2021, and $15.3B in 2022). 

Then came 2023 and 2024 which, again based on Rock Health’s data, saw funding in digital health nosedive considerably ($10.7B in 2023 and $10.1B in 2024), along with a decrease in IPOs and failure by some companies that had gone public. Last summer I caught up with Halle Tecco, an entrepreneur and investor passionate about fixing healthcare, and Gabe Perna, Digital Health editor of Modern Healthcare, to discuss our thoughts on all things digital health. Not surprisingly, given the two-year malaise which the digital health market was slogging through, one of the central themes of that conversation was the financial status of the industry and what the future may hold. Rome wasn’t completely burnt to the ground but there were significant headwinds and challenges facing companies trying to innovate, attract and retain customers, and get to their next level. Our collective sentiment for the remainder of 2024 and start of 2025: ‘wait and see’ and cautious optimism. 

When I came across Halle’s recent blog post, “What Happened to the Digital Health Unicorns of 2020-2022?,” it reminded me of that conversation eight months prior. The question is a great one—after two strong years of investment followed by two very lean years, how many of the 65 companies that had reached unicorn status in the heyday of 20-22 had found a way to adapt to changing markets and maintain their success? The answer surprised me—according to her research:

• 89% are still operating today.

• One-third of those managed to raise additional funding in 2023-2024.

• One went public and another is preparing to go public soon (Hinge Health; filed S-1 on March 10).

• Four companies were acquired or merged.

• Only two companies have shut down (Forward and Olive AI).

Yet, as Halle notes, while many are still standing, there were plenty of hurdles—down rounds, layoffs, unlabeled rounds, roll-ups—founders and executives had to navigate. And, according to Rock Health’s 2024 Year End Market Overview, median deal size for digital health companies raising later stage rounds (C and D) in 2024 were smaller than previous years and 86% of labeled deals went to Seed, Series A and Series B rounds—“investors are betting on younger companies, some of which are free from the valuation baggage of 2020-2022 fundraising.” 

Adding to that and looking forward, a Business Insider article last month outlines the high stakes for digital health companies considering an IPO in 2025, “revenue in the several hundreds of millions, profitability and growth at a pace of 30% or more on top of the prior year’s revenue.”  

While innovation has continued at a rapid pace and advancements abound, the market has changed considerably and the barriers to success (and exit) are much higher. There aren’t only lessons for founders and executives but for communicators as well. What can healthcareIT marketers and PR professionals do to support their leaders and brands to guide them through these rough waters and achieve success? Those tips forthcoming in part 2, stay tuned! 

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