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Health tech investors have been pouring money into early-stage startups as more mature companies with inflated pandemic-era price tags struggle to raise funds.
Series A health tech startups collected $1.7 billion in funding across 109 deals in the first half of this year, according to Silicon Valley Bank’s midyear report. That’s around $100 million more than the first half of last year. Median valuations for Series A deals also grew to $44 million, compared to $38 million in 2023.
Meanwhile, mid-stage Series B and Series C health tech startups are raising much smaller sums in extension rounds, Julie Ebert, Managing Director of SVB’s National Life Science and Healthcare team, told Endpoints News in an interview. The small boosts are meant to get the startups into the next year, so they could potentially raise at a higher valuation.
“For digital health, it’s a little bit of a tale of two cities,” Ebert said.
Raising funds has become harder in the wake of the pandemic as interest rates have climbed. Some health tech companies are considering selling themselves instead of raising new funds in the current environment, Ebert said. But as the federal government gears up to cut rates, venture investment in startups could increase in the back half of the year, she said.
Across all types of healthcare startups, including health tech, biopharma, diagnostic tools and medical devices, Series A valuations and deal sizes were up significantly from 2023, the report said. In all, healthcare startups raised $28 billion across 1,400 deals in the first half of this year — below peak deal activity in 2021 and 2022, but beating the same period last year.
At least 28% of deals across healthcare startups were down rounds or flat rounds, the highest amount since at least 2019, according to the report.