The healthtech sector grew exponentially post-pandemic. It saw a steep rise in investments, the number of deals and deal amounts, making 2021 the year of healthtech. This sudden growth saw a steep decline in 2022. With macroeconomic headwinds changing the market landscape, the sector grappled for funds.
However, 2023 seems to have lifted the gloom. The market is showing signs of resilience and stability. Silicon Valley Bank’s recent report on the Future of HealthTech found public markets showing early signs of improvement.
What does this mean for healthtech innovators? What can we expect from healthtech in 2024?
Here’s the breakdown of the report to give you an outlook on healthtech in 2024:
Key takeaways from SVB Future of Healthtech Report 2023
Unveiled at HLTH 2023, SVB’s Future of Healthtech Report 2023 gives a comprehensive analysis of the trends, opportunities and challenges in today’s healthtech innovation market.
While 2023 has been a difficult year for healthtech stakeholders worldwide, the report remains optimistic about the future. It highlights stabilising economic conditions and resilience of the healthtech sector.
Here are the key takeaways:
#1 Investments in healthtech are stabilising
The report found healthtech investments and deal pace relatively flat this year, with a total investment of $8.2 billion. While this is a steep drop from record-breaking levels in 2021, it suggests the sector is stabilising.
“The stabilisation hints towards a new investment environment marked by fewer deals, smaller deal sizes and slow investment pace.”
#2 Healthtech sector shows resilience
The report found healthtech stocks showing resilience in 2023, with the first positive performance trends in over a year. Despite ongoing public market headwinds, the healthtech sector traded up +6% in Q1 and +25% in Q2.
With economic conditions showing signs of strengthening, public markets are exhibiting early signs of improvement.
#3 Valuation resets to lead investments
2023 saw considerable downward pressure on valuations, resulting in flat and down rounds, valuation cuts and undisclosed valuation rounds. However, the report highlights that valuation resets helped match more modest growth and higher profitability targets in 2023.
It found venture fundraising rebounding and ample capital being available for right-sized investments into healthtech companies.
“While these valuation haircuts are undoubtedly painful for companies and their stakeholders, it has also led to a right-sizing of the market to a more sustainable future.”
#4 Smaller deal sizes
Mega deals became the thing in 2021, with 61% of investment dollars being mega deals. However, this number dropped to 38% in 2022 and just 23% this year, resulting in a 116% decrease in mega deals.
It shows that the investors are becoming selective and disciplined in their investment approach after a let loose in 2021. This could be positive for the healthtech sector in the long run as it will help reduce the risk of overvaluation and lead to a more sustainable investment landscape.
#5 Rise in strategic mergers and acquisitions
While there were zero IPOs in 2023, the report found strategic mergers and acquisitions (M&A) on the rise. It found private tech acquirers more active in 2023, while big techs like Google, Amazon, Microsoft were less active.
“We anticipate increased M&A activity in H2’23 and H1’24 as companies run out of cash and are forced to raise at a lower valuation or sell.”
#6 Value-based care in the spotlight
Value-based care (VBC) remained the bright spot in 2023, with over 50% of this year’s mega deals focused on VBC delivery or enablement. Though VBC adoption is still a work in progress, there is impressive recent momentum that is guiding the transformation.
The report found payers doubling down on VBC models and large payers and retailers making strategic acquisitions in the VBC space, creating a positive momentum.
“Organisations who do not reshape their business and delivery model to support an outcomes-oriented approach to care will be less successful if not outright unsustainable in the future healthcare economy.”
– John Fryer, SVP and National Head of Markets, Lumeris
Parting words
“While the near-term outlook remains choppy, our belief in the resilience of the innovation economy remains unwavering. The most innovative companies will not only survive this new investment landscape but also emerge stronger because of it.”
SVB Future of Healthtech Report 2023
