Digital Health Trends Revealed – Exuberance Gives Way to Savvy Investors

Forget Your Apps – Galen Growth 2023 Report Shows a Sector Shifting Toward Practical Value - Now With a Downloadable Link to the Data

At last year’s mid-point, Galen Growth predicted turbulence in the digital health sector. The international market research team was an early alert system, forecasting the dramatic shift in venture capital funding that questioned the industry’s direction, outlined steps needed for success, and where it would find its customer sweet spot.

The transformation of the digital health ecosystem is marked by consolidation, increased investor scrutiny, a shift in investment strategy, and the dramatic convergence of big tech and big health. Galen Growth has now released its 2023 Year-End Digital Health Global Key Trends Report. Medika Life was provided with an in-depth preview of this world-class authoritative data set and shares the report with readers at no cost.

Recognized globally by life science, health systems, and investors for its in-depth analysis, Galen Growth draws on its proprietary HealthTech Alpha platform, the world’s leading data, intelligence, and insights mining tool to compile its reports. Galen Growth tracks more than 680M data points and 14,500+ digital ventures.  

This comprehensive coverage is curated by Galen Growth’s specialized research team led by Sara Schmachtenberg, who leads a global group of analysts and industry experts in Asia, Europe and the United States. We appreciate Julien de Salaberry, CEO of Galen Growth, for making this report available to Medika Life and Lawrence Wurtz, the Galen Growth US lead, for his guidance. Special thanks to Ritesh Patel, who reminds us, “If it moves, digitize it!”

If you think digital health begins and ends with your smartphone, full stop! Digital health is vast and includes AI, ChatGPT, GenAI, health IT and more.  It harnesses the power of software as a prescription medical treatment for people with unmet medical needs. It is on the cutting-edge of health information technologies, driving smart wearables used to monitor patient vitals and report data back to provides. It ensure precision dosing of medicines.  It’s transforming women’s health and senior care. As its efficacy and safety parameters have morphed, the category demands the same degree of clinical commitment, regulatory oversight, and commercial savvy as any clinical product influencing life and health outcomes. The Galen Growth Trends Report studies 68 categories across 18 clusters. There is no comparative data that provides an overview of this magnitude.

While some “trend” reports cite dramatic numbers – largely pinpointing the dramatic drop in overall sector funding – the Galen Growth 2023 Trend Report offers a comprehensive analysis that guides analysts from industry and investment firms on where the money and where the successive waves of innovation are expected. Digital health as a category is maturing.  Gone are the investment dollars driven by unbridled exuberance and people licking their chops to enter “health’s tech boom.”  Get your hands on the 2023 Year-End Digital Health Global Key Trends Report to learn more. In the meantime, here is an analysis of the data and what it might mean for the category.

An Evolution in Digital Health Investment

Data Provided by Galen Growth – 2023 Year-End Digital Health Global Key Trends Report

2023 saw a tectonic shift in the digital health landscape as investors abandoned former highfliers and sought a more realistic perspective after the boundless enthusiasm influenced by COVID-19 in 2021. Even after more than a decade of maturity, the digital health sector has over 10,000 private companies showcasing varying degrees of innovation and potential. This evolution has led to increased commitments from pharmaceutical companies directing greater investment toward digital health innovation within their research efforts. Simultaneously, health systems are intensifying their focus on harnessing digital health innovation to enhance healthcare delivery and address capacity and productivity challenges.

Wallets seemed tighter in 2023.  The global averages revealed that only 31% of early-stage ventures, 34% of growth-stage ventures, and 53% of late-stage ventures raised funds in the last 18 months. But that’s also because many had already raised successful seed funds in the prior years. The remainder of the ecosystem was left to cut costs or rethink its business model.

A Complex Environment for Digital Health Ventures

Despite a thriving investment ecosystem, digital health faces headwinds. Recent data paints a mixed picture: fewer than 35% of digital health ventures secured funding in the past 18 months. This indicates an overall decline in investor support but a reorientation toward sub-sectors offering less risk and more customer upside. The pace of mergers and acquisitions (M&A) notably slowed, and initial public offerings (IPOs) and special purpose acquisition companies (SPACs) were few. Particularly in Europe, the absence of recorded IPOs underscores that investors retreated, waiting to see what the markets find valuable before reengaging. Less than a handful of years ago, there was significant money available to help scale up companies such as Pear Therapeutics (United States), (United States), and Babylon (United Kingdom). In the wake of their collapse, some investors remain in shock, and others are reflecting on the due diligence questions they should have pursued earlier.

The Rise of GenAI – Practical Need for Health Information Interpretation

Data Provided by Galen Growth – 2023 Year-End Digital Health Global Key Trends Report

GenAI (Generative AI) has emerged as one of the most exciting applications in the health sphere. Its prominence in biopharma and partnerships among health systems and innovators underscore its status as a central focus in 2023 and beyond.  The sector is shifting to address health system pain points – from taking the wash of “big data” found in electronic medical records and “scraping it” for clinical data that can be used to improve patient care – from confirmed diagnoses to better understanding chronic conditions to tracking for service provided requiring reimbursement codes and importantly providing healthcare staff summaries of patient status. 

On a topline, looking only at investor engagement and regulatory filing trends in the digital health domain would say the sector is in retreat. The Galen Growth data show its reorientation and why. The rise of GenAI is the “symptom.”  The disease might be responsible for the most significant part of the cost of care – health provider systems – recognize disruptive digital health technologies as the way to become more effective in operations and, most importantly, patient outcomes.

Increasing Partnerships and Technological Integration

Data Provided by Galen Growth – 2023 Year-End Digital Health Global Key Trends Report

The emergence of AI, ChatGPT, and GenAI has sparked partnerships with health systems that have been pivotal for digital health ventures despite the challenges posed by investor belt-tightening. In 2023, announcements of new partnerships surged 1.2 times from the previous year, with a 3% year-on-year increase in the total number of partnerships globally. Technological integration remains a cornerstone, with 39% of private digital health ventures leveraging Artificial Intelligence (AI) or Generative AI technologies to address this sector’s desire for greater efficiencies.

Big tech companies have long been sitting on the sidelines trying to understand better – to comprehend – how the multi-layered – fragmented – health system operates.  Behemoths like Amazon, Google, Microsoft, OpenAI and Google have all made big plays to partner, acquire and integrate health-specific AI platforms into their portfolios.  Health information – much of it handwritten and transcribed – defines “big data” – simply the ecosystem is awash in data.  GenAI might begin to make sense of the information chaos.

The application of AI is vastly different in health than tech and the giants will find the waters murky. In health-delivery settings, AI deals with sensitive patient data subject to strict privacy laws (e.g., HIPAA in the United States). Compliance with government health regulations is paramount, and data security raises legal concerns. There are ethical hurdles extending to issues like informed consent, patient autonomy, and the potential for AI to affect clinical decisions and treatment plans. Regardless, big tech has the cash to deploy and figure that out and they are eager to deploy in the health sector.

Biopharma All Aboard 

The research solutions cluster claimed 20% of the total funding in 2023.  Biopharma companies seek to “fail early” – to guard parents as we advance medicines in the research clinic and reduce the costs of creating new medicines.  They are embracing the idea and putting it into action, recognizing that information sorted at Lightspeed can better target drug discovery efforts and validate drug development teams’ trial design recommendations. 

Decentralized clinical trials have existed for some time. However, the COVID-19 era that became jet fuel for digital-health investment also paved the way for contract research organizations, life science companies, retail pharmacy chains, academic medical centers, and regulatory agencies to roll up their collaborative sleeves to create pathways and policies for the institutional use of this approach.

Companies that harness varied technologies and AI have sprung up to serve academic medicine and industry.  Long-awaited NGO groups such as the Decentralized Trials Research Alliance came into being, signaling increased opportunities for the sector. Research meetings such as SCOPE are seeing more and more digital health tech leaders step to the main stage.  The Galien Foundation, which once awarded its Nobel Prize like Prix Galien only to biopharma and medical device companies, has now included digital health and incubators, accelerators, and private equity entities among its categories.  Digital health is hard-wired into the ecosystem of science and medicine.

Like hospitals seeking to operate at heightened efficiency, the drug development sector recognizes that it needs to reach a much larger pool of patients – with a long-needed emphasis on diversity and broader geography – conveniently participating in clinical trials and ways to collect and sort added data.  Digital health is finding its seat around this table.  But at the same time, the seats are limited, and companies are choosing partners with caution and clinical data post the investment hysteria of 2022.

Galen Growth 2023 A Microscope and a Telescope

Photo Credit: Pexels by Photo by James Frid:

Digital health ventures addressing patients’ therapeutic care needs have a higher bar to leap to address environmental funding challenges.  It is now recognized that a Food and Drug Administration 510K approval is insufficient to secure market success.  Demonstrative proof points – the most critical biopharma sector, like clinical evidence, is essential. The need to show patient-care value – either as a solo therapy or in concert with medications – is needed. The Galen Growth Trends Report underscores that the ecosystem requires clinical and peer-reviewed “proof points” – not enthusiasm.

Data Provided by Galen Growth – 2023 Year-End Digital Health Global Key Trends Report

Investors are navigating stormy seas for improved returns in an extended higher cost of capital environment, grappling with a constrained investment value chain, reduced exits, scarce IPO opportunities, and current valuations.  Plus, let’s not forget, that private equity’s primary responsibility is to their limited partners – often institutions that place endowment funds with the firm expecting solid return on investments. Innovators and entrepreneurs have responded by pushing harder to provide the complex, fragmented health ecosystem with a range of digital health technologies that improve operations and patient outcomes – money and lives saved. 

The belt-tightening of investors has pushed out some who mistook category excitement for a quick pathway to returns. The past 18 months have reshaped the sector and catalyzed the transition from short-term, exit-oriented strategies toward sustainable venture-building approaches.

As the sector adapts and recalibrates, the Galen Growth 2023 Trends Report is a diagnostic of the past 18 months and a vital telescope to a potentially transformative future.


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Gil Bashe, Medika Life Editor
Gil Bashe, Medika Life Editor
Health advocate connecting the dots to transform biopharma, digital health and healthcare innovation | Managing Partner, Chair Global Health FINN Partners | MM&M Top 50 Health Influencer | Top 10 Innovation Catalyst. Gil is Medika Life editor-in-chief and an author for the platform’s EcoHealth and Health Opinion and Policy sections. Gil also hosts the HealthcareNOW Radio show Healthunabashed, writes for Health Tech World, and is a member of the BeingWell team on Medium.


Editor in Chief, Medika Life

Meet the Medika Life editor-in-chief, working closely with founding editors Robert Turner and Jeff Livingston, MD.

Not your usual health-industry executive, Gil Bashe has had a unique career shaped by more than three decades in health policy, pharma, life science, digital health, eco-health, environmental innovation and venture capital and informed his determination to ‘give back.’

A champion for health innovation that sustains people’s lives and improves their care, Gil honed his perspectives on both battlefield and boardroom. He started in health as a combat medic in an elite military unit. He went on to serve as a clergyman tending to the ill; as a health products industry lobbyist in environmental affairs; as CEO of one of the world’s largest integrated health marketing companies; as a principal in a private equity-backed venture; as a Medika Life author and Health Tech World correspondent; and as Chair Global Health and Purpose at FINN Partners, a community of purpose dedicated to making a difference.

In the forefront of change, Gil is ranked as a Top 10 Digital Health Influencer; Medical Marketing & Media Top 10 Innovation Catalyst; Medika Life named him a “Top 50 Global Healthcare Influencer,” and PM360 presented him with its “Trailblazer Lifetime Achievement Award.” He is a board member for digital health companies and is an advisor to the CNS Summit, Galien Foundation, Let’s Win for Pancreatic Cancer, Marfan Foundation and other health-centered organizations.





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