Digital health funding hit new heights in 2021. According to Rock Health’s Q3 report, funding had already hit $21.3 billion across 541 deals this year. Average funding amounts for Series A, B and C+ rounds have grown more than two times since 2017. 

With that huge growth in mind, MobiHealthNews asked executives and other leaders in the digital health space about funding in 2021. How will it change the industry? Is this a digital health bubble?

Stay tuned for more predictions and insights from these leaders. Last week, we covered the momentum and expansion of virtual care in 2021.

Amihai Neiderman, CEO and cofounder of Nym Health

"Smart venture capital firms quickly and accurately diagnosed demand from payers, providers and pharma to digitize, which resulted in a large injection of capital into health tech. However, not all of their investment will see returns, as we'll likely see consolidation in some areas. However, I do believe there are enough IPOs [initial public offerings], SPACs [special purpose acquisition companies] and acquisitions to justify the valuations we are seeing. It will be interesting to see if some of the more mature, heavily funded digital health companies finally get to an exit."

Guillaume de Zwirek, CEO and founder of Well Health

"The current flush capital landscape is a double-edged sword. On the one-hand, more capital should increase R&D and adoption; on the other, too much capital into companies who haven't found product market fit can lead to overinvestment and public failures, which drag down the entire industry. 

"We've seen a huge expansion in public and private company multiples throughout the pandemic. I don't think the implied growth rates needed to validate those multiples are sustainable. I am especially concerned about digital health companies who have gone public via SPAC and do not have the history or predictability in growth, and can make wild projections to validate big market caps (unlike traditional listings). I am also concerned about tier 2 and tier 3 investors who are making massive investments at crazy multiples. These investors are unlikely to have the wherewithal to live out a market correction. As a result, I recommend that all entrepreneurs prioritize (a) partners over valuation and (b) evergreen funds over short PE-style lifecycle funds whenever possible.”

Snezana Mahon, chief operating officer of Transcarent

"The influx of funding in the digital health space over the last two years has been incredibly exciting. The increased interest doesn't mean that we're necessarily in a bubble, but the reality is that not every company is going to succeed. Like with anything else, companies have to be able to prove ROI, both through better health outcomes and financial savings. And they have to prove the solution is scalable. I think we'll see continued consolidation from the companies that can't do that."

Cassie Choi, chief operating officer and cofounder of Pair Team

"In general, more funding allows entrepreneurs to take bigger, riskier and more innovative chances – this is true in digital health, as well. We are seeing large, early-stage funding rounds purely on an idea of how much better the healthcare system could work. This is amazing because it lets us move from inch-by-inch progress to leaps-and-bounds forward as an industry. Digital health is not a bubble; yes, with so much funding, there are ideas with shaky foundations that are also getting funded, but that is the minority. The majority of the funding is going toward companies solving truly meaningful challenges in healthcare. It is an incredibly positive force for the world."

William Chan, CEO and cofounder of Iodine Software

"If anything, the pandemic demonstrated how badly the industry needed funding. Even though it's the largest industry in the U.S., investment in innovation hasn't been proportional to the size of the overall healthcare spend, so I don't think it's a bubble. Now that innovative companies have the capital to grow, I expect that we'll finally start to see smarter solutions to our system's biggest problems, like provider burnout and revenue leakage.”