According to seed fund firm Rock Health, investors poured more than $4.1 billion into digital health companies in 2014, which was more than the prior three years combined. But are venture capitalists growing tired of the market segment?
Rock Health polled audience members at an event for investors last month, and found that nearly two-thirds felt that “private digital health companies [are] over-valued right now.” More than half cited the long sales cycle of these new companies as their biggest concern. On the other hand, More than a third expect to invest more in the segment, with fewer than one in 13 planning to invest less.
The take away for start-ups is that the free-flowing money may be coming to an end. Better business plans with a clear — and short — path to profitability are more likely to snag funding in this environment. But there is still likely to be lots of money available for digital health companies.