Q&A: Where digital health funding could go in 2023
Dr. Sunny Kumar, a partner at GSR Ventures, sat down with MobiHealthNews to discuss the financing climate for digital health firms and his forecasts for 2023.
In regards to question of big takeaways at digital health in 2022, Dr Kumar says, 2022 has been a year of transition and a healthy reset, as macro factors like the interest rate, the conflict between Russia and Ukraine in Europe, “zero-COVID” in Asia, and the supply chain affected the entire economy, including the healthcare ecosystem. Investors, entrepreneurs, and huge corporations have all taken a step back and reevaluated the ecosystem, asking, “Where are we creating true value?” Dr. Sunny Kumar believe that this is the question that everyone, especially the investing community, is asking. Ultimately, digital health can generate absolute, perhaps world-changing value. In certain cases, however, this may have been somewhat exaggerated in recent years. At their peak, telemedicine companies such as Teladoc traded at 25 to 30X revenue multiples, whereas they now trade at 2X or 3X. He believes that what we are currently witnessing is the markets resetting and realigning, and that the future will be about creating genuine wealth.
When asked does he believe that some of this was foreseeable last year, he said, some of the signals were definitely there. Considering how quickly we were to put money into various startups, he believes that some of the investors got a little ahead of themselves. There are still fantastic firms available today, and fundings are still taking place. But things are beginning to settle back into the regular diligence cycles.
In regards to how has the digital health funding downfall has affected his decision making and advice for others who are investing. He said, In the past, companies were valued on how fast they could grow, and to some degree, “grow at all costs”. Now, before investing, it’s more important to make sure that your growth is responsible relative to other costs.
When asked about what do he think the investment landscape will look like in 2023, he said, Based on his estimations, the grand total of dollars will appear very much like it did in 2022 when viewed from a run rate perspective. The year 2021 saw astronomically high valuations. Companies that went public in 2021 and raised capital haven’t felt the urge to go back to the private markets to raise more money. In 2023, we should see a resurgence of several of these businesses. In his opinion, we can expect to see those businesses returning to the market in 2023, most notably around the middle of that year.
An era of slowed growth for the United States and the rest of the world is extremely likely. Even in a shrinking economy, it’s reasonable to spend money if you’re getting $5 or $10 back on your investment.
Source: mobihealthnews