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In 2023, the healthtech sector in India, home to over 10,000 companies, witnessed a notable funding decline to $682.7 million, down from $1.5 billion in 2022 owing to factors such as reduced late-stage investments, fewer funding rounds (from 247 to 103), and a decrease in average cheque size.
The sector, previously buoyant from 2020 to 2022 due to heightened pandemic-related investments, is now undergoing a necessary correction, with unsustainable business models facing challenges. Yash Sinha from BlackSoil, an alternative credit platform mentions a reassessment of investment outlook, emphasising the impact of exuberance in previous years.
$3.5 billion funding in 2021
Data from Tracxn, a data intelligence platform shows that the sector witnessed its highest funding of $3.5 billion in 2021, after which it started to witness a decline. Despite the industry’s highest funding in 2021, market size projections have not matched reality, leading to recalibrated expectations.
According to Neha Singh, co-founder of Tracxn, the pandemic globally positively influenced the healthtech industry, with the Indian sector raising $9.4 billion to date. “Almost 60 per cent of funds were raised in the last three years after 2020, depicting the growth of this sector in recent years.”
However, challenges include lower-than-expected willingness to pay in both enterprise and consumer segments and delayed realisation of data monetisation’s promised impact.
“In fact, both enterprise and consumer segments have demonstrated a lower-than-expected propensity to pay, which cannot be overlooked. Additionally, the promise of data monetization—a key revenue driver long-touted as pivotal in healthtech business strategies—has yet to materialise at scale,” noted Manu Rikhye, Partner, Merak Ventures, an early stage VC firm.
Show of resilience
Health technology can be segmented into two broad sectors: curative care and preventive care and the the Indian healthtech market is projected to reach $25 billion by 2025, states a report by report by LoEstro Advisors. The growth is expected to stem from factors such as increased internet penetration, demand for enhanced accessibility, and rising chronic diseases.
“The silver lining here is that despite a projected 65 per cent decline in venture funding in health-tech from its 2021 peak, we expect to see the emergence of resilient companies in this space,” added Sinha.
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