Investors are understandably cautious this year as the Federal Reserve tightens monetary policies and financial markets erased the gains from the last 12 months. Public company investors in sectors with enticing upside—like digital health—are waiting for headwinds to abate before they jump back in, and investment in venture-backed companies has slowed considerably, writes Fenwick & West Life Sciences Group.
The numbers from the first quarter of 2022 reflect this caution. After a record-breaking 2021 for the white-hot digital health sector, where the number and size of funding rounds reached new heights, the first quarter saw a slowdown in digital health dealmaking and the IPO market quieted significantly.
The downturn, of course, is not confined to digital health. Challenges including inflation, rising interest rates, the war in Ukraine and ongoing supply chain issues have resulted in capital preservation and belt tightening, postponed IPO plans and valuation markdowns across the startup landscape.
