Telehealth startups are struggling to raise financing after a boom in valuations during the height of the Covid pandemic, says Jill Frew, managing director at healthcare investment bank Cain Brothers.
In early 2021, says Frew, digital health stocks traded at 20-times forward revenue, Mergers & Acquisitions reports. Now publicly traded Teladoc Health and Amwell, formerly known as American Well, are trading at two- or three-times forward revenue.
The problem with the sector is few are profitable, says Frew. “Over the last couple of years, $30 billion was invested in digital health. Last year, one thousand companies got funding, and they went back to the markets every 18 months. Now one hundred a quarter get funding, and investors and boards are telling startups to revisit burn rates and are announcing layoffs.”
Reports surfaced that unicorn Cedar, which had a $3.2 billion valuation during a $200 million Series D funding in 2021, would lay off 24 percent of its workforce. Forward Health, valued at $1 billion, was reported to have cut 5 percent of its workforce – just to name two in the month of July. Read more.
