Only AI Survives Amid Investment Drought... Global Digital Health Investment Hits Five-Year Low

CB Insights "Q3 Digital Health State of the Industry" Report
289 Deals in Q3... Downward Trend for Two Consecutive Quarters
All Four New Unicorns Are AI-Based Companies
AI Investment Concentration Evident Across the Entire Market

The scale of global investment in digital health startups continued to decline in the third quarter, reaching its lowest level in five years. Despite weakened investor sentiment, all four newly minted unicorns (privately held companies valued at over 1 trillion won) were artificial intelligence (AI)-based companies, highlighting an increasingly pronounced concentration of investment in AI within the digital health industry.

According to the "Q3 Digital Health Status Report" published on November 5 by global market analysis firm CB Insights, global investment in the digital health sector for the third quarter reached 4.5 billion dollars (approximately 6.48 trillion won), a 14% decrease compared to the previous quarter. The number of investment deals in the third quarter also dropped to 289, about 100 fewer than in the first quarter of this year.

Investment in early-stage companies also contracted. While the share of investments in mid-stage startups rose from 18% last year to 20% this year, marking a five-year high, the proportion of early-stage deals fell from 63% to 57% over the same period. Analysts note that investors are increasingly channeling funds toward companies with proven technologies and track records rather than taking risks on untested ventures.

During this period, four new unicorns emerged, two more than in the second quarter. Three were based in the United States and one in Asia, all leveraging AI technology. The new unicorns include UltraGreen, which offers an AI platform for fluorescence-guided surgery assistance; Enveda, which automates the discovery of natural product-based drugs; Ambience, a company specializing in clinical document automation; and Thyme Care, a cancer patient management platform.

Since the COVID-19 pandemic, the digital health industry has shifted away from a structure centered on telemedicine platforms, which previously drove expansion, toward increasing use of AI technology in clinical data analysis, drug development, and medical devices. As investors pay more attention to technological effectiveness and data competitiveness, the market is being reorganized around AI.

This trend of capital concentrating on a small number of companies is also intensifying across the broader startup sector. According to the CB Insights report, total global startup investment in the third quarter amounted to 95.6 billion dollars (about 136 trillion won), exceeding 90 billion dollars for the fourth consecutive quarter. However, the number of investment deals fell to 5,898, the lowest since the fourth quarter of 2016.

The domestic market is experiencing a similar trend. According to the Ministry of SMEs and Startups, new venture investment in the first half of this year reached approximately 5.678 trillion won, a 3.5% increase year-on-year. However, the number of companies receiving investment fell to 1,901, a decrease of about 20% compared to the previous year. This indicates a clear trend toward "scaling up and selectivity," with capital remaining concentrated in specific segments rather than circulating throughout the ecosystem.

The concentration of investment in AI companies is expected to continue. More than half (51%) of global startup investment is already focused on AI-related companies, and the same trend is evident in the domestic market. In September, the Ministry of SMEs and Startups committed 310 billion won from the Korea Fund of Funds to select a second round of funds totaling 600 billion won, with a focus on technology startups in AI and deep tech. As the government pledges to usher in the "AI era," it is anticipated that the AI-centered ecosystem will become even more entrenched.

This content was produced with the assistance of AI translation services.