SEA’s healthtech map reveals challenges in funding path

Health is wealth. In Southeast Asia, this phrase looks like it’s catching on – at least if the amount of money that people are putting into digital healthcare products is any indication.

Revenue from the region’s digital health market is expected to reach US$5.4 billion by the end of this year and US$8.4 billion by 2028, as per a Statista report.

This is keeping investors interested. Total funding secured by healthtech firms in 2023 has reached US$372.1 million so far, eclipsing the amount raised for the whole of 2021 – when investor interest in the sector was at its peak due to the pandemic.

But there is more here than meets the eye, as over 75% of the funding this year came from two deals: Halodoc’s US$100 million series D round and Temasek-backed SeaTown Holdings’ US$110 million investment in Foundation Healthcare Holdings. If you exclude those, total funds raised by the sector is 35% lower than last year.

This is also reflected in the number of funding deals, which dropped 40% compared to 2022 – the lowest level in four years. Even with two months left, the year will likely finish with the number of deals at a three-year low.

This is similar to 2021 when slightly over 80% of the total funding went to five companies, which was pointed out in Tech in Asia’s analysis last year.

While funding has slowed down in the healthtech space this year, it doesn’t mean that investors have called it quits. Tech in Asia’s data shows a higher number of bridge rounds – making up nine out of 30 deals – among the funding rounds in 2023.

In fact, nearly half the number of bridge rounds raised by healthtech firms since 2019 – 19 out of 43 – happened over the last two years. This started in the second half of 2022, while the funding winter was intensifying and pandemic restrictions were being lifted across the region.

An industry insider tells Tech in Asia that the rise in the number of bridge rounds comes from existing investors trying to buy more runway for their portfolio firms while these startups attempt to build a sustainable business. However, the person notes that healthtech startups in the region are still finding it difficult to raise money.

Antler is the most active investor in Southeast Asia’s healthtech space, with investments in 18 startups. It’s followed by East Ventures and Seeds Capital, the venture arm of Enterprise Singapore.

While the region’s healthtech industry is still nascent – most of the startups are in the pre-series A stage – there were two startups that closed late-stage deals: Halodoc’s series D fundraise and Doctor Anywhere’s series C1 round.

Considering we are currently in the middle of a funding winter, even a few of these late-stage deals bode well for the healthtech sector. Many other industries in the region haven’t even witnessed one such deal over the past year.

Refusing to get off the telemedicine train

The impact of the pandemic brought telehealth services to the fore in 2020 and 2021. But with the lockdown restrictions lifting last year, the sector was predicted to see a decline.