Digital health had a breakout year in 2021, with startups raising $29.1 billion in 729 deals. At the height of the funding boom, startups raised $6.7 billion in the first quarter of 2021. That grew to $8.3 billion in the second quarter, followed by $6.8 billion in the third quarter. Digital health startups signed 183 deals in the first quarter of 2022, with an average deal size of $32.8 million.

"This could be related to seasonality," the report said. "February is a shorter month, and late-stage deals can skew monthly patterns, but this quarter's monthly funding numbers may be early indicators of a digital health venture funding correction."

The more-restrained funding numbers in the first quarter may reflect investor caution, according to the report, with the rise and fall of COVID variants, energy shocks, market volatility, the dismal performance of public digital health companies and inflation numbers signaling choppy waters for digital health investors.

First-quarter funding shifted to different digital health sectors than in previous quarters. Funding for startups catalyzing R&D in biopharma and medical tech dropped slightly to second place, while funding for startups augmenting clinical workflow rose eight spots to third place, Mental health care continues to be a hotspot, with startups in this sector raising $1 billion in the first quarter. Investment in startups supporting reproductive and maternal health, which totaled $424 million during the quarter, reentered the top six for the first time since 2019.

Such factors as supply chain and energy disruptions, market corrections and the Russian invasion of Ukraine make it difficult to predict the next three quarters, the report said.

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