Survey: ChatGPT/GenAI is influencing investors’ funding strategies

Healthcare data and analytics and tech-enabled services will be the sectors most impacted by generative AI, according to a survey by investment firm GSR Ventures.

The survey, which included responses from more than 40 healthcare technology venture capitalists, found that over 71% believe ChatGAPT/GenAI changes their investment strategy “somewhat” or “a little.” In contrast, 12% say it affects their strategy “not at all,” and 17% say it changes it “significantly.”  

Investors anticipate valuations will be reasonably similar next year compared to 2023, with 78% (+/-20%) saying they will be the same. Slightly more investors say valuations will continue to fall in 2024. 

Oncology was deemed the clinical area with the most promise for startups, followed by cardiology. Nearly one-third of investors (32.5%) said ophthalmology holds the least promise for startups. 

The biggest challenges for companies in investors’ portfolios in 2023 were redirecting towards profitability (33.3%), followed by go-to-market challenges (31%), and fundraising (28.6%). Investors also noted finding and attracting talent and customer retention were difficulties companies faced. 

Half of investors said the provider shortage and burnout crisis hold the most significant opportunity for emerging companies.  

For the remainder of 2023, investors said they expect to make the same number or more investments compared to 2022. 

WHY IT MATTERS

According to a report by Rock Health, digital health startups raised $2.5 billion across 119 deals in the third quarter of this year, making Q3 the second lowest-funded quarter by dollars raised since Q4 2019 and bringing 2023’s total funding to date to $8.6 billion across 365 deals. 

The report notes investors are funding startups with new treatment pathways and clinical flow solutions, and though there have been notable bankruptcies in 2023 within the digital health space, such as London-based multinational digital health firm Babylon and prescription digital therapeutics maker Pear Therapeutics, “digital health’s new reality is ‘smaller but mighty.'”