India attracted USD 7.92B in VC funding for digital health in 10 years

India’s digital health ecosystem has emerged as a crucial player on the global stage, reflecting the country’s growing importance in the healthcare technology sector. With 816 domestic digital health startups and 66 international companies establishing a presence, India hosts the second-largest digital health ecosystem globally. However, this rapid expansion comes with its unique challenges and opportunities, which India digital health investment must consider carefully.

A robust yet challenging digital health ecosystem
India’s digital health sector is undoubtedly vast, but the ecosystem’s survival rate reveals underlying vulnerabilities. Currently, the survival rate of Indian digital health ventures stands at 80%, significantly lower than the global average of 92% and the Asia-Pacific average of 84%. This disparity highlights the challenges that Indian digital health startups face, including market saturation, regulatory hurdles, and operational inefficiencies. For digital health investors, this means that while the market offers vast potential, the risks are also considerable, necessitating a cautious and well-informed investment strategy.

Venture capital funding: A story of peaks and troughs in digital health investment

Over the past decade, India has attracted $7.92 billion in venture capital funding for digital health, ranking second in the Asia-Pacific region. The sector saw its highest level of investment in 2021, with a staggering $2.6 billion raised, largely driven by high-profile digital health funding deals like PharmEasy’s $500 million Series F round. However, this peak was followed by a noticeable decline in 2022 and 2023, reflecting broader global economic trends and market corrections. As of mid-2024, digital health funding levels appear to be stabilising, suggesting that the market might have reached a new equilibrium after the pandemic-driven surge.

For digital health investors, this fluctuation in funding underscores the importance of timing and market sentiment. While the sector may no longer see the explosive growth of 2021, the stabilisation indicates a more mature and potentially less volatile investment environment.

Disease-agnostic solutions: A strategic focus in India’s digital health sector
One of the defining characteristics of India’s digital health landscape is its focus on disease-agnostic solutions. Approximately 61% of digital health ventures in the country concentrate on improving overall healthcare access rather than targeting specific diseases. This approach is particularly relevant in lower- and middle-income countries like India, where broad-based healthcare solutions can have a more significant impact. These ventures often involve healthcare software that enhances practice management, concierge services, and other health management tools that improve operational efficiency and patient care.

This emphasis on disease-agnostic solutions offers a unique investment opportunity in the Indian digital health market. By addressing systemic healthcare challenges, these ventures are well-positioned to scale and adapt to diverse markets within India and globally. Digital health investors looking for ventures with broad applicability and scalability may find significant value in this segment.

Key categories driving growth in India’s digital health market

The digital health ecosystem in India is diverse, with several key categories driving growth:

1. Health management solutions (17%): This category focuses on improving physician and hospital workflows, which is crucial in a country where healthcare infrastructure often struggles to meet demand. The high percentage of ventures in this category reflects the urgent need to streamline clinical operations and reduce administrative burdens.
2. Online pharmacy (14%): Digital health solutions for medication distribution are gaining traction, especially in a country where pharmaceutical access can be limited, particularly in rural areas. The growth of online pharmacies also reflects the broader trend of digitising traditional healthcare services.
3. Health services search (11%): This category includes platforms that help patients find healthcare services. This function is vital in a country with vast geographical and socioeconomic diversity. These platforms are essential for improving healthcare access and ensuring patients find appropriate care.
4. Telemedicine (9%): Telemedicine has become increasingly important in India, where the physician-to-patient ratio is low, particularly in rural regions. Virtual care solutions are not only filling the gap in healthcare access but are also becoming a preferred method for many patients and providers.

A dynamic investment landscape in digital health
India’s digital health ecosystem has attracted over 1,100 investors, with significant participation from prominent venture capital firms such as Peak XV Partners, Accel Partners, and Chiratae Ventures. These digital health investors have been instrumental in driving the sector’s growth, supporting ventures across various stages of development, from seed funding to Series F rounds.

The partnership landscape is also dynamic, with over 1,150 partnerships announced over the past 14 years, primarily involving healthcare providers, insurance companies, and pharmaceutical firms. Since 2019, the number of publicly announced partnerships has remained stable, indicating a consistent interest in collaboration within the sector. For digital health investors, these partnerships signal a mature and interconnected ecosystem where strategic alliances are critical for scaling and innovation.

Conclusion: A Market of Cautious Optimism for Digital Health Investors
A Market of Cautious Optimism for Digital Health Investors India’s digital health ecosystem presents a compelling mix of opportunity and risk. While the sector’s scale and growth potential are undeniable, the challenges of a lower-than-average survival rate and fluctuating funding levels must be carefully navigated.

However, the focus on disease-agnostic solutions, the diversity of growth-driving categories, and the stable partnership landscape all point to a maturing and stabilising market.For India digital health investment, this means that while the days of explosive, unchecked growth may have passed, the Indian digital health sector still offers significant opportunities.

A strategic, well-timed investment approach, grounded in a deep understanding of the market’s nuances, could yield substantial returns as the digital health ecosystem evolves. In summary, India’s digital health market is one of cautious optimism. In this market, the right investments, guided by a clear understanding of the ecosystem’s dynamics, could lead to substantial long-term growth. Galen Growth