HTN Startup Market Conditions 2023 Update

We surveyed ~90 startup leaders about their funding strategies to get a collective perspective on changing market conditions.

TL;DR: In just 8 months since our last survey, a lot has changed in the financing market. From early-stage companies shutting down, to mass layoffs across late-stage orgs, to bank runs causing panic amongst startup leaders trying to access their accounts. Market conditions have rapidly changed and now feels like a more stressful time than ever for health tech leaders trying to navigate these turbulent times.

With that, we thought it would be a good time to update our previous market conditions survey to get a fresh perspective on both the business and personal impact on startup leaders. 

Let us preface this all by saying that there likely isn’t anything inherently novel in the data you’ll find below – if anything it is a confirmation of what many of us have felt across the community and in our day-to-day as startup operators. At the same, we do hope these findings serve as benchmarks to help folks understand others’ sentiments and gauge how they measure up against the group.

Here are some more specific takeaways we will dive into below:

  • Most early-stage startups believe they will be able to raise capital before cash runs out, but it’s going to be tough

  • Companies are split on strategies heading into raising

  • It might be time to consider a down round

  • Angel investors & debt are becoming more attractive financing options among early-stage health tech operators

  • Early-stage builders are tightening and focusing hiring strategies 

  • Startup customers & vendors going under is not a major concern yet, but operators are paying closer attention

The overarching learning we have from this survey is that the challenges that were facing the growth stage and public company health tech market this time last year appear to have trickled down to early stage startups as well now. As you’ll see in the responses, the pendulum appears to have completely swung from a founder-friendly environment where capital was free-flowing to an investor-friendly environment where raising capital requires more proof. The bar is higher for early stage investment, which is going to be an adjustment period for founders expecting their process to be similar to what they’ve heard from peers in the past few years. 

One last thing: It feels like a sign of the times that when we started this survey on March 5th, it wasn’t on any of our minds that over the next few days the bank that serves many health tech startups would collapse. So when Silicon Valley Bank failed just a few days later, it served as a stark reminder of just how much the market has changed. We note that responses to this survey were collected March 5 - 14th, but we didn’t see any notable difference in responses, whether they were before / after SVB.

State of Startups: Demographics & Business Profile

Before we jump into the results, there are a few things worth noting up front. While this is meant to be an update from our original Market Conditions survey (here), we of course are working with a different pool of respondents, so comparisons can’t be made perfectly. And we’ll include our caveat that this isn’t a scientific survey - just a representation of folks within the HTN community who took the time to fill out the survey. Considering that, we thought we’d set the stage by summarizing some of the demographics of the respondent pool below. Of course, you’re always welcome to dig into the data in the Appendix at the end of this article:

  • Audience: 88 total respondents, 91% of which are C-level or equivalent (e.g. CXO, President, Founder, Chair, etc.).

  • Most respondents (94%) are early- to mid-stage: This includes 24% pre-seed, 38% seed, and 33% Series A-B. Only about 2% of respondents were growth stage companies (Series C-D), which definitely skews the story below to startups. 

  • Respondents are primarily from Care Delivery or Infrastructure & Enablement orgs: This includes 32% care delivery and 22% infrastructure & enablement.

Beyond respondent demographics, we also gathered a few details related to business profiles and how companies’ are thinking about their capital needs and fundraising strategies.

Respondents by Paying Customer

In aggregate, respondents reported a healthy mix of who their primary paying customer is, with 28% reporting payors, 17% patients/consumers, 6% life sciences/pharma, 17% independent providers, 17% health systems, and 7% digital health startups. It’s worth calling out that only 7% of companies indicated that their primary paying customer is another digital health startup. This is worth remembering later on when we look at how companies feel about their customers potentially shutting down later in the article.

Respondents by Months of Runway

On the whole, 54% of startups report having at least 12 months of runway left. While we don’t have a direct comparison from the previous survey, it seems like many companies are in a pretty healthy spot at the moment.

Cutting the data by organization stage, we found that Series A-B companies seem to be in the best spot, with 73% of startups reporting 12+ months of runway. Naturally, pre-seed and seed stage companies have less runway, and as we will see later, they are the ones primarily out in the market trying to raise capital right now.

You can see that there is a cohort of companies that have only a few months of runway left, with 12% of startups reporting less than 3 months of runway. It’s indicative that we should expect to continue hearing a trickle of companies shutting down / being acqui-hired throughout 2023.

Respondents by Fundraise Timeline

Unsurprisingly, the funding needs below mirror the responses to runway levels we saw above. In aggregate, 55% of startups are either in the process of trying to raise or will need to start a fundraising process this year. Meanwhile, 43% of companies report not needing to raise additional funds – either because they just completed a raise, are already good on cash, or are cost cutting to avoid raising entirely. Unfortunately, there is a very small group (2%) of orgs indicating they are likely shutting down in the coming months. 

Now, with a solid understanding of respondent demographics and where companies are at from a business standpoint, let’s dive into the good stuff. 

Based on the survey structure, we have cut the data into two overarching perspectives, which we refer to through out the rest of the article: 

  1. Raising Capital Track (n = 37 respondents): Respondents in this category answered either ‘Currently in the process of trying to raise’ or ‘We will need to start a fundraising process in 2023’. 

  2. Not Raising Capital Track  (n = 30 respondents): Respondents in this category answered either ‘We are good on cash runway, no need to raise’; ‘We just completed a raise and are good on runway’; or ‘We are cutting costs to avoid needing to raise’.

If you’re looking at those numbers and saying to yourself, 37 + 30 does not equal 88 total respondents, don’t worry you’re right. To clarify all of this, the 88 respondents filled out questions 1-7 of the survey. But, a small handful of folks dropped off after that, thus we pulled them out of the remaining data to appropriately reflect responses, which you’ll see throughout the charts below.  


Most early-stage startups believe they will be able to raise capital before cash runs out, but it’s going to be tough

There is good news and there is bad news. The good news is that most folks that need capital are optimistic that they will be able to raise those funds (and avoid shutting down). However, the bad, and likely not “news” anymore at this point, is that it is going to be a struggle to do so, with 62% of all respondents noting how tough it is/will be to raise additional capital before cash runs out. It’s worth noting that Series A-B seem to feel a bit more confident than their pre-seed to seed peers, with 45% indicating that the raising process is “business as usual” (see chart in Appendix for data). 

Note: This analysis only includes respondents from the ‘Raising Capital Track’ who provided an answer (n=37).

Reflecting back to the original survey, where most early-stage respondents reported that their fundraising raising strategy would “not be impacted” (62% pre-seed; 56% seed; 52% Series A-B), it’s unfortunate, yet unsurprising to see how operators’ expectations have experienced a painful reality check. As we called out then, operators seemed to still be in a place of expecting to experience the ease and overabundance of raising capital that their predecessors were lucky enough to have over the past couple of years. Those days appear to be over. Again, this may be obvious to many now, but it’s interesting to catch this change in sentiment in the data. 

This was an interesting learning shared by one seed-stage founder about how they’d rethink their approach to fundraising in the future:

“It is most clear to me that as a startup founder, a considerable portion of my time should always have been focused on fundraising. If / when we are able to raise this round and /or I were to do another startup, I would maintain at least 20% of my time committed to fundraising regardless of our current financials.”

There is a shared sentiment and good reminder within this statement as it relates to fundraising. It may have been the case in 2020/2021 that a founder could throw a pitch deck together, get it in front of any investor, and have a pretty decent chance of scoring a term sheet. Or, for some startups they probably didn’t even have to do that, with investors attempting to preempt their fundraise processes. Our favorite anecdote of this comes from this NYTimes article, which highlighted how Hinge Health was being reverse pitched by investors via Cameo videos. It was a very different environment only two years ago. 

Thinking about the expectations that the ease of the old process created, it's no surprise that there has been a certain level of comfort built up when it comes to the psychology around raising. As an early-stage founder, it’s natural to seek advice from people who are one step in front of you on the journey. Why wouldn’t you do that? But now the world is so vastly different that hearing about their processes a few years ago probably does more harm than good in terms of helping a founder understand what they should be doing. It has and will likely continue to feel like a rude awakening for more folks currently in the market for funding who may be struggling with the process.

When we asked founders the question “how are you feeling?” in the survey, responses showed that a lot of this pain is being felt acutely at the pre-seed / seed stages. Especially when we consider it alongside commentary like the following:

We feel that the bar for raising a seed round has definitely risen - investors require more traction and more hypotheses to be de-risked, as opposed to the classic "seed rounds are about the team and idea" ethos. That's no longer enough, and investors seem to have a lower risk tolerance.” – Operator of a pre-seed care navigation startup

Or this observation from a founder of a pre-seed diagnostics & RPM company:

“It feels like investors are still sitting on the sidelines waiting for other investors to make a bet. Lots of "this is good but we'd like to see more traction".

Or this takeaway from a seed stage DTx founder: 

“Bad time to be raising. May need to put our IP on the shelf and return to industry until VC is more active.”

To sum up the previous anecdotes: diligence matters again, investors’ risk appetites are way lower, and 2021 raising expectations are dead. 

While it might be the case that, “the bar for raising a seed round has definitely risen”, as of late, we think it’s important to put that statement into context. Is it harder to raise today compared to 2021? Yes. However, we have to remember that the 2021 time period marked a historical surge in money flowing into health tech, and by no means reflected “normal” fundraising conditions. Just take a look at the data from Rock Health’s 2022 report – it’s clear that 2021 was somewhat of an anomaly for health tech funding from a historical perspective.

Companies are split on strategies heading into raising

Looking at the responses in aggregate (‘All’ column), companies across stages appear to be split between trading off growth to avoid raising as long as possible (30%) and accelerating growth to improve metrics for an anticipated raise this year (41%). 

Note: This analysis only includes respondents from the ‘Raising Capital Track’ who provided an answer (n=37).

Considering the takeaway from earlier, that while most early-stage companies believe that they will be able to raise this year, but it is going to be a challenge, the chart above starts to make a lot of sense. If you’re a startup leader right now looking at the market and understanding the fundraising challenge ahead of you, you’re likely going those one of two ways: 

  1. Accelerate growth, improve metrics, demonstrate tractions → to increase your likelihood of success of raising 

  2. Slow growth, reduce burn, keep things moving → wait it out and come back when the market improves 

Either way, we aren’t in the same spot we were in mid-2022 when the first survey came out and we had 51% of respondents saying their fundraising strategy was “not impacted”.

It might be time to consider a down round 

Down rounds have been the buzzword of the year across the broader tech community, as we’ve seen companies like Stripe and Instacart, being pushed to slash their valuations.

In the background of all this, there has been discussion of a lag between public company write downs (which have been commonplace for some time now), and the emerging reports of private startup markdowns across the tech landscape. Despite the lag, we are starting to see more headlines pop up announcing private investment write downs. For instance, just last week, Tiger Global announced the firm is set to mark down the value of its investments in private companies by about 33%.

Turning to our survey results, we see about 18% of companies at the Series A-B stage predicting that the most likely outcome of their next raise will be a down round. On the whole, the more likely outcome for startups actually appears to be raising at an increased valuation or flat round, which account for 38% and 30% of respondents, respectively.

Note: This analysis only includes respondents from the ‘Raising Capital Track’ who provided an answer (n=37).

Another interesting takeaway here can be found among the 36% of pre-seed and 17% of seed respondents who indicated ‘Other’. A common answer behind that ‘Other’ category is folks noting they are likely pursuing a SAFE (Simple Agreement for Future Equity), a type of funding popularized by YCombinator a decade ago. In case you’re unfamiliar, a SAFE is an instrument where an investor gives a company money in the immediate term in exchange for shares promised in the future, when that company goes on to raise at a priced round. 

For those interested, this was a helpful read from research platform, Lexology, explaining what founders should be thinking about when considering a down round. The first thing they mention to figure out is ‘Has the board determined there is no reasonable alternative to raising a down-round?’. Included in those alternative options is venture debt, convertible notes, and…you guessed it, SAFEs.

Speaking of alternative financing options, we explore how startups are thinking about their choices in the next section.

Angel investors & debt are becoming more attractive financing options among early health tech operators

Note: This analysis only includes respondents from the ‘Raising Capital’ Track who provided an answer (n=37)

It’s interesting to note that folks just getting into the space or building something new (pre-seed / seed), are the most likely to be considering alternative financing options, specifically Angel investors (64%). In many ways, this seems like a reversion to the way funding markets have historically acted - getting your first capital in the door requires you to tap into your personal network and get funding from people who believe in you as a founder. 

We can’t help but wonder if these earlier builders are learning from experiences over the past few years where the first money in the door was from VCs, placing stress on the startup to enter a hyper growth phase before it has even necessarily figured out its model. We have increasingly heard the conversation that venture capital may not always be the best financing option for health tech orgs after all, so it’s interesting to see early builders picking up on that discussion here. 

Of course, the other hypothesis here is that VC investors have just become stricter, forcing early companies to consider alternative options. We see this alluded to by one pre-seed founder:

“We are early-stage which is a better position to be in than others, but it's frustrating as we prepare for fundraising because investors all say the bar is much higher now and we will need to meet more milestones than we planned for to raise the same target amount of capital”

A similar sentiment even for those early operators contemplating about the future outcomes of a raise:

“Fine from a revenue and burn perspective since we've been very lean up until this point anyway. Once we formally go out to raise our seed it will be interesting to see if the VCs we've been speaking with will actually commit to our round.”

Looking at the Series A-B stages, we assume these are folks who have been around the block with a couple of VC raises under their belts, thus likely doubling down on the traditional VC route, as we see 73% of Series A-B companies not having considered alternative financing options. 

Early-stage builders are tightening and focusing hiring strategies 

In this section, we separate out our analysis to look at differences in hiring strategy and workforce reduction between companies that are in the ‘Raising Capital’ Track and those that are in ‘Not Raising Capital’ Track. As you can probably imagine, whether or not you feel secure on cash at the moment dictates how you might be thinking about your hiring in the coming months.

Raising Capital Track 

The hiring and force reduction picture at early-stage companies isn’t nearly as doom- and-gloom as the recent layoff headlines that later stage health tech companies have reported (just a few recent examples of this here, here, here, and here). In fact, 68% of startups in aggregate report that they’re still hiring. 

A remaining 19% (depicted in the ‘Other’ grouping) are indicating hiring freezes, particularly at the pre-seed and seed stage. In many ways, this seems like a continuation of the trend from the last market conditions survey we did. At that time, the upheaval in the public markets was just starting to show itself in the private growth-stage company cohort. It shouldn’t be entirely surprising that this has now trickled down to the early-stage startup cohort. It appears early-stage startups are learning from experience at the growth-stage and are becoming very strategic about who they bring onboard. 

Note: This analysis only includes respondents from the ‘Raising Capital’ Track who provided an answer (n=37).

At the same time, as a growing number of employees at late-stage startups and big tech – from the likes of Meta, Google, Twitter, and more –  find themselves back in the job market, there certainly will be no shortage of talent up for grabs in the coming months, when those earlier stage companies do decide to make those hires. According to tech layoff tracker,, 84,714 and 36,491 were laid off in January and February 2023, respectively.  

One pre-seed stage founder notes the ease of hiring recently: 

“Fundraising is tough, but hiring is easier, and the healthcare needs are massive, we can't afford to stop building.”

Overall, the days of hiring in excess are certainly long gone and most organizations appear to be getting focused on key hires and operating as lean as possible for as long as possible.

“We’re in a good spot, but I can see hiring slow down in the near future as we make our existing workforce maximally trained and productive. Providers and payers are still buying, from our vantage.”

You might look at the chart below, see that 78% of startups in aggregate have not needed to conduct layoffs, and think that seems pretty solid. However, this is of course lower than the 90% of companies that have not needed to conduct layoffs in the ‘Not Raising Capital’ Track, as we will see in the next section. Again, this makes sense to see if you’re a company that feels more secure on cash.

Note: This analysis only includes respondents from the ‘Raising Capital’ Track who provided an answer (n=37).

Not Raising Capital Track 

Comparing the following chart to the one above, companies that are secure on cash – either because they recently raised or have decided to cut costs in order to avoid raising – are in a better place when it comes to hiring than folks who are in need of additional capital. In aggregate, this cohort of companies is more heavily concentrated on continued hiring – with 43% tightening, but still hiring, 40% actively hiring, and 17% considering alternative options, including hiring freezes and contractors. And, notice that there is no mention of active or upcoming layoffs happening. 

Note: This analysis only includes respondents from the ‘Not Raising Capital’ Track who provided an answer (n=30).

Workforce reduction at these companies is also in a better place, with 10% of startups reporting at least a 1% reduction in headcount, compared to 22% noted by companies in need of capital.

Note: This analysis only includes respondents from the ‘Not Raising Capital’ Track who provided an answer (n=30).

Startup customers & vendors going under is not a major concern, but operators are paying closer attention

More than half (51%) of respondents across the board are not concerned about their customer base going under. And, this generally makes sense given that earlier we learned for the majority of companies, their primary paying customer is an incumbent/legacy stakeholder (e.g. pharma, health system, payor, etc.). Of course, there is a bit of irony in this as presumably many startups saw one of their more important vendors - their bank - go under while the survey results were being collected here. 

Only 7% of startups report their primary customer being another digital health startup, which should insulate the 93% of companies a bit from the turmoil in the early stage digital health landscape. 

While on the whole, that feels like good news, we should also acknowledge that there are a small number (3%) of respondents who are hearing rumblings about customers shutting down. It shouldn’t come as a surprise that the handful of companies who are worried about their customers shutting down are targeting either patients / consumers or digital health companies. 

One concerned founder of a company whose primary customer is other digital health startups notes the following:

“We're about to hire for 2-3 roles but we are concerned about the impact of the market on our customers.”

Note: This analysis only includes respondents from both the ‘Raising Capital’ and ‘Not Raising Capital’ Tracks who provided an answer (n=67).

On the vendor side of things, the story is slightly different. A small group (6%) of respondents are reporting already seeing some vendors shutting down, 9% hearing rumblings, and 15% feeling generally worried. An additional 36% are not worried, but certainly paying more attention to it. 

As with other findings, this one feels unfortunate, yet unsurprising given the dynamic described above. 

Note: This analysis only includes respondents from both the ‘Raising Capital’ and ‘Not Raising Capital’ Tracks who provided an answer (n=67).

Sentiments & shared learnings

We know that building is tough for lots of teams right now – How are you feeling about the overall situation your organization is in?

As evident by this article, we know how hard it is for startup leaders out there right now. In general, responses covered a range of sentiments - here we’ve highlighted just a few to reflect that depth of emotions at the moment.

  • “It is really hard hiring right now. Salary expectations are still really high. Performance expectations are low. And many applicants are jaded about startups and don’t understand that your startup is in a WAY better position than companies currently suffering.”

  • “I am feeling great. Financial pressure helps the ecosystem become more clear. When everyone is doing well, you can’t tell which products are truly exceptional. Hopefully the bad vendors will fail and it will become easier to evaluate partnerships and to hire.”

  • “Challenging but doable; we didn't start our business due to good timing or chasing a newly available or in-vogue GTM opportunity. We've been here for a while, and we're comfy.”

  • “SVB is rattling, waiting to see what the ripple effects are. Feel like people have to build a must-have not nice-to-have -- the best will survive.”

  • “We're fairly happy all things considered - that being said I can see the number of qualified buyers willing to pay large amounts of money somewhat capping so we are looking at ways to either expand our offering and/or be more focused until we have the engineering resources to build a better service.”

Anything you’d like to share or think people should know about the process you’ve gone through (either from a work or personal perspective)?

Responses covered a number of learnings regarding building a health tech business right now. Here are a few of the more interesting ones:

  • “Transparent communications and decision-making within the org has made each employee invested in looking for ways to ensure we stay on a healthy path - Very intentional hires with refreshed ROI & prioritization analysis.”

  • “Just ask your friends/co-founders if they are okay. "Hey, I haven't asked you in a while; are you okay?"... "Yeah, why?"... "I just care about you.”

  • “You ARE the business. You have to manage your own psychology and emotional resilience during these times, more than ever.”

  • “[Aggressive] growth strategies encouraged by VCs and tech thinking in general may not apply when your strategy requires 5 year execution plans in a slow moving ecosystem. The same insulation that protects healthcare from some downturns means you have longer spin up time and the idea of 'winner take all' doesn't apply - so plan growth and map aggression levels of your growth strategies accordingly.”

  • “Focusing on sleep and health are increasingly critical during junctions like Post-COVID belt tightening, and I feel that I'm not always doing enough -- so I am working hard at that as well as all of our other business goals!” 

HTN is here to help

If you’ve made it this far, that’s a win, kudos to you! 

As we noted earlier, this article is meant to serve as a benchmark for startup operators navigating stressful times. Taking the results of this survey in combination with the anecdotal conversations we’ve had with many early stage founders in the past few months, we recognize this is likely to be a hard year for many founders, both professionally and personally. 

If you’re looking for support - either on the professional or personal front - please don’t hesitate to reach out to either us, the HTN team, or other founders within the community. We spend a good chunk of time in our open office hours chatting with early stage founders about fundraising strategy, general corporate strategy, as well as on the personal side of the equation - i.e. making sure you’re taking care of yourself so you don’t burn out.


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