Digital Health after Silicon Valley Bank Collapse?

The recent collapse of Silicon Valley Bank (SVB) came as a shock to everyone; especially to the many startup companies in the digital health sector who depended on it to survive.  

Once the news was out, companies rushed to withdraw their money hoping to switch to another bank.  Although some were lucky, many were just too late. Some larger companies, such as Roku, had about $487 million at SVB. 

The collapse flustered the already stressed startup digital health industry, trying to deal with the economic downturn, rising interest rates and a slump in funding. 

Feds To the Rescue

To avert an all-out panic in the financial world, U.S. regulators announced that they would step in to protect all deposits, even those above the $250,000 limit normally not guaranteed by the FDIC (Federal Deposit Insurance Corporation).   

A Big Number

$151.6 billion. That’s the total amount of uninsured U.S. deposits held by Silicon Valley Bank, making up most of the bank’s deposits as of December, according to FDIC filings.

Big Brother Banking 

SVB had provided a lifeline to small companies (many Digital Health startups); it was easier to get credit with SVB versus some of the bigger banks, such as Bank of America or Wells Fargo.  

“We had all our money at Silicon Valley Bank. They were our full banking partners,” said Ellen DaSilva, CEO and founder of Summer Health, a text-based pediatric care provider. “When I started the company, I would say all of the people in my life also banked with SVB.”

Why is Digital Health Important?

Digital health is fueled by the innovation of small startups.  This is a broad field where digital technology is used to improve health care.  It includes health information technology, devices, software, telemedicine/telehealth and other applications.

Whether we realize it or not, many of us use digital health technologies every day.  Examples include wearable devices like Fitbits or smartwatches, scheduling appointments online or getting lab results through a phone app. 

SVB was the bank for many digital health startups and venture capital firms. The bank was used by 76% of venture capital-back initial public offerings in healthcare since 2020.

It was a booming area but then funding dropped 48% in 2022 from record-high levels of almost $30 billion in 2021, according to Rock Health, a venture fund dedicated to digital health.

While the total for 2022 was the second-best year for funding for digital health startup, the fourth quarter was the lowest quarterly funding total in five years. Most experts say 2023 will be worse.  

Benefits of Digital Health

The vision of digital health is a promising one. The overall goal is to improve health equity and bridge gaps in the current system by providing higher quality of care to more people in a more efficient way.   

Future of Digital Health 

• Investment funding will be more cautious; this slump was already seen in 2022.
• Digital health companies will likely need to be more efficient and reduce operating costs, which may include layoffs. 
• New technologies will continue to develop and evolve at a fast pace, especially in the areas of new drug development using artificial intelligence, creating software to reduce physician workload/burnout and ways to access data to support personalized healthcare and to eliminate  geographic barriers. 

For information about the FDIC and your bank deposits, read here.

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