Health tech companies in the U.S. and the European Union have raised about $23 billion so far this year, a downward shift as the market recovers from the massive investment in 2021, according to a report by Silicon Valley Bank.

The report, which tallies funding through Sept. 30 this year, noted the decline was particularly sharp in the third quarter, dropping 39% from Q2 and 67% from the height of investment seen in the second quarter last year.

Mega-rounds, or funding rounds worth $100 million or more, fell 40% compared with 2021, while the year so far has seen a 47% decrease in new unicorns, startups valued at over $1 billion. 

Meanwhile, the report found zero health tech IPOs from venture-backed companies in the U.S. and E.U. so far this year, while performance of companies that went public in recent years trended downward.

But there has been an uptick in merger and acquisition activity, though it has tapered as the year progressed. While there were 48 deals in Q1, there were only 30 in the third quarter. Median acquisition prices were significantly down as purchasing companies tried to balance the lofty valuations seen over the past few years. 

"We've moved from a growth-at-all-costs era to an era that emphasizes clear value creation, whether it's through improving health outcomes, access or affordability. Investment has shifted into earlier stages where valuations are corrected from last year's sky-high levels," the report's authors wrote.

"With a record amount of dry powder available to healthtech startups, and mergers and acquisitions on the rise, there is still a tremendous opportunity for healthtech companies to grow."

However, there have been other bright spots in the health tech field so far in 2022. Though investment has still slowed, mental health companies have actually seen median deal sizes and valuations increase. 

Interest in platform tools addressing multiple mental health conditions is growing, with platform companies earning 69% of investments so far this year, up from 51% in 2021. The report notes the sector has seen more companies offering culturally competent mental healthcare.

"As MH care demand soars, we expect more point solutions to expand to platform to grow their patient bases," the report's authors wrote. "Despite market saturation, point solution valuations have risen in 2022. Their focus on single conditions allows for high-quality, specialized healthcare, especially for higher acuity MH disorders like treatment-resistant depression, OCD, etc. Interestingly, point solution median deal size in 2022 ($12M) is double platform’s ($6M)."

Alongside a growth in female-founded health tech companies, women's health startups have raised $877 million so far in 2022. Though that tracks below last year's $1.4 billion, investments are 30% higher than the full-year investment in 2020.

Fertility and pregnancy care were a huge part of the women's health market, making up 68% of investment. 

"The increase in investments despite the market’s broader downturn is promising for the WH industry," the authors wrote. "As these companies grow and mature, they can scale to serve more women and their diverse health needs."