April 9, 2024

AI babies

Hi there,

Here is this week's Hot or Not, featuring:

Y Combinator in AI
Tanking digital health M&A
Big pharma's buying spree
A big-time data shortage

Hot: YC in AI

Y Combinator just revealed its latest batch of startups (run this search on CBI to see them all).

More than half of these companies operate in the AI realm, covering everything from government contracting to medical transcription.

Zooming in on its genAI investments shows a particularly strong focus on boosting productivity in the workplace.

CBI customers can see every company from the recent YC batch here.

Not: Digital health M&A

While venture M&A activity appears to be leveling off and settling in at a new plateau, that isn't true for all sectors.

We're seeing notable weakness in M&A in the digital health market.

Why the M&A drop?

Lots of digital health companies that raised during a Covid-inspired rush but who saw demand dry up or never materialize
Me-too players in the hottest sectors, i.e., the 51st telehealth platform really wasn't that different
Strategics in healthcare mostly being risk-off and financial sponsors not being in the business of buying money-incinerating startups looking for a sustainable business model
The poor results of digital health players that did make it out to the public markets. Former unicorns Babylon Health and Pear Therapeutics were both delisted last year, while telehealth player Amwell's market cap is under $210M after going public at a $4B valuation in 2020.

While private company exits remain limited, there is a bright spot in broader healthcare M&A: big pharma has been on an acquisition spree, buying up primarily publicly traded biotech companies.

More on this next.

Learn more about digital health's Q1 — including a funding surge — with CBI analysts on April 30.

Hot: Big pharma acquisitions

On that note, Johnson & Johnson will buy medical device maker Shockwave Medical for $13.1B in a deal announced Friday.

It's part of a wave of recent deals.

Fortune 500 pharma companies have already announced or closed 11 acquisitions in 2024, compared to 20 in all of 2023.

J&J's acquisition fits into its expanding cardiovascular portfolio, per Acquisition Insights on its CB Insights profile.

See how you can cut your analysis down from hours to seconds with CB Insights' new AI capabilities here.

Not: AI data supply

GenAI companies burned through high-quality data to train their large language models.

Now, they're facing a shortage of new data to use.

Some companies have scraped proprietary sources to get fresh data, but this practice has drawn scrutiny.

For example, OpenAI's reported use of YouTube videos for model training is coming under fire.

So now companies are also exploring the use of synthetic data, which is artificially generated but still mimics real-world data.

Explore the trend in our generative AI predictions and 2024 tech trends reports.

I love you.

Anand

@asanwal

P.S. We recently released our AI 100 report covering the most promising AI startups in the world. How did we decide who made the cut? Join us for a briefing on April 11 to find out.