ANDHealth gives AUD $9 million as capital squeeze bites

ANDHealth has awarded up to AUD $9 million to five Australian digital health startups, as concerns over access to capital rise sharply across the sector.

The latest round of the ANDHealth+ funding and acceleration programme selected Australis Scientific, Corcillum, Earflo, Kraken Coding and More Good Days. Ninety startups applied, making it the most competitive round in the programme's nine-year history. Applications were up 65% on the previous four cohorts.

New survey data released alongside the funding round points to a widening mismatch between demand for investment and available backing for digital and connected health companies. The FY2026 Industry Sentiment Survey found that 92% of small and medium-sized businesses in the sector plan to raise growth capital in the next 12 months, while 90% want to expand geographically over the same period.

That appetite for expansion is colliding with mounting financial pressure. The survey found 86% of businesses ranked access to capital among their top five challenges, up from 60% in the FY2023 survey, while 51% named it as their single biggest problem.

Digital health continues to grow quickly in Australia. The segment has expanded at a 55% compound annual growth rate since 2018 and doubled in size in the past three years. The domestic market is forecast to exceed AUD $45 billion by 2033, while the global market is projected to reach USD $946 billion by 2030.

Capital squeeze

The funding shortage is already shaping business decisions across the industry. Forty-six per cent of companies said they were raising capital as a survival measure rather than to support growth, 21% had cut staff, and 17% had paused market expansion plans.

Confidence in the broader investment environment was also weak. Less than 10% of those surveyed said Australian investors have the knowledge and skills to support them, while 39% were unsure whether domestic investors could back businesses through the scaling phase.

Economic conditions have added to the pressure. The share of companies saying market conditions were affecting their ability to raise capital rose from 32% in FY2022 to 66%, while 49% said those same conditions were making it harder to secure government funding.

The survey also identified areas where businesses want policy change. Eighty per cent called for digital and connected health-specific investment funds, 74%  backed public procurement reform to give greater priority to local innovation, and 66% supported a dedicated health technology assessment and reimbursement framework.

Bronwyn Le Grice, Chief Executive Officer and Managing Director of ANDHealth, described the findings as a warning for the sector.

"This is an alarming signal for a sector that has the ability to transform Australia's health and care sector to drive patient outcomes and economic benefits. Australia has the foundations of an internationally competitive digital and connected health sector, but too many companies are being held back by the settings that determine whether local innovation can reach patients and scale. The 'if not, why not' procurement principle recommended in the SERD report is one example of the reform needed to give Australian-developed technologies a fair opportunity to be adopted locally. But procurement is only one part of the bottleneck. Companies also need access to capital that understands the complex pathway from clinical evidence to commercial scale, and reimbursement frameworks that reflect how health and care delivery is changing," Le Grice said.

Diversity trends

The survey showed some improvement in leadership diversity. Sixty per cent of companies reported at least one female founder, up from 47% in FY2022, while 39% reported a female chief executive or managing director, up from 33%.

At the same time, the data pointed to uneven outcomes for women-led businesses. Those companies were typically smaller, had raised less median capital and reported lower confidence in support from local investors than their male-led peers.

Rachel Yang, Partner at Giant Leap, linked the results to broader patterns in startup funding.

"It is no coincidence that the majority of digital health founders are women, nor that the number one challenge they face is access to capital. Women are the majority of healthcare users, the majority of the healthcare workforce, they drive most household healthcare decisions, and represent over half the population. The capital gap they face is not unique to digital health. It reflects a broader pattern across the startup ecosystem, where investment decision-making remains predominantly male. In a sector where the founder base skews heavily female, that structural dynamic has a compounding effect," Yang said.

Investors and company leaders said the issue extends beyond one funding cycle. Dr Elaine Stead, Principal at Main Sequence Ventures, said the figures point to a structural weakness in how capital reaches the sector.

"When 86 percent of founders identify capital access as a top-five barrier, that's a structural failure in how we've built our investment ecosystem. It's not a new observation that Australia lags the world, with VC accounting for only 0.16 percent of Australia's GDP - but it represents real companies that stall, real breakthroughs that don't reach patients, and real talent that eventually finds a better-funded home somewhere else. What concerns me more is the second finding - the lack of dedicated digital health investors. The opportunity in Australian digital health is genuine and significant. The question is whether we're willing to invest in it with conviction before that opportunity moves offshore," Stead said.

Dr Kath Giles, Chief Executive Officer and Managing Director of OncoRes Medical, said non-dilutive funding has become more important as market conditions tighten.

"Capital constraints have become the defining challenge for digital and connected health companies, particularly in a more risk-averse global funding environment. In this context, non-dilutive funding, such as programs like ANDHealth+ and the R&D Tax Incentive, has become increasingly critical, both as a source of capital and a lever for attracting private investment. Importantly, it enhances the business case for companies to remain Australian-based, enabling them to progress key milestones locally without being forced to seek offshore capital prematurely," Giles said.