Today's Competitive Market

Hiring in digital health has gone through several cycles of freezes and frenzies over the last three years. So many in fact, that it’s leading to a collective shrug from hiring managers and candidates, alike. 

In 2021, a record-breaking $29.1B was raised in digital health across 729 deals, nearly doubling the funding that flowed in 2020 and eclipsing a “mere” $8.2B by 3x¹. 88 funding rounds of more than $100M represented 57% of all deals. All this funding into new and existing companies led to unprecedented hiring sprees. From our perspective, every function was competitive across compensation, benefits, process acceleration, you name it. And it seemed that everyone was jumping from one shiny object to another. For example, in our 2021 Digital Health Executive Compensation Survey, 63% of respondents in the product function switched roles in 2021². 

But the second half of 2022 started to tell a different story. Q3 2022 funding plummeted to $2.2B, off the previous year’s $6.8B, with a small rebound to $2.7B in Q4³. According to Layoffs.fyi, there have been 200 rounds of layoffs in the Healthcare industry between July 1, 2022 and September 30, 2023 - and that’s just the ones that are known³. With so many layoffs happening, the natural conclusion is that it is an employer’s market - perhaps salaries will come down or you don’t need to hire at a breakneck pace in order to win your dream candidate. The laws of supply and demand are not so simple. 

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Is hiring easier now?

As an executive in your company, you might be saying to yourself, “This is great! There are lots of people on the market, and I have job openings, so that means that competition will be high. I will be able to choose the best person, pay them 2020 prices, and all will be right.” 

There are portions of that statement that are true. Yes, there were a lot of layoffs. And yes, some companies cut across every function to eliminate overall P&L bloat. However, there are a few factors at play that make the general state of the market more nuanced. 

• Levels of employees were affected differently
• Not all functions were affected at the same rate 
• Compensation has not come down
• Stability has become the new currency 

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Levels

Unless there is a published list of who has been impacted by a reduction in force, it’s hard to tell on the surface which levels (i.e. executive, mid-level, entry-level) were impacted. That being said, we can tell you what we’ve seen from our experience anecdotally. We’ve heard a familiar refrain from companies and investors alike: “All these people are on the market now, this must be good for you!” Not so. Approximately half of our business is recruiting C-Suite and the other is VP-level. One benefit of being a leader at an organization is that you’re privy to nuanced information so that you can make an independent determination about the viability of a business. This typically means that by the time that a layoff is announced, someone in the executive position is likely already having advanced conversations about other opportunities. So while someone at the VP level may be surprised, C-Suite individuals are not. 

Translation: always be recruiting. Developing relationships constantly and planning your hiring needs quarters ahead can help flatten the boom/bust cycles a bit.

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Functions

Many of the layoffs disproportionately affected those functions that were focused on expansion, versus securing the core. Mid-level operations took a really strong hit, as did marketing and sales. If your function was focused on next-gen growth for the company (like a new product / value proposition) or wasn’t immediately contributing to the company’s profitability, there was a strong likelihood that you would be looking for a new job in 2023. 

While we don’t have the firepower to run analyses on layoff lists or have the insight into whether someone was laid off or quit or just switched jobs, we do have some insight into how many people are actively or passively looking. 

Over the years, Aequitas Partners has developed a proprietary index of 450 companies that make up the top companies in digital health. Companies are added to the list based on their growth in capital, revenue, quality of team and investors, as well as observed / reported impact in healthcare. Across those companies, we used our powers of deduction (aka our very expensive LinkedIn Recruiter licenses) to see the percentage of individuals within those organizations at the Vice President level who have actively listed themselves as being open to work across the functions. 

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The percent of individuals who are open to work in the last five months has stayed relatively consistent, with a slight uptick starting at 18.4% in May and growing to 21.5% in October. Marketers are the most “on the market” these days, with 25.3% actively pursuing new opportunities, representing a 7.5% increase over May. Following marketing, operations is not far behind with 22.6% being open to work today, growing from 18.9% in May

But the biggest hike, and surprise to us, was engineering. Though engineering has the lowest percent rate of openness at 15.9% in September, that’s a substantial increase comparatively over 10.9% in May. Note that this data is likely underreported as there are plenty of execs who are actively looking for new roles without ever opening themselves up to be discovered by recruiters on a platform. 

This bodes well for companies that perhaps weren’t looking to bring in VPs right now, but can seize the opportunity to do so. 

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If we look at the data that Aequitas Partners gathered through our compensation study at the end of 2022, you will see a similar trend of 19.9% who are actively looking, with an additional 46% who are passively looking or will listen if they’re approached. These are staggering numbers! On a functional basis, however, marketing and operational roles dramatically outpace the others, with 81.7% of operators across the director, VP, and C-Suite line at least passively looking for new opportunities, and 81.3% of marketers doing the same. 

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Compensation

With all the organizational shifts going on, compensation is a natural next step to evaluate. While it’s not the candidate’s market that it once was, as companies focus on profitability, it is even more important that hiring is done well from the get-go. There has long been a dearth of high-quality executive talent out there, but even now, with so many seemingly on the market or at least willing to talk, sifting through all the talent becomes even more complicated. How do you know if a sales person didn’t grow revenue because leadership was terrible or the product had issues or they themselves just couldn’t pull in the deals? How do you know if a product person was ineffectual themselves or did the CEO just switch directions every quarter? So how do you know what to pay? 

Well the good news is that the exorbitant climb of base salary has halted somewhat, but they have certainly not come down. Revenue still continues to be a high-driver, with business development individual contributors seeing nearly a 13% pop in salary in 2022 versus 2021. And sales leaders have seen a 7.7% increase. Great leadership continues to be of importance with founding and non-founding CEOs seeing a 5.6% and 7.5% increase in base salary, respectively.  

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Stability

As much as individuals are looking for new roles, whether they’re leaving their old jobs behind is a different story. In 2021, we saw firsthand several instances where a candidate went from first conversation to signed offer in less than a month. One candidate was within a week! (In case you’re wondering how that worked, the offer came first and the interviews later). Since then, many of those very same candidates have come back to us to say that they are back on the market. The equity positions they were granted are under water. The company can’t afford to pay the high salary. The company has changed directions. Each one, whether they are still at that company or not, say the same thing - “I’m going to take my time.” 

This trend is borne out in the data, as well. According to our survey, 47.6% of respondents switched jobs in 2021. Fast forward to 2022, and that number has been slashed to less then half to 20.1%. That’s a drastic cut in movement! At the time, the primary reasons for leaving included mission / product, leadership, and title / role. When we control for things like RIFs or company exits, Mission / Product skyrockets to 33.5%, Leadership to 25.4% and Title / Role to 19.5%.

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Compare this to the data of why someone would leave and all of a sudden, the mission / product importance drops to 24.5%, leadership to 23.1%, title is a wash at 12.3% and compensation is a whopping 25.4% as a primary reason for change.

So what does this tell us outside of 74.3% of respondents simply looking out for #1? (JK, JK) But if we take our cynical hat off for a second, the fact that leadership continues to be so high on the list of reasons of why someone left and why someone will leave, is a signal that stability and the ability to lead through the hard times is paramount, particularly today. Of the potential reasons, leadership had a huge bump from 19.9% as a potential reason for resignation in 2021, to 23.1% in 2022. Short-term wins like compensation, title, and even the mission / product took a hit. 

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Conclusion

So what can companies do? Well, just because someone wants a higher salary, doesn’t mean you should pay it just to get them. But do know that there will likely be companies who still will. Know that while many people are at least passively looking, they may not be ready to leave. Across our internal data, we’ve seen many candidates decide to stay at their current companies, even after engaging in a process, because while the future is uncertain, at the very least it’s the devil they know. But for functions like marketing and operations that have suffered more consequences post restructuring, they will not have the luxury of time and waiting for the right thing. So keeping your process tight without much delay between next steps will leave you in the best position to hire the best individual for the role. 

It remains to be seen how all the data shift and change over the rest of the year (obligatory study for you to participate in the 4th Edition of the Digital Health Executive Compensation Study). One thing we can say for certain is that yes, there are great candidates on the market, and yes, there are great opportunities out there, and yes, the right people working together as a team will make all the difference._‍

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_{1) Rock Health, “2021 Year-End Digital Health Funding” https://rockhealth.com/insights/2021-year-end-digital-health-funding-seismic-shifts-beneath-the-surface/
2)Aequitas Partners, 2021 digital health study
3) Rock Health, “2022 Year-End Digital Health Funding” https://rockhealth.com/insights/2022-year-end-digital-health-funding-lessons-at-the-end-of-a-funding-cycle/
4) Layoffs.fyi, accessed October 8, 2023.}

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