Digital health funding surged in 2025, with U.S. startups securing $14.2 billion in venture capital, marking the highest investment total since 2022. According to a report released by Rock Health, this figure represents a significant increase from the $10.5 billion raised in 2024. A notable trend in this growth is the increased focus on artificial intelligence (AI), with firms emphasizing AI offerings capturing 54% of the total funding last year, up from 37% in 2024.
The report indicates that while the funding landscape showed improvement compared to the previous two years, it did not return to the record-breaking levels seen in 2021. Interestingly, many digital health companies encountered hurdles during 2025, as evidenced by a relatively high percentage of unlabeled funding rounds. Thirty-five percent of deals last year did not receive a designation, such as Series A or B, signaling potential difficulties in meeting benchmarks for formal funding rounds.
The total number of deals also declined, with 482 transactions completed last year compared to 509 in 2024. This drop led to an increase in average deal size, which rose to $29.3 million from $20.7 million the previous year. The report highlighted a surge in mega deals as well, with transactions exceeding $100 million making up 42% of last year’s investment total, the highest proportion since 2021.
Startups securing these larger rounds typically share two characteristics: a focus on AI and participation from large venture capital firms. For instance, when firms like Andreessen Horowitz or General Catalyst were involved in a Series A deal, the average raise was $24.1 million, compared to $18.9 million when they were not. By Series D and beyond, the presence of these investors boosted the average round size to $265.7 million, up from $172 million without their engagement. Additionally, AI-focused companies commanded a premium in funding, with the average Series C deal size for AI-enabled startups reaching $83.7 million, compared to $52.1 million for their non-AI counterparts.
Some AI firms successfully closed multiple large funding rounds last year, a strategy that can be risky as it allows limited time between rounds to achieve progress while consuming cash reserves. The report noted, “That may reflect mounting pressure to ‘get in on’ the AI race (at whatever cost) or confidence that AI itself can speed the path to product-market fit.” However, the effectiveness of this approach remains uncertain.
The enthusiasm for AI in the healthcare sector appears justified, yet AI startups are likely to face significant competition from established health IT firms, such as electronic health record vendors, and companies like OpenAI, which have shown interest in the sector. In a parallel development, mergers and acquisitions (M&A) in the digital health landscape surged last year, with 195 deals reported, a sharp increase from a five-year low of 121 in 2024. This rise in M&A activity was driven partly by growth-stage digital health firms aiming to enhance their capabilities, talent, and customer base, along with acquisitions of distressed assets.
Last year also witnessed five initial public offerings (IPOs) in the digital health space, including notable firms like Hinge Health and Omada Health, signaling a potential revival in public market activity after years of stagnation. Despite the evident demand for more public exits, the authors of the report cautioned that policy and economic uncertainties may pose challenges for companies aiming to go public. The prolonged government shutdown last fall contributed to a backlog of filings at the Securities and Exchange Commission, while the healthcare sector faces considerable coverage losses due to anticipated Medicaid cuts.
As digital health funding continues to evolve, the interplay between AI innovation and traditional health IT will be crucial. The sector’s ability to navigate potential roadblocks could shape its trajectory in the coming years.
See also
Bank of America Warns of Wage Concerns Amid AI Spending Surge
OpenAI Restructures Amid Record Losses, Eyes 2030 Vision
Global Spending on AI Data Centers Surpasses Oil Investments in 2025
Rigetti CEO Signals Caution with $11 Million Stock Sale Amid Quantum Surge
Investors Must Adapt to New Multipolar World Dynamics
