Dive Brief:
- Digital health funding spiked in 2025 as investors poured a growing amount of cash into artificial intelligence companies, according to a report released Monday by Rock Health.
- U.S. digital health startups raised $14.2 billion last year — the highest funding total in the sector since 2022, the venture capital firm and advisory said. In comparison, companies brought in $10.5 billion in venture capital investment in 2024.
- Firms touting AI offerings collected 54% of total funding in 2025, up from 37% in the previous year. These startups also raised larger rounds, scoring a 19% premium on average deal size compared with companies that didn’t focus on AI.
Dive Insight:
Last year’s digital health funding landscape wasn’t a return to the record-breaking investment environment seen in 2021, but it was a meaningful increase over the past two years, according to Rock Health.
Still, many digital health firms faced challenges in 2025. One sign is a relatively high number of unlabeled rounds, where raises aren’t assigned a letter like Series A or B. That can hint companies need cash but don’t meet the benchmark for another labeled round.
Thirty-five percent of deals last year were unlabeled, down from 44% at their peak in 2023 but still high compared to the single-digit counts seen before 2021, according to the report.
And fewer companies received funds. Though the funding total was higher, deal count was 482 last year, compared with 509 in 2024. As a result, average deal size rose to $29.3 million, up from $20.7 million in 2024.
Mega deals also increased. Raises worth more than $100 million accounted for 42% of last year’s investment total, the highest proportion since 2021.
The startups that raised larger rounds are associated with two characteristics: The companies tended to focus on AI, and large venture capital firms participated in the raise, according to Rock Health.
For example, when Andreessen Horowitz or General Catalyst participated in a Series A deal, average size was $24.1 million, compared with $18.9 million when these firms weren’t involved. By Series D and beyond, rounds that included these investors averaged $265.7 million, compared with $172 million without their participation.
AI companies also commanded a premium over non-AI firms. The average Series C deal size for an AI-enabled startup was $83.7 million, up from $52.1 million for non-AI companies.
Some AI firms closed multiple large rounds of funding last year. Speeding fundraising timelines can be risky, giving limited time between rounds to make progress as companies burn through cash, according to Rock Health.
“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,” the report’s authors wrote. “Whether that bet pays off remains to be seen.”
The increased funds piled on AI startups could be justified, given the excitement from the healthcare sector about the technology, the report’s authors wrote. Still, AI startups will face competition from incumbent health IT firms — like electronic health record vendors — and companies like OpenAI that have demonstrated interest in the sector.
Meanwhile, mergers and acquisitions soared last year, rising to 195 deals from a five-year low of 121 in 2024. Some M&A was driven by acquisitions from growth-stage digital health firms looking to add new capabilities, talent and customers — but other deals were purchases of distressed assets.
Last year also included five digital health initial public offerings, including firms like digital musculoskeletal care company Hinge Health and chronic condition management firm Omada Health, after years of slow public market activity for the sector.
And though there’s pent-up demand for more public exits, policy and economic uncertainty could make it challenging for companies to move forward, the report’s authors wrote.
The historically long government shutdown last fall created a backlog of filings at the Securities and Exchange Commission, while the healthcare sector faces significant coverage losses when massive Medicaid cuts go into effect.
