Digital Health Funding Surged to $14.2B in 2025 as Investors Wrote Bigger Checks

A new report finds funding hit its highest level since 2022, driven by bigger bets on AI and a small group of standout companies.

Unstable market conditions didn’t deter U.S. digital health startups from delivering a funding rebound in 2025 that exceeded expectations and reached levels not seen since the post-pandemic boom, according to a report by Rock Health.

Annual funding for digital health startups reached $14.2 billion last year, representing a 35% increase over 2024’s $10.5 billion and marking the highest total tracked by the venture fund and advisory firm since 2022.

The research illustrates how the 2025 funding spike was driven by larger, more concentrated investments rather than broad participation across the startup landscape.

Though total capital grew last year, a drop in volume resulted in 482 deals, compared with 509 transactions in 2024. Average deal sizes expanded from $20.7 million in 2024 to $29.3 million in 2025, and mega deals (raises of more than $100 million) accounted for 42% of all funding, the highest proportion since 2021.

Rock Health called 2025’s dynamic “a tale of haves and have-nots,” noting that removing the top nine companies by dollars raised would pull total funding below 2024 levels.

Another sign that many digital health startups continue to face financial pressure and constrained growth prospects is the growing share of unlabeled funding rounds, which accounted for 35% of deals last year, the report highlighted. That figure was below the 44% peak experienced in 2023, but notably higher than the single-digit levels seen before 2021.

AI and Mega Funds Shape the Winner Class

Two dominant drivers of outsized investment in 2025 were mega-fund participation and artificial intelligence (AI).

Rock Health found that when major venture firms like Andreessen Horowitz and General Catalyst joined a round, average deal sizes were significantly larger across funding stages. In Series A rounds with their participation, average funding reached $24.1 million versus $18.9 million without, and the gap widened at later stages.

AI also played a pivotal role. Half of deals (50%) in 2025 were closed by “AI-enabled” companies, and these startups seized 54% of total funding, an increase from 37% the prior year. AI-focused companies commanded roughly a 19% premium on average deal size compared with peers not centered on AI.

The report noted that some of the largest AI-driven raises in 2025 came together on accelerated timelines, with companies returning to the market quickly as investor appetite remained strong despite concerns about burn rates and lingering execution risk.

“Racing through these rounds can make investors uneasy, as shorter gaps between raises leave less time to make durable progress,” the report’s authors wrote. “And AI companies are indeed burning more cash than their peers, yet investors continue to write big checks. 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.”

M&A and Public Exits Gain Momentum

Elsewhere, 2025 also saw an uptick in public exit and M&A activity.

Five digital health companies—Hinge Health, Omada Health, Heartflow, Carslmed, and Profusa—completed IPOs, marking a resurgence after several years of limited public market exits. At year-end, Hinge Health and Heartflow were trading above their IPO prices.

Within M&A, activity jumped to 195 deals, up 61% from 2024, with digital health companies responsible for 66% of acquisitions. Private equity (PE) also increased its presence, accounting for 10% of all deals, resulting in nearly a 600% rise in PE healthtech spend compared with the prior year.

While some transactions represented strategic growth moves, others reflected distress sales, revealing the unevenness of the market.

Looking forward, the report points to policy developments that could shape the digital health landscape in 2026, particularly around value-based care pathways.

For example, the CMMI ACCESS Model, set to launch in July, offers a 10-year Medicare value-based payment pathway for digital health interventions targeting chronic conditions. While details such as payment levels are still emerging, Rock Health suggested that such models could present meaningful opportunities for mature and emerging companies alike.