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Digital Health Venture Funding Split Between 'Davids and Goliaths'

Analysis  |  By Jay Asser  
   January 21, 2025

A new report examines the dynamics of dealmaking in the healthcare innovation landscape.

As venture funding for digital health startups has dipped in recent years, the market has created an environment where big and smaller players are vying for investments.

In 2024, there was an increased focus on earlier-stage funding, along with more modest later-stage check sizes, while larger companies made major moves to round out activity, according to a report by Rock Health.

Venture funding for U.S. digital health companies totaled $10.1 billion across 497 deals last year, continuing the decline from $10.8 billion (503) in 2023, $15.7 billion (594) in 2022, and $29.2 billion (740) in 2021.

When adjusting for inflation, 2024's total approximates to $8.3 billion, which nearly matches the $8.2 billion raised in 2019β€”the report's benchmark year before the pandemic fueled a heavy funding cycle.

One reason for the decreased funding levels last year was companies choosing to invest in younger startups. Sixty three percent of funding rounds were labeled, compared to 57% in 2023, and of the labeled deals, 86% supported startups raising their Seed, Series A, and Series B rounds.

Another factor in funding trends is smaller check sizes for companies that raised later-stage rounds. Median deal sizes for Series C and D fundraises in 2024 were $50 million and $55 million, respectively, compared to $62 million and $58 million in 2023.

There were also fewer mega deals, or fundraises over $100 million, which made up 21% of last year's funding versus 32% in 2023, 38% in 2022, and 56% in 2021.

Still, deployable capital is being concentrated at the top by the heaviest hitters, the report highlighted. Andreessen Horowitz and General Catalyst were the digital health's top investors last year, based on disclosed investor syndicates, and captured 20% of committed LP capital in the venture market, according to PitchBook.

"David and Goliath dynamics in digital health came into sharper focus in 2024, aligning with broader venture and healthcare industry trends and reflecting the natural layers within technology stacks," the Rock Health report's authors wrote. "We believe a balance of big and small players will be needed to preserve diversity of thought and innovation in healthcare."

Jay Asser is the CEO editor for HealthLeaders. 


KEY TAKEAWAYS

The U.S. digital health sector brought in $10.1 billion in venture funding in 2024, once again falling short of the previous year's mark, analysis by Rock Health found.

More investment last year targeted early-stage startups, with 63% of funding rounds supporting them, compared to 57% in 2023.

Major organizations like Andreessen Horowitz and General Catalyst led the way for top investors, contrasting the movement by smaller companies.


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