The digital health sector is showing signs of stability and growth as venture capital funding for startups increased in the first half of 2025. According to a report by Rock Health, U.S.-based digital health companies raised $6.4 billion during this period, a slight increase from the previous year. One key driver of this growth was the use of artificial intelligence (AI) in digital health offerings, with AI-enabled startups accounting for 62% of the total funding.
The second quarter of 2025 saw a significant uptick in venture funding for digital health firms, signaling a positive momentum in the sector. Despite fewer deals compared to the previous year, the average deal size increased as investors poured more money into late-stage rounds. This trend was supported by the fact that AI-enabled firms raised significantly more per round compared to non-AI counterparts.
The first half of 2025 also saw an increase in mega-deals, with 11 mega-rounds completed, nine of which went to AI startups. This suggests a growing interest and confidence in AI-powered digital health solutions. Additionally, the sector experienced a notable increase in public exits, with companies like Hinge Health and Omada Health completing successful IPOs, marking a positive turn in the industry’s IPO market.
Overall, the digital health sector is on a positive trajectory, with increased funding, growing interest in AI technologies, and a resurgence in public exits. Mergers and acquisitions continue to be a popular exit strategy for companies in the sector, with a significant increase in M&A deals expected for the year. This growth and stability bode well for the future of digital health innovation and investment.
