Health Tech Investment Bolstered by Artificial Intelligence, According to Silicon Valley Bank
The healthcare sector saw a slowdown in venture capital investment in the first half of the year, but health tech funding stood out as a bright spot. A report published by Silicon Valley Bank highlighted the growing interest in artificial intelligence as a key driver of this trend.
In the U.S. and Europe, health tech startups raised a total of $8.2 billion across 358 deals, marking the best first half performance in the segment since early 2022. The surge in funding was particularly evident in companies utilizing AI, especially for administrative and back-office purposes. Jackie Spencer, the head of relationship management for life science and healthcare banking at SVB, emphasized the sustainability and profitability of these business models from a venture capital perspective.
Despite the overall slowdown in healthcare investment, health tech continued to thrive. The first half of 2025 presented challenges for fundraising in the healthcare sector, with funds on track for the lowest capital closure in over a decade. Uncertainties in the macroeconomic environment, including lingering concerns over interest rates, inflation, and international conflicts, have contributed to this trend.
Healthcare companies encompassing biopharma, medical devices, and diagnostics startups have faced fundraising difficulties this year. Economic uncertainties such as tariffs and potential cuts to NIH funding have added to the challenges for investors and startups alike.
In the health tech segment, uncertainties persist due to factors like cuts to Medicaid and rising medical costs in Medicare Advantage. Despite these challenges, health tech accounted for a significant portion of overall healthcare investment, with AI playing a key role in driving innovation. Back-office applications of AI, aimed at streamlining administrative tasks, have garnered substantial funding in the first half of the year.
The IPO market for health tech companies remains selective, with past underperformances weighing on the sector’s overall performance. However, the sector has witnessed high-dollar mergers and acquisitions, with private equity firms actively acquiring and consolidating point solutions. Non-traditional buyers, including venture-backed companies and private equity firms, are driving M&A activity in the health tech space.
Overall, the outlook for health tech investment remains positive, with AI-driven solutions leading the way in innovation and funding. As the industry continues to evolve, partnerships, acquisitions, and IPOs are expected to shape the future landscape of healthcare technology.
