The healthcare industry saw a significant increase in venture capital investment in 2024, driven by a growing interest in artificial intelligence (AI) startups, according to a recent report by Silicon Valley Bank. Funding for healthcare companies in the United States reached $23 billion last year, up from $20 billion in 2023. Nearly 30% of the total investment in 2024 went to startups that are leveraging AI technology, showcasing the industry’s shift towards innovative solutions.
Jackie Spencer, head of relationship management for life science and healthcare banking at SVB, predicts that 2025 will bring a “steady yet modest” increase in deal value and volume across the healthcare sector. However, the market for initial public offerings (IPOs) is expected to remain subdued until conditions improve, and newly public companies demonstrate success.
While total investment in the healthcare sector is still below the levels seen during the pandemic, the number of VC deals in 2024 surpassed those in 2021. Overall, healthcare investment has grown by 44% since the beginning of 2020. AI has emerged as a key driver of healthcare investment, particularly in biopharma startups where the technology is being used for drug discovery, candidate screening, and clinical trial design.
In 2024, $5.6 billion was invested in AI-backed companies, nearly tripling the amount from the previous year. Biopharma startups raised $24.2 billion across 568 deals, a significant increase from 2023. On the other hand, health tech startups saw a decline in funding, with $10.6 billion raised across 706 deals compared to $15.4 billion in funding over nearly 1,200 deals in the previous year.
Despite the overall decrease in health tech funding, early-stage startups in the sector experienced a slight increase in investment in 2024. Investors have been focusing their later-stage funding on established companies, prioritizing reduced risk in their spending decisions.
Looking ahead, the exit landscape for health tech companies is expected to improve in 2025. Companies like Hinge Health and Omada, both of which have raised substantial amounts of funding, are potentially gearing up for IPOs this year. A successful IPO from these companies could signal a positive shift in the industry and encourage other late-stage startups to follow suit.
Overall, while the healthcare industry continues to face challenges, the increasing investment in AI startups and the potential for successful IPOs in 2025 suggest a promising future for innovation and growth in the sector.
