SAN FRANCISCO—Digital health investment seems to be hitting a healthy stride, bringing in $14.2 billion in funding in 2025, up 35% from the prior year and the highest total since 2022.
The market is nowhere near the pandemic-era peak, but it marked a growth year, driven in large part by excitement around artificial intelligence, according to Rock Health's year-end analysis of digital health deals in 2025.
But 2025 also was a tale of two markets and a clear separation between the "haves" and "have-nots," Rock Health analysts noted.
"On one side, AI-native upstarts attracted huge rounds at unprecedented speed, a handful of companies broke the IPO drought, and private equity made major moves, signaling real bets on an emerging 'winner' class," Rock Health analysts Megan Zweig, Jacqueline Kimmell and Maddie Knowles wrote in the report.
On the other, the market continues to bifurcate as 35% of deals were flat or down rounds. Unlabeled rounds remained elevated at 34% of deals in 2025, according to the report.
"Coupled with the elevated pace of M&A, which included a number of distressed exits, suggesting many companies are still grappling with valuation overhangs from prior cycles while operating in a more competitive market," Rock Health wrote.
A number of trends took shape in 2025, and it's expected that these factors will continue to shape investments in 2026. There is a growing concentration of power, according to Rock Health's analysis, as certain players maintain outsized influence including megafunds, or venture capital firms with at least $500 million to deploy, a well-capitalized unicorn class and incumbents, Rock Health noted in the report.
At the same time, big foundation model companies are looking for their next frontier as just last week OpenAI unveiled ChatGPT for Health and Anthropic on Sunday announced Claude for Healthcare.
Here's a look at key findings in Rock Health's analysis of digital health funding in 2025:
In the fourth quarter of 2025, digital health startups brought in $4.2 billion across 129 deals, marking the highest quarter total Rock Health has logged since the second quarter of 2022. The headline numbers show a market that, like the broader VC market, has ticked up to a new normal around 36% above the pre-pandemic baseline (2019, adjusted for inflation).
Megadeals, raises over $100 million, accounted for 42% of all funding in 2025, the highest proportion since 2021 and nearly double last year's share. Remove the top nine companies by 2025 dollars-raised and total funding falls below 2024, Rock Health noted. This means fewer companies are capturing capital. Startups raised $3.7 billion more in 2025 than in 2024, though deal count dropped by 5% (482 compared to 509 deals in 2024). Average deal size rose to $29.3 million, up from $20.7 million in 2024.
Megafund participation and AI drove larger check sizes. 2025 saw 26 megadeals and 15 newly minted unicorns, up from just six last year. "The 'Goliath' investors topped the term sheets, with Andreessen Horowitz (a16z), General Catalyst (GC), and Kleiner Perkins all participating in at least five mega deals each," analysts noted.
AI is also pulling in a premium. Across 2025, 50% of deals were closed by "AI-enabled" companies. AI-enabled digital health companies captured 54% of total funding, up from 37% last year, and commanded a roughly 19% premium on average deal size compared to companies not explicitly centering AI in their products and services. This was most pronounced at series C, where startups commanded a 61% “AI premium.”
M&A activity jumped to 195 deals in 2025, up 61% from 2024. Digital health companies remained the most frequent acquirers, capturing 66% of deals, up from 53% in 2024 and the highest proportion since Rock Health began tracking in 2013. PE firms were the second most-common acquirer of digital health companies with 10% of all deals.
The uptick in M&A was driven by growth-stage companies with fresh capital going on shopping sprees to pick up new capabilities, talent and customers. Companies are acquiring startups for new features and capabilities to integrate with existing offerings. Consider Talkspace acquiring Wisdo Health to expand into peer support, or Fabric Health continuing to stitch together stalled businesses into a more comprehensive platform. M&A has also become a key strategy among AI infrastructure players. Many large startups, such as Commure, Abridge and Innovaccer, are relying on inorganic growth to bulk up teams and roll out new use cases.
For some companies, M&A was a survival strategy. Rock Health notes that Thirty Madison's valuation reportedly fell from $1 billion to $500 million as it sold to GLP-1 provider RemedyMeds, Upfront Health sold for $8 million less than it raised, and SteadyMD sold for $25 million after raising nearly $40 million. "Consolidation of this kind may not yield desired outcomes for acquirees and their investors, but acquirers are certainly benefiting from lower prices on assets that help them leapfrog on growth and infrastructure," Rock Health analysts wrote.
2025 marked an IPO comeback. After just two public exits in the prior three years, five digital health companies went public last year—Hinge Health, Omada Health, Heartflow, Carlsmed and Profusa. Two of the five were trading above their IPO prices (Hinge and Heartflow) as of market close in 2025. Industry watchers are keeping a close eye on Aledade, Included Health, Maven Clinic, Virta and Zelis as potential IPO targets in 2026.