Digital health companies are increasingly leaning on unlabeled rounds while clinical operations startups capture the bulk of 2025’s largest funding rounds, according to Rock Health’s latest analysis of digital health deals in the third quarter.
The top-line numbers for the third quarter have outpaced 2024, Rock Health reported. Digital health companies raised $3.5 billion across 107 deals, inked 19 rounds over $100 million and increased the average deal size by nearly $8 million compared to last year. Megafunds like Andreessen Horowitz (a16z), Kleiner Perkins and General Catalyst and others have contributed to nearly 80% of these fundraises.
Year-to-date digital health funding now stands at $9.9 billion across 351 deals, surpassing 2024’s total through the third quarter at $8.4 billion.
However, the advisory firm contends that the prevalence of unlabeled rounds, longer timelines between series A and series B raises and a thinning number of series B deals show that the market is murkier than it looks at a glance.
Unlabeled raises have increasingly bridged the gap for companies that have not yet met their targets for their next raise. Rock Health noted the rising prominence of unlabeled rounds in the first half of 2023. Though the prevalence has decreased from a high of 55% in Q4 2024 to 35% so far this year, Rock Health predicts that unlabeled rounds are an enduring part of digital health’s future.
“What once looked like a stopgap has now become routine,” Rock Health's analysts wrote in the report.
Unlabeled raises make it harder for investors and health systems to understand how companies are doing, Rock Health wrote. While one company raising an unlabeled round might be struggling, another may be preparing to scale rapidly.
The median length of time between series A and series B rounds has lengthened dramatically, to an average of 27 months, up from 17 months in the period of 2023 to 2024, Rock Health found. All other rounds are occurring closer together.
Meanwhile, the number of series B rounds has been chopped in half. Only 30 companies reported series B funding rounds through the third quarter of 2025, compared to an average of 60 deals per year over the past four years.
Because series B rounds often help separate the failing startups from the ones that scale, the lack of series B deals is one of the main points of evidence Rock Health uses to show that the bottom is falling out for the middle market. Companies are having a harder time hitting the marks they need for their series B raises, and the market has become murkier than in the past.
“There’s a set of companies raising quickly at high valuations—and then there’s everyone else," Becca Shmukler, partner at the Laerdal Million Lives Fund, said in the report. “For those navigating the tougher path, the playbook is to find the moat and double down on clear differentiators. We’ve seen companies break through when they hit a meaningful milestone—like landing a major distribution deal, getting FDA clearance, or proving commercial traction—that becomes the hook for the next round.”
The part of the market that had the most activity was digital health solutions for workflow and infrastructure, namely AI companies. Some of the third quarter’s biggest deals came from the provider workflow automation products offered by Strive Health ($550 million series D), Abridge ($300 million series E), Innovaccer ($275 million series F), Ambience ($243 million series C) and Commure ($200 million growth/PE), among others.
The report notes that 42% of digital health funding since the first quarter of 2025 funded clinical workflow companies. Startups in the space are moving horizontally to acquire companies or partner with health systems to capture more of the workflow process, like adding prior authorization to an ambient scribe platform.
Incumbents like Epic, Oracle, Innovaccer and athenahealth are “doubling down” to provide their own versions of startup products, Rock Health says.
“The result is a reset: what was novel quickly becomes standard, and incumbents’ data advantage compounds with every use,” the report authors wrote. “But layering more into already complex systems can frustrate users and slow iteration, ultimately leaving room for startups that win on clearer ROI or sharper focus on overlooked workflows.”