Digital Health Funding Surges in 2025, Driven by Mega-Deals and AI Innovation

Digital health funding in 2025 is outpacing last year's figures, with investment reaching $9.9 billion through the third quarter, according to a recent report by Rock Health. This surge in funding, driven by larger deal sizes and an increase in mega-rounds, signals a shift in the digital health landscape as investors focus on AI-powered solutions and workflow optimization tools.

Funding Trends and Mega-Deals

In the third quarter of 2025, U.S. digital health startups raised $3.5 billion across 107 deals, contributing to the year-to-date total of $9.9 billion. This figure already exceeds the $8.4 billion raised through the third quarter of 2024, highlighting the sector's continued growth despite economic uncertainties.

The average deal size has increased significantly, reaching $28.1 million in 2025, up from $20.4 million in 2024. This growth is largely attributed to the rise in mega-deals, defined as rounds worth $100 million or more. So far in 2025, the sector has recorded 19 mega-rounds, surpassing last year's total. Notable recipients of these large investments include Ambience Healthcare, an AI-backed documentation firm, Judi Health, a benefits platform, and OpenEvidence, an AI medical search tool.

These mega-deals have had a substantial impact on the overall funding landscape, accounting for nearly 40% of the year's total investment, or $3.8 billion.

Shifting Investment Patterns and Industry Focus

While the total funding amount has increased, the digital health sector is experiencing changes in investment patterns. Startups are securing fewer middle-stage deals, particularly Series B rounds, with only 30 such raises recorded through the third quarter of 2025. This marks a significant decrease compared to previous years, which saw over 60 Series B deals annually.

Additionally, there has been a persistent trend of unlabeled raises, where companies complete funding rounds without traditional series designations. In 2025, 35% of funding rounds have been unlabeled, down from 44% in 2023 but still well above pre-2021 levels. This shift complicates the benchmarking process for investors and makes it challenging for enterprises to assess which startups are ready for large-scale partnerships.

Funding is increasingly concentrated on a narrower set of value propositions, with tools that handle clinical and non-clinical workflows for healthcare delivery capturing 42% of the sector's funding in 2025. This focus on augmenting healthcare workflows is driving some startups to pursue partnerships or acquisitions to expand their capabilities.

M&A Activity and Industry Consolidation

The digital health sector is experiencing a significant uptick in merger and acquisition activity. M&A deal volume has increased by 37% compared to last year, with 166 acquisitions recorded so far in 2025, versus 121 for the entire year of 2024. This trend reflects the industry's focus on consolidation and the integration of complementary technologies and services.

As the digital health landscape continues to evolve, investors and industry observers will be closely watching how these funding trends and consolidation efforts shape the future of healthcare technology and delivery.