Medtech VC Funding Surges in 2025, Driven by Late-Stage Investments

Venture capital investment in the medtech sector is on track to reach its second-highest annual funding total on record, according to a recent report from PitchBook. Despite a decline in the number of deals, the industry has seen a significant increase in funding, particularly for late-stage companies and AI-native startups.

Q2 2025 Funding Highlights

The second quarter of 2025 saw $4.1 billion in VC funding for medtech companies, maintaining the strong pace set in the first quarter. This brings the total investment for the first half of the year to $8.5 billion, putting the sector on course to surpass the $16.2 billion raised in 2022.

However, the number of deals has fallen to its lowest quarterly count since at least 2017. PitchBook recorded 189 deals in Q2, bringing the total for the first half of 2025 to 421. This trend aligns with broader VC activity, suggesting a shift towards capital concentration in the private markets.

Late-Stage Companies and AI Startups Lead the Way

The rise in funding is primarily attributed to larger investments in more mature companies and AI-native startups. Companies in the latest stages of the venture lifecycle saw a 25% increase in investment value during Q2, offsetting declines in early-stage funding.

"Larger rounds increasingly favor top-tier companies and AI-native startups, leaving other startups fighting for a smaller pool of capital," PitchBook noted in its report.

This shift is partly due to the current exit environment. With buyouts and initial public offerings (IPOs) down, VC funds are investing larger amounts in a smaller pool of relatively mature companies. In the first half of 2025, late-stage companies accounted for 25% of VC deals, up from 11% in 2021.

Surgical Devices and Diagnostics Attract Investor Interest

The surgical devices and tools segment has emerged as the hottest destination for capital within medtech, accounting for 46% of deal value and 30% of the deal count in Q2. Following closely is the diagnostics and life sciences sector, which represented 19% of deal value and 28% of deal count.

PitchBook's analysis suggests that medtech companies are increasingly turning to venture-growth funding to extend their runway, as exit opportunities remain limited. The value of VC exits in the first half of 2025 totaled $2.9 billion, significantly lower than the $10.7 billion recorded for the entire year of 2024.

"With medtech companies struggling to reach an exit, more are turning to venture-growth funding to extend their runway," the report stated. "As net funding continues to rise despite subdued exit activity, investors are clearly readjusting their expectations and recognizing that medtech venture time horizons have extended."