The digital health sector experienced significant funding activities in the first quarter of 2025, with startups raising $3 billion. This funding represents an increase from the $2.7 billion raised in the same period last year. Despite a similar number of deals—122 compared to 133 last year—the average deal size rose from $15.5 million to $24.4 million, according to Rock Health.
This pattern aligns with typical seasonal investment trends where Q1 funding surpasses Q4 of the previous year. The ongoing return of late-stage funding has strengthened these trends, indicating a recovery from the low levels seen in early 2024.
Early-stage startups dominated the deal counts, constituting 83% of funding rounds, with significant seed, Series A, and Series B rounds. Achira raised $33 million in a seed round, Open Evidence secured $75 million in Series A, and Hippocratic AI obtained $141 million in Series B. Large, late-stage funding rounds were also notable, with Innovaccer securing $275 million, Abridge obtaining $250 million, and Qventus receiving $105 million.
Strategic M&A deals were instrumental, with 67% of the 46 transactions involving startups acquiring other startups. Companies focused on merging to integrate new features, such as Hone Health acquiring Ivee and Hims & Hers purchasing Trybe Labs.
Modular tech stacks remain popular, allowing companies to adapt to technological advancements efficiently. Channel partnerships emerged as a critical strategy, demonstrated by Eli Lilly expanding its platform and Amazon scaling its initiatives through Teladoc.
In conclusion, digital health funding activities in Q1 2025 reflect cautious optimism, with strategic mergers, adaptable tech stacks, and partnerships being essential strategies. These efforts help companies navigate a complex market landscape and foster innovation and growth.
