AI Startups Drive Growth in Digital Health Funding in 2025

In the first half of 2025, U.S. digital health companies raised a total of $6.4 billion, marking an increase from the $6 billion raised during the same period in 2024 and $6.2 billion in 2023. A significant portion of this funding, 62%, was attributed to startups focused on artificial intelligence (AI), indicating a strong trend towards AI solutions in the digital health sector.

Emerging Trends in Digital Health Investments

Digital health firms managed to secure $3.4 billion in the second quarter of 2025 alone. This figure is above the average quarterly funding of $2.6 billion observed since the beginning of 2023. The increase in funding is accompanied by a notable rise in the average deal size, which grew to $26.1 million from $20.4 million the previous year.

The landscape of digital health funding is characterized by a total of 245 transactions recorded in the first half of 2025. Although this number is slightly lower than the 273 transactions noted in the same period in 2024, it reflects a consolidation towards larger deals. AI-focused firms are leading the charge with average funding rounds amounting to $34.4 million, significantly outpacing the $18.8 million per round raised by their non-AI counterparts.

Mega-Rounds and Mergers Define the Market

Another key development in the digital health funding arena is the prevalence of mega-rounds, which are funding rounds exceeding $100 million. In the first half of 2025, there were 11 such mega-rounds, with AI startups capturing the majority, accounting for nine of these large funding rounds.

The mergers and acquisitions (M&A) activity in the digital health sector also remains robust, with over 100 deals completed in the first half of 2025. This compares to 121 digital health purchases recorded last year, underscoring a strategic emphasis on rapid integration of AI capabilities and talent through acquisitions.

The Role of AI in Health Technology

The rebound in healthcare technology venture capital in 2025 is largely driven by the adoption of AI. AI technologies are increasingly being utilized to automate documentation processes and enhance diagnostic accuracy, offering tangible improvements in healthcare delivery. While healthcare providers are eager to innovate with AI, payers remain cautious, particularly concerning the definitions and applications of AI technologies.

AI startups are at the forefront of driving growth in digital health funding, spearheading initiatives that deliver fast pilot solutions to address immediate healthcare challenges. The next phase of digital health innovation is expected to be defined by the delivery of measurable value, as AI continues to improve efficiency across various sectors, including the legal industry.

Strategic Acquisitions and Specialized Solutions

Companies like Fog Solutions, which specialize in AI application development, highlight the emphasis on integrating specialized capabilities and algorithms into existing frameworks. The current trend of acquisitions is aimed at quickly gaining access to AI talent and technology, enhancing the overall capability of healthcare firms to adopt and implement AI solutions effectively.

As the digital health sector continues to evolve with AI at its core, the focus remains on delivering innovative solutions that not only solve immediate problems but also contribute to long-term improvements in healthcare efficiency and outcomes.

AI startups are poised to define the next chapter of digital health innovation, focusing on delivering measurable value and efficiency across the healthcare spectrum.