Health Tech Venture Capital Investment Sees Significant Growth in 2025

In 2025, the health tech sector has experienced a noteworthy rebound in venture capital (VC) investment, with funding through the third quarter surpassing the total of the previous year. This resurgence is characterized by a 12% increase in the number of deals, and the average deal size has reached $7.7 million. A significant driver of these larger funding rounds is the integration of artificial intelligence (AI) tools, which are increasingly being developed into practical products within the health tech field.

Increased Funding and Deal Activity

2025 has been a year of considerable growth for health tech venture capital investment, with projections indicating significant increases in funding. This growth is further underscored by the strong investor interest in innovative health tech startups, which are attracting substantial private capital. The emerging technologies in this sector are drawing substantial venture capital, and this trend suggests an evolving investment strategy within the health tech space.

San Diego-based startups have raised $590 million in the third quarter of 2025, although this represents a 60% drop compared to the previous year, marking the smallest quarterly investment total in eight years. Similarly, the number of venture capital deals in the region decreased to 48 in Q3 2025, down from 61 deals last year, marking the lowest quarterly count in seven years. This decrease is partly attributed to market hesitancy, making early-stage and growth capital harder to secure.

Geographical and Sectoral Trends

The concentration of AI investment is notably in the Bay Area, reflecting both geopolitical and national security priorities. Within this framework, companies like Crystalys Therapeutics have raised $205 million in a Series A funding round, while Turnout and GigaIO each secured $21 million in seed and Series B financing, respectively. Firestorm Labs, which was founded in 2022 and focuses on defense technology, secured $47 million in Series A funding, emphasizing the diverse applications of health tech and its defense implications.

These investments also highlight the critical role that startups play in U.S. job creation and economic growth. The focus on AI and defense technology within health tech investment reflects broader national security concerns and the strategic value of technological advancements.

Market Dynamics and Future Outlook

Despite the robust venture capital activity, there have been no major health tech initial public offerings (IPOs) in the third quarter of 2025, with policy uncertainty affecting IPO decisions. As a result, no significant health tech listings are expected for the remainder of the year. Nonetheless, there is a growing confidence in the market bolstered by tech IPOs, which are gradually boosting investor sentiment.

Mergers and acquisitions (M&A) activity is also rebounding on a national level, providing additional avenues for growth and investment within the sector. The demand for health tech solutions continues to rise, driven by technological advancements and the evolving needs of the market.

Conclusion

The health tech venture capital landscape in 2025 is marked by significant growth and evolving investment strategies. With projections suggesting new records for health tech investments, venture capitalists are actively seeking high-potential startups that can meet the increasing market demand. While challenges such as market hesitancy and policy uncertainty persist, the overall trajectory of the health tech sector remains positive, with technological advancements and strategic investments paving the way for future developments.