Late-Stage Digital Health Funding Sees Significant Increase in Q1
Unlabeled Rounds and Market Dynamics Unlabeled funding rounds, which lack specific categorization, constituted 35% of the deals made this year. This trend of unlabeled rounds reached a peak of 55% in the fourth quarter of 2023, contributing to complications in market clarity. Digital health companies secured $9.9 billion across 351 deals by the third quarter of 2025, surpassing last year's funding pace.
The digital health sector witnessed a substantial influx of capital, raising $9.9 billion across 351 deals through the third quarter of 2025. This surge in funding surpasses the pace observed in the previous year, highlighting a growing interest and investment in the field.
Unlabeled Rounds and Market Dynamics
Unlabeled funding rounds, which lack specific categorization, constituted 35% of the deals made this year. This trend of unlabeled rounds reached a peak of 55% in the fourth quarter of 2023, contributing to complications in market clarity. Despite these challenges, the capital flow in the digital health sector remains robust, albeit with noticeable variability that underscores an uneven market.
The structure of funding suggests an uneven recovery, with middle-stage companies experiencing varied deal sizes. Investors continue to exercise high selectivity, particularly in late-stage investments, which have come to dominate the top deals in the sector.
Increase in Average Deal Size
The average size of deals has seen a considerable increase, rising to $28.1 million from the previous year's average of $20.4 million. This jump in average deal size reflects the growing confidence of investors in the digital health market, particularly in late-stage firms. However, the number of Series B rounds completed this year stands at 30, marking a decline from the annual average of over 60, and showcasing the widest spread in Series B activity since 2021.
Mega Deals and Their Impact
Among the deals completed this year, nineteen financings reached or exceeded $100 million. These mega deals accounted for 39% of all dollars raised, further emphasizing the dominance of late-stage investments in the market. The funding structure, characterized by these large transactions, indicates an uneven recovery process within the industry.
The late-stage investments appear to be particularly concentrated in the DMV region, with digital health funding seeing a marked increase in the first quarter. The District of Columbia, in particular, recorded an investment of $2 billion in Q1 2022, following a peak of $2.6 billion in Q2 2021. Despite the strong capital flow, the deal count in DC has remained steady, suggesting a cautious approach by investors.
Future Prospects and Federal Influence
Looking ahead, federal policies could potentially boost funding for local startups, although investors are likely to remain selective in their investment strategies. The digital health market continues to evolve, and the influx of capital in late-stage ventures suggests a promising outlook for the sector. Nonetheless, the uneven distribution of funding and the prevalence of unlabeled rounds present ongoing challenges for market participants.
In conclusion, while late-stage digital health funding has seen significant growth in the early part of the year, the landscape remains complex and variable. Investors are navigating a market defined by large, selective investments and a notable increase in deal sizes, all within an environment marked by both opportunity and uncertainty.