Dive Brief:
- Venture capital funding for healthcare technology startups is rallying in 2025, with investment through the third quarter surpassing last year’s total, according to a report published Thursday by PitchBook.
- Startups raised $3.9 billion in the third quarter, down slightly from the $4 billion and $4.4 billion, respectively, scooped up during the first two quarters of the year. The number of deals increased 12% compared with the previous quarter.
- Average deal size rose to a record high of $7.7 million, suggesting that higher valuations — especially for companies touting artificial intelligence tools — are driving larger funding rounds, according to the analysis.
Dive Insight:
AI has been boosting digital health funding in recent months, as investors rush to pour funds into one of the most exciting emerging technologies in the healthcare sector.
Some of the largest funding rounds of the third quarter went to AI companies, including a $243 million Series C for clinical documentation and coding firm Ambience Healthcare and a $210 million Series B raise for AI medical information platform OpenEvidence, according to the PitchBook report.
Ambient notetaking scribes, which typically record patients’ conversations with doctors and automatically draft a clinical note, are one of the fastest growing use cases for AI, PitchBook said. Those tools are offered by a number of startups, including Ambience and Abridge, the latter of which has also raised two large funding rounds this year.
AI-backed revenue cycle management is another major area for AI, the report noted. These companies have raised more than $1.2 billion in venture capital funding since 2021.
The health tech sector continues to be largely focused on “practical” AI products that augment workflows and manage administrative work, while “potentially more revolutionary technologies—such as patient-facing agentic AI and platforms for early prediction of major health events like heart failure, sepsis, and seizures—have a way to go before widespread commercialization,” the report’s authors wrote.
Health tech funding edges past 2024 total
Meanwhile, the third quarter included a significant uptick in exits for venture capital-backed health technology firms. Forty-two companies notched exits during the period. More than half were acquisitions of smaller seed and Series A startups, according to the report.
But there were no major health technology initial public offerings in the third quarter, after the sector saw the IPO market begin to unfreeze after a long period of stagnation earlier this year. Digital musculoskeletal care company Hinge Health, went public in May, and chronic condition management firm Omada Health hit public markets the following month.
Policy and economic uncertainty is likely making companies reconsider IPOs, experts say. For example, the sector is bracing for the impact of the One Big Beautiful Bill Act, which will likely create millions more uninsured Americans and financially strain providers.
“We do not expect further major healthtech listings in 2025,” the PitchBook report’s authors wrote. “Ongoing policy uncertainty and a wait-and-see approach from late-stage startups have likely pushed new IPO activity into 2026.”
