U.S. digital well being startups snagged $10.1 billion in enterprise funding throughout 497 offers in 2024, a slight lower from 2023 at $10.8 billion throughout 503 offers, in response to a brand new report from Rock Well being.
Though 2024 surpassed the $8.2 billion raised in 2019 (the benchmark yr outdoors of Covid-19) in absolute phrases, adjusting for inflation alters the general image. In 2024, one U.S. greenback was equal to about $0.82 in 2019—which means that the $10.1 billion in digital well being funding raised in 2024 is roughly equal to $8.3 billion in 2019 {dollars}.
There are just a few causes for this decrease funding quantity in 2024. The primary is that buyers are shifting their focus to earlier stage startups. About 63% of 2024 funding rounds have been labeled. Amongst these, 86% have been for startups elevating their Seed, Sequence A and Sequence B rounds.
As well as, startups that raised later-stage rounds had smaller test sizes than in earlier years, in response to Rock Well being. The median deal measurement for Sequence C and D fundraises was $50 million and $55 million, respectively—down from $62 million and $58 million in 2023, and a big lower from the 2021 peaks of $73 million and $105 million.
“Rising early-stage fundraising exercise, alongside smaller late-stage offers drove 2024’s complete funding numbers downward—a dynamic that provides us necessary intel as we head into 2025,” Rock Well being said. “New startups are attracting investor consideration regardless of a extra tempered funding setting; but … their progress trajectories will depend upon how successfully they navigate a Goliath-rich setting. Later-stage startups combating downward valuation pressures or stalled fundraising rounds might fold or search acquisition within the coming yr—probably restarting digital well being M&A exercise, which hit a decade low in 2024 at 118 offers.”
One other main pattern the report uncovered is that the VC area is changing into extra concentrated. It cited analysis from Pitchbook that confirmed that of the 391 VC corporations within the U.S., 30 funds accounted for 75% of 2024’s dedicated capital within the U.S. Two “mega funds” — Andreessen Horowitz and Normal Catalyst — have been the digital well being sector’s high buyers in 2024 and accounted for 20% of all dedicated LP capital within the U.S. enterprise market.
Rock Well being additionally reported that AI-enabled digital well being startups acquired numerous curiosity from buyers in 2024, representing 37% of this yr’s digital well being funding throughout 191 offers.
Moreover, the report revealed that funding was concentrated into “already widespread” worth propositions and therapeutic areas, corresponding to nonclinical workflow, psychological well being and weight problems care.
In the end, the traits of “early-stage startup exercise amidst large strikes by massive healthcare gamers” have created a “David and Goliath dynamic” in healthcare innovation, Rock Well being said.
“We consider a stability of huge and small gamers will probably be wanted to protect range of thought and innovation in healthcare,” the report famous. “For founders and buyers, it’s necessary to keep in mind that not each startup must be a Goliath (or unicorn…or decacorn) to achieve success. Creating worth for purchasers and sustaining a transparent understanding of 1’s addressable market, achievable scale, and valuation will assist keep a right-sized perspective.”
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