H1 2025's Digital Health Fund: Market Stable, AI Dominates and Exits Return
The digital health world showed real market traction in the first half of the year, according to a report from Rock Health, which raised $6.4 billion in venture capital in a report released on Monday.
In the first half of 2025, the total funding of digital health startups was slightly higher than the $6.2 billion and $6 billion raised by these startups in the first half of 2023 and 2024, respectively. This shows a stable market that has figured out the new normality of the prosperity of the pandemic era, the report notes.
AI-centric startups accounted for 62% of all digital health ventures in the first half of the year, raising an average of $34.4 million per round, a premium of 83% over the non-AI-AI peers of these startups. Most of these AI-first companies produce products to improve clinical workflows, non-clinical administrative tasks and data infrastructure.
In the first half of 2025, nine of the 11 large fundraising activities closed by Digital Health startups (a total of $100 million or more) were raised by AI-focused companies. For example, clinical documentation startup Abridge raised $250 million in February and $300 million in June. Other AI startups, including Innovaccer, Hippocratic AI, Qventus and Truveta, have closed more than $100 million in rounds.
The report noted that providers have also quickly adopted some of these tools.
For AI tools that address things like environmental documentation and medical reference platforms, some hospitals reported a 90% usage rate, given the amazing shift in providers’ past resistance to new technologies, the report said. It also says AI startups have won the trust of providers by providing more intuitive products, more seamlessly implementing tools to existing technology infrastructure and producing measurable results.
In addition to the billions of dollars flowing to AI suppliers, the long-awaited IPOs of Hinge Health and Omada Health were exhibited in the first half of 2025, two exports that many felt overdue due to stagnation. The report notes that these companies have spent more than a decade building trust, refining their care models and deploying AI to deliver scalable care.
The public debut of Hinge and Omada could mark the beginning of a more mature digital health market, which could help rekindle investor confidence and lay the foundation for future exits and healthier investment cycles.
While public products have attracted headlines, the report notes that most digital health startups have exited through mergers and acquisitions, with 107 such deals in the first half of 2025, bringing the year to nearly double the total in 2024.
Private equity firms also fuel integration by combining traditional healthcare businesses with AI local startups. The report said they bet that these roll-ups will increase efficiency and scale.
Digital health companies are also facing growing policy and economic uncertainty in a promising exit environment and growing pace of AI adoption, especially with regard to the recent passage of the A Large Beauty Act. The bill’s Medicaid job requirements and changes to the ACA market could cause millions of uninsured people to narrow the addressable market and exacerbate financial pressures for providers.
To drive these shifts, Rock Health encourages digital health startups to participate in federal programs early and try to align with priorities like chronic diseases and AI.
Photo: ta nu, getty image
