U.S. digital health startups snagged $10.1 billion in venture funding across 497 deals in 2024, a slight decrease from 2023 at $10.8 billion across 503 deals, according to a new report from Rock Health.
Although 2024 surpassed the $8.2 billion raised in 2019 (the benchmark year outside of Covid-19) in absolute terms, adjusting for inflation alters the overall picture. In 2024, one U.S. dollar was equivalent to about $0.82 in 2019—meaning that the $10.1 billion in digital health funding raised in 2024 is roughly equivalent to $8.3 billion in 2019 dollars.
There are a few reasons for this lower funding amount in 2024. The first is that investors are shifting their focus to earlier stage startups. About 63% of 2024 funding rounds were labeled. Among these, 86% were for startups raising their Seed, Series A and Series B rounds.
In addition, startups that raised later-stage rounds had smaller check sizes than in previous years, according to Rock Health. The median deal size for Series C and D fundraises was $50 million and $55 million, respectively — down from $62 million and $58 million in 2023, and a significant decrease from the 2021 peaks of $73 million and $105 million.
“Increasing early-stage fundraising activity, alongside smaller late-stage deals drove 2024’s total funding numbers downward — a dynamic that gives us important intel as we head into 2025,” Rock Health stated. “New startups are attracting investor attention despite a more tempered funding environment; yet … their growth trajectories will depend on how effectively they navigate a Goliath-rich environment. Later-stage startups struggling with downward valuation pressures or stalled fundraising rounds could fold or seek acquisition in the coming year — potentially restarting digital health M&A activity, which hit a decade low in 2024 at 118 deals.”
Another major trend the report uncovered is that the VC space is becoming more concentrated. It cited research from Pitchbook that showed that of the 391 VC firms in the U.S., 30 funds accounted for 75% of 2024’s committed capital in the U.S. Two “mega funds” — Andreessen Horowitz and General Catalyst — were the digital health sector’s top investors in 2024 and accounted for 20% of all committed LP capital in the U.S. venture market.
Rock Health also reported that AI-enabled digital health startups received a lot of interest from investors in 2024, representing 37% of this year’s digital health funding across 191 deals.
Additionally, the report revealed that funding was concentrated into “already popular” value propositions and therapeutic areas, such as nonclinical workflow, mental health and obesity care.
Ultimately, the trends of “early-stage startup activity amidst big moves by large healthcare players” have created a “David and Goliath dynamic” in healthcare innovation, Rock Health stated.
“We believe a balance of big and small players will be needed to preserve diversity of thought and innovation in healthcare,” the report noted. “For founders and investors, it’s important to remember that not every startup needs to be a Goliath (or unicorn…or decacorn) to be successful. Creating value for customers and maintaining a clear understanding of one’s addressable market, achievable scale, and valuation will help maintain a right-sized perspective.”
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