AI Fuels Digital Health Funding Surge
Source: aha.org
Digital Health Funding Surges in Q1
Digital health funding, especially for artificial intelligence (AI) companies, jumped 47% in Q1 compared to the previous quarter, even though deal volume decreased by 9%, according to a CB Insights report. This highlights a broader trend in venture capital: Investors are making fewer investments but with larger amounts of capital.
Investments reached their highest point since mid-2022 despite a decrease in contract deal volume. The report attributes this to a more selective funding environment, where capital is concentrated in established companies, particularly those using AI for specialized health care applications.
Megarounds & AI Dominance
Funding from megarounds (deals of $100 million or more) increased to $2.5 billion across 11 deals in Q1, accounting for 46% of all digital health funding. Startups focused on AI secured eight of these 11 megarounds, indicating investor expectations for significant returns. AI startups raised $3.2 billion in Q1, representing 60% of all digital funding. This is an increase from 41% in 2024.
The segments that received the most funding included AI-derived small molecule drug discovery and clinical documentation tools, reflecting a move towards targeted, high-impact applications.
New Unicorns Emerge
Digital health saw the creation of six new unicorns in Q1 (companies valued at over $1 billion), which is more than the total for all of 2024. With half of these investments focused on AI related to provider workflows, the data suggests that investors are most confident in areas where AI directly supports care delivery.