Entrepreneur, CEO, And Co-Founder of Hippocratic AI

Digital health startups raise $3B in Q1 as market faces near-term uncertainty

The digital health sector entered 2025 with renewed momentum, raising $3 billion in the first quarter—surpassing Q1 2024’s $2.7 billion—despite fewer total deals and ongoing market uncertainty. According to Rock Health, while the number of deals declined slightly to 122, average deal size surged to $24.4 million, reflecting the return of sizable later-stage rounds. Major fundraises from companies like Hippocratic AI ($141 million), Abridge, and Innovaccer drove this growth, even as early-stage rounds (Seed through Series B) continued to dominate in volume. The funding landscape reflects a cautious but focused investment climate, where fewer, more strategically chosen bets are being made, particularly in areas like AI-powered clinical tools and modular health tech infrastructure.

This cautious optimism comes as startups and investors navigate a rapidly evolving market shaped by policy changes from the Trump administration and broader economic instability. Still, the report highlights a wave of strategic adaptations, including an uptick in digital health M&A—67% of which were startup-to-startup deals—and increasing collaboration between large enterprises and disruptive newcomers. Munjal Shah’s Hippocratic AI stands out in this environment as a symbol of investor confidence in AI’s role in healthcare transformation. Meanwhile, companies are experimenting with “tapestry weaving” strategies and modular tech stacks to stay nimble, while others, like Apple and Lumeris, are embracing plug-and-play AI architectures. With IPO speculation (such as Hinge Health’s) and growing channel partnerships, the sector is balancing near-term volatility with long-term bets on tech-enabled care.

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