Digital Health Funding Falls 18% in Q4 2025: What It Means for Startups

Q4 2025 Funding Overview

Venture capital investment in digital health companies dropped 18% quarter-over-quarter in Q4 2025, falling to approximately $3.2 billion. This continues a correction trend that began in late 2022 as investors recalibrated expectations after the pandemic-era boom.

The decline was concentrated in late-stage deals, particularly Series C and beyond. Early-stage funding remained relatively stable, suggesting that investor appetite for digital health innovation persists, but with greater scrutiny on business models and paths to profitability.

Where Capital Is Still Flowing

AI-powered diagnostics and clinical workflow automation continue to attract the most investor interest. Companies that demonstrate clear ROI for health system customers and have recurring revenue models are securing funding at reasonable valuations.

Mental and behavioral health platforms also remain a bright spot, driven by persistent demand that far outstrips the supply of traditional providers. Platforms offering hybrid models that combine digital tools with access to licensed clinicians are particularly well-positioned.

What Startups Should Do Now

For digital health startups, this environment demands capital efficiency. Extending runway, focusing on customer retention metrics, and demonstrating clear clinical or economic value will be essential for companies seeking their next round of funding.

Strategic partnerships with established health systems and payers can provide both revenue and validation that makes venture fundraising easier. Startups that can show contracted revenue from enterprise customers will stand out in a more discerning investment landscape.