US Digital Health Sector Sees $9.9 Bn Boost as Big Rounds Dominate

In the third quarter, U.S. digital health startups raised $3.5 billion across 107 deals. Total funding for 2025 reached $9.9 billion, surpassing the $8.4 billion raised through the same period in 2024.

Digital health funding in 2025 is tracking ahead of last year as outsized fundraising rounds boost overall investment, according to a new report by venture capital firm and consultancy Rock Health.

In the third quarter, U.S. digital health startups raised $3.5 billion across 107 deals. Total funding for 2025 reached $9.9 billion, surpassing the $8.4 billion raised through the same period in 2024.

However, startups are inking fewer middle-stage deals and are increasingly avoiding rounds with traditional series labels, Rock Health researchers wrote.

At the same time, the sector is seeing a growing number of large funding rounds worth $100 million or more, often backed by well-known investors. Startups completed fewer rounds in the third quarter compared with earlier in the year, but the average deal size rose to $28.1 million, up from $20.4 million in 2024.

So far in 2025, the industry has recorded 19 mega-rounds, already surpassing last year’s count. These include investments in artificial intelligence-backed documentation firm Ambience Healthcare, benefits platform Judi Health, and AI medical search tool OpenEvidence.

Overall, such large rounds contributed nearly 40% of the year’s total, accounting for $3.8 billion in digital health funding.

Some post-pandemic investment trends continue to shape the sector, creating challenges for traditional fundraising cycles. Unlabeled funding rounds, where companies complete raises without Series A or B designations — increased during the pandemic as startups with high valuations sought capital before meeting milestones for another traditional round.

So far in 2025, 35% of funding rounds have been unlabeled, down from 44% in 2023 but still well above pre-2021 levels. “These raises weaken the benchmarks investors and founders rely on to underwrite growth and complicate how enterprises assess which startups are ready to partner at scale,” Rock Health researchers wrote. “Two companies announcing unlabeled raises may be in very different positions—one extending runway on shaky fundamentals, another preparing for strong growth—yet they look the same from the outside.”

The time it takes for startups to secure a Series B round is also increasing, with fewer companies closing such deals. Only 30 Series B rounds were recorded through the third quarter, compared with more than 60 annually over the past four years.

Together, the sustained presence of unlabeled raises and a decline in middle-stage rounds contribute to uncertainty about which companies are prepared to scale, the report said.

Funding is also concentrating in fewer areas, with tools that support clinical and non-clinical healthcare workflows attracting the most investment. AI documentation solutions and revenue cycle management products captured 42% of total funding so far this year.

The focus on improving healthcare workflow efficiency has prompted more startups to pursue mergers or acquisitions to expand their offerings. M&A deal volume is up 37% from last year, with 166 acquisitions completed in 2025 compared with 121 in all of 2024, according to Rock Health.

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