If last year’s digital health market felt like David vs. Goliath, Rock Health’s full-year funding recap has you covered with the reason why.
Here’s 2024 by the numbers:
- U.S. digital health funding totaled $10.1B across 497 rounds
- Continued downtrend in investment (2023 was $10.8B total, 503 rounds)
- Shift to early-stage companies drove the dropoff
There’s a tale of two trends unfolding between the early-stage startups and late-stage incumbents battling for market share, and neither side is helping out the funding total.
- Investors began focusing on early-stage startups throughout 2024, and a whopping 86% of labeled rounds went to Seed, Series A, and Series B startups.
- Larger companies also started to see smaller checks, with the median Series C and D raise clocking in at $50M and $55M, respectively (down ~10% from 2023).
The shift to earlier-stage investments was driven by an appetite for startups that can show traction with small/medium sized organizations, especially among increasingly influential mega-VCs like General Catalyst and Andreessen Horowitz.
- These smaller orgs want gen AI capabilities, aren’t a top target for massive IT players, and can be a goldmine for the startups that can fill that gap.
- The mega-VC influence in digital health follows a broader trend, with PitchBook data showing that 50% of all venture capital raised in the U.S. last year went to just nine firms… out of 391 total VCs. GC and a16z happened to rank #1 and #2.
Since it wouldn’t be a 2024 recap without the magic two letters: AI investment reached a fever pitch, and AI-first startups took home 37% of the overall funding.
- Goliaths in this space include incumbents like Epic, the healthcare divisions of Big Tech players like Microsoft, and younger startups with the warchest to compete like Commure.
- Rock Health sees a future where the AI Davids can continue thriving by addressing specialized use cases or smaller customer segments, as long as they keep an eye on the roadmaps of their bigger competition to avoid getting stepped on.
The Takeaway
If the healthcare industry wants to keep innovating, it needs companies of all shapes and sizes to make it happen. Rock Health’s 2024 recap is a good reminder that not every startup needs to be a Goliath, and that the Davids are still finding success by right-sizing their operation to the customers they serve.
