In a first quarter packed with uncertainty and policy shifts, digital health didn’t skip a beat.
Rock Health’s Q1 Digital Health Market Update counted $3B in venture funding across 122 rounds (up from $2.7B in Q1 2024), and it sounds like there’s finally some optimism in the air again.
Early-stage startups dominated the deal count, with Seed, Series A, and Series B raises comprising 83% of labeled rounds in Q1 (in line with 86% last year).
- Those included some extra-large investments like Achira’s $33M Seed, Open Evidence’s $75M Series A, and Hippocratic AI’s $141M Series B.
The bigger story was the triumphant return of late-stage mega-rounds, headlined by Innovaccer’s $275M Series F and Abridge’s $250M Series D.
- While Q1 only clocked five raises that were Series D or later, this cohort lifted the quarter’s median Series D+ round size to $105M – almost double the $55M median Series D+ size seen in 2024.
Success in this climate requires “leapfrogging.” Rock health devoted a large section of the report to its four strategies for leapfrogging over market shifts using their unique circumstances.
- Tapestry Weaving – using M&A to integrate new features and offerings into your capability mix. Of the 46 M&A deals tracked in Q1, 67% involved digital health startups acquiring other digital health startups, up from 53% across 2024.
- Modular Tech Stacks – designing flexible infrastructure that reduces dependencies and allows for new integrations. Lumeris’ newly introduced Tom AI platform is a perfect example, leveraging capabilities of 60+ LLMs depending on use case.
- Platforms and Channel Partners – building platforms that can plug in channel partners and key experiences. Q1 was brimming with good examples, including Eli Lilly bringing GLP-1 partners onto Lilly Direct and Teladoc expanding its Connected Care Program.
- Engaging Disruptors – embracing solutions that challenge the status quo. Rock Health highlights Labcorp’s participation in Teal Health’s $10M raise, which proactively aligned it with an in-home cervical cancer screening startup that’s disrupting traditional pap tests.
The Takeaway
Following a year of valuation corrections and down-rounds, digital health VCs are showing signs of life, but we’ll have to wait until Rock Health’s next report to see if the momentum can stand up to a trade war.
