How digital health VC funding evolved in 2024

Digital health has become a crucial sector of the healthcare industry, with companies leveraging technology for everything from lowering patients’ risk of developing heart disease to creating digital twins to improve clinical trials.

Researchers from digital health strategy group and venture fund Rock Health took a look back at where investors put their money in the digital health field in 2024. They found that venture capital (VC) firms are largely favoring early-stage startups and sticking to tried-and-true areas like artificial intelligence (AI). The report also found that major funds like Andreessen Horowitz’s a16z and General Catalyst are gaining more influence.

Numbers breakdown. In 2024, US-based digital health startups raised a total of $10.1 billion in 497 deals, according to Rock Health’s January 13 analysis. That’s slightly down from 2023 when startups raised $10.8 billion in 503 deals, and is almost the same amount they raised pre-pandemic in 2019 ($8.2 billion in 425 deals) when accounting for inflation.

The decrease in dollar amount can largely be attributed to the fact that investors are favoring smaller, early-stage deals as opposed to late-stage funding rounds that tend to have larger check amounts, according to the report.

Adriana Krasniansky, head of research at Rock Health’s advisory arm, told Healthcare Brew that investors favor newer startups because they have more room for new players to come in and gain equity in the company.

Where the money went. Most of 2024’s digital health funding (85%) went to popular areas including AI, disease treatment, and streamlining workflows, according to Rock Health’s analysis.

Of the startups focusing on disease treatments, the most funded were those focused on mental health, cardiovascular disease, oncology, obesity, reproductive health, and diabetes. 

Startups focused on AI got 37% of the year’s total digital health funding, accounting for 191 deals.

A tale of two startups. One of the most notable trends to come out of 2024 is how bifurcated the space is becoming, Krasniansky said.

On one hand, there are a lot of new small startups emerging and attracting investors. But at the same time, the digital health field has matured enough that it’s starting to see some large influential players raising huge funding rounds from big names like a16z and General Catalyst, according to Krasniansky.

For example, in February 2024, a16z participated in a $70 million Series B round for Ambience Healthcare, a company leveraging AI to streamline clinical notetaking. And General Catalyst has put millions into Commure, a company working to automate provider workflows. General Catalyst this month also co-funded health benefits startup Transcarent’s acquisition of another benefits company, Accolade, for $621 million.

The mega funds (or VC firms that have assets of at least $500 million) are becoming more influential across digital health, according to Rock Health’s report. A16z and General Catalyst were top investors in the sector last year.

This trend of mega funds becoming more influential in digital health follows a broader movement of capital being concentrated among a few major firms. PitchBook data found that 75% ($49 billion) of capital VC firms raised in 2024 came from 30 of the 391 VC firms in the US, and just nine firms made up 50% ($35 billion) of total capital raised.

Looking forward, early-stage startups are “going to have to learn how to play around these players and not just compete,” Krasniansky said. “That changes a lot of dynamics when it comes to how a startup thinks about exiting and how it thinks about its total addressable market.”