What You Should Know
- The Rebound: According to the new State of Digital Health 2025 report from CB Insights, digital health funding rose 19% YoY to $22.3B in 2025, driven by fewer, larger checks—average deal size jumped 29% to $20.3M.
- The Consolidation: M&A activity surged 33% to 210 deals, ending a three-year decline. The market saw massive exits like Thermo Fisher’s $9.4B acquisition of Clario and Waystar’s $1.3B purchase of Iodine Software.
- The AI Moat: Artificial Intelligence was the defining theme. AI companies accounted for 24% of all M&A activity and represented 100% of the 14 new unicorns minted this year, including Abridge and Hippocratic AI.
The Return of the Mega-Round
The rebound was powered largely by the top end of the market. “Mega-rounds” (deals worth $100M+) captured 44% of total funding, totaling $9.8 billion across 48 deals.
Leading the pack was Oura, the Finnish smart ring maker, which secured a massive $900 million Series E in Q4. This deal signals a broader conviction in “proactive health monitoring,” a trend further validated by Function Health ($298M) and Neko Health ($260M) securing massive war chests for preventive clinics.
Other heavy hitters included Elon Musk’s Neuralink ($650M) and Google’s drug discovery spinout Isomorphic Labs ($600M), proving that deep tech and biology are still attracting the deepest pockets.
M&A: Buying the “AI Moat”
Perhaps the healthiest sign for the ecosystem is the return of liquidity. M&A activity surged 33% year-over-year, with 210 deals closing in 2025. Strategic acquirers are no longer just buying revenue; they are buying data and intelligence. AI companies accounted for nearly a quarter (24%) of all M&A activity.
- The Blockbuster: Thermo Fisher Scientific acquired clinical trials platform Clario for $9.4 billion, the largest exit of the year.
- The AI Play: Waystar acquired revenue cycle automation firm Iodine Software for $1.3 billion. Iodine processes data from 33% of U.S. inpatient discharges, giving Waystar an unassailable data advantage.
This trend suggests that in 2026, proprietary datasets will become the most valuable asset on a digital health balance sheet.
The Unicorn Stampede
If 2024 was a trickle, 2025 was a flood. The industry birthed 14 new unicorns (startups valued at $1B+), nearly triple the number from the previous year.
Every single one of them has AI at its core.
- Abridge ($2.8B): Leading the charge in generative AI for clinical documentation.
- Hippocratic AI ($1.6B): Building safety-focused LLMs for patient interaction.
- Chai Discovery ($1.3B): Using AI to accelerate drug development.
This uniformity confirms that “AI-enabled” is no longer a differentiator; it is the prerequisite for a billion-dollar valuation.
The “Middle Class” Boom
While early-stage deal share dropped to a record low of 59%, the “middle class” of startups is thriving. Mid-stage deals (Series B/C) reached an all-time high of 19% of deal volume. This shift is most pronounced in the U.S., where investors are prioritizing “proven traction” over “promising slides.” However, the report notes that Asia and Europe remain fertile ground for earlier bets, with Asia maintaining a healthy 62% share of early-stage deals.
For more information about the report, visit https://www.cbinsights.com/research/report/digital-health-trends-2025/
