Health Tech startups: from the post-pandemic spike to AI disruption

The data visualized here captures this dynamic journey, charting the annual number of health tech startup deals in the U.S. from 2011 through 2024. 

What began as a cautious trickle of deals in the early 2010s evolved into a vibrant, competitive market, catalyzed further by external pressures such as the COVID-19 pandemic and the parallel acceleration of venture capital interest in healthcare innovation. For healthcare leaders and investors alike, this trajectory underscores a pivotal era of both opportunity and caution: while the sector remains fertile ground for disruptive growth, the recent normalization in deal flow signals a more selective and strategic investment climate.

The dramatic spike in 2021, peaking at an astonishing 740 deals, reflects a moment of unprecedented enthusiasm as telemedicine, remote patient monitoring, AI-driven diagnostics, and consumer health platforms drew accelerated funding. Yet, as with many hyper-growth cycles, recalibration soon followed. 

The subsequent decline in deal volume, stabilizing in the high 400s as of 2024, suggests a maturing market where investor discernment is sharpening, and operational excellence is taking precedence over pure hype. For decision-makers in healthcare delivery, investment, and policy, these patterns are more than statistics, they are a strategic roadmap. Understanding this evolution is crucial for identifying which health tech innovations will not only capture capital but also achieve long-term impact across the healthcare continuum.

Key takeaways from chart:

• Steady Early Growth (2011–2015):
  From 94 deals in 2011 to 326 in 2015, the sector experienced consistent year-over-year growth, reflecting early-stage digital health adoption and growing investor confidence.

• Acceleration Phase (2016–2019):
  Deal volume continued to rise steadily, reaching 425 in 2019. This period marked broader integration of health tech solutions within clinical workflows and the increasing role of data analytics in healthcare delivery.

• Pandemic-Driven Surge (2020–2021):
  The onset of COVID-19 catalyzed a dramatic leap, from 475 deals in 2020 to a peak of 740 in 2021. Urgent demand for virtual care and digital health tools drove record-breaking investment levels.

• Post-Pandemic Correction (2022–2024):
  Following the 2021 high, deal activity cooled to 594 in 2022, 503 in 2023, and 497 in 2024. This decline signals market recalibration as investors emphasizes sustainable business models over speculative growth.

• Signs of Market Stabilization (2023–2024):
  The marginal decline from 503 to 497 deals suggests the sector is finding its equilibrium. The stabilization points to a more disciplined investment environment, with capital focusing on proven solutions and scalable technologies.

• Implications for Stakeholders:
  The maturation of the health tech space necessitates sharper diligence. Strategic investors and healthcare executives should prioritize startups with validated outcomes, strong regulatory pathways, and interoperability with existing systems.

Measured Momentum: The Resilient Structure of Health Tech Funding

While the health tech sector has experienced fluctuations in overall deal volume, the composition of deal types has remained remarkably steady over the past five years, a signal of underlying market resilience. The accompanying data offers a closer look at the median deal sizes for digital health investments in the U.S., segmented by stage (Series A, B, C, and D+). What immediately stands out is the sharp spike in 2021, when median deal sizes soared to an unprecedented $224 million. Yet beyond that dramatic headline figure lies a subtler, more strategic insight: despite variations in overall capital intensity, the proportional distribution of funding across different stages of company maturity has held firm.

This consistency reflects a market that, while reacting to macroeconomic and public health pressures, has maintained a clear-eyed approach to nurturing companies from early-stage innovation through to later-stage scale.

For executives and investors navigating this environment, the steadiness across deal stages is an encouraging sign of capital discipline and thoughtful portfolio construction. The 2021 surge, while extraordinary, appears to have been an outlier rather than a fundamental shift in capital allocation strategy. 

Since then, median deal sizes have moderated, yet capital continues to flow proportionately across Series A through D+ rounds, signaling sustained investor confidence in both emerging and scaling digital health ventures. For healthcare operators and strategics looking to partner, invest, or acquire, this pattern underscores the importance of long-term engagement across the innovation lifecycle—not just chasing headline-grabbing later-stage deals but also recognizing the ongoing vitality at the foundational stages of health tech growth.

Key insights from chart:

• 2021: The Outlier Year
  Median deal size peaked dramatically at $224M in 2021, reflecting pandemic-driven urgency and investor appetite for scaling digital health solutions quickly.

• Consistency Across Stages
  Despite fluctuations in total median deal size, the proportional spread of funding across Series A, B, C, and D+ rounds remained steady throughout the 2020–2024 period.

• Series D+ Dominance, But Not Disproportionate
  Series D+ rounds consistently commanded the largest median deal sizes across all years, peaking at $105M in 2021 and maintaining robust levels thereafter.

• Series B & C Stability
  Series B and Series C deals showed relative steadiness post-2021, with Series B hovering around $29M–30M and Series C stabilizing in the $50M–73M range.

• Post-Surge Normalization (2022–2024):
  After 2021’s peak, median deal sizes gradually normalized: $167M in 2022, $163M in 2023, and $149M in 2024, signaling a more measured, sustainable funding environment.

• Early-Stage Resilience (Series A):
  Series A deal sizes held a steady course, even increasing slightly from $11M in 2020 to $14M by 2024, reflecting continued investor commitment to seed early innovation.

• Strategic Implication:
  The consistent deal stage distribution suggests that health tech investors are maintaining balanced portfolios. Strategic buyers and operators should continue monitoring opportunities across all stages, as value creation is occurring at both ends of the maturity spectrum.

Quiet Climb: AI’s Growing Share in Health Tech Capital

Artificial intelligence is no longer a side note in healthcare innovation, it’s rapidly becoming a central pillar of health tech investment strategies. The data here, tracking AI’s share of total U.S. digital health funding from 2017 to 2024, reveals a compelling trend: while the absolute volume of AI-focused investment has remained relatively steady in recent years, the proportion of total digital health funding allocated to AI solutions has climbed steadily upward. This signals not just enduring interest but increasing prioritization. 

In a capital environment that has grown more selective, AI is capturing a larger slice of the funding pie, reflecting investor belief in its transformative potential across diagnostics, operational efficiencies, and personalized patient engagement.

For healthcare executives and capital allocators, this shift is more than a passing trend—it represents a meaningful recalibration of where value is being placed in the innovation pipeline. Even as broader digital health investment volumes fluctuate, AI continues to attract a disproportionate share of attention and dollars. 

This trajectory underscores AI’s evolution from a promising enabler to a core competency for future-ready healthcare enterprises. Investors are doubling down not necessarily because there’s more overall capital in play, but because AI's applicability across multiple healthcare verticals, payer systems, providers, life sciences, and patient services, positions it as a foundational asset in modern healthcare strategy.

Key takeaways for investors:

• Steady Funding Volume, Growing Share:
  AI funding volume (in billions) has remained relatively stable across recent years, yet its share of total digital health funding continues to climb.

• AI's Rising Share of Wallet:
  The percentage of total health tech funding allocated to AI solutions has shown a consistent upward trajectory, indicating growing strategic importance.

• 2021 Inflection Point:
  Around 2021, as overall health tech funding peaked, AI’s share began its clear rise, even as the broader market began to normalize in subsequent years.

• Investor Prioritization of AI:
  The growing percentage points to a sharpening investor focus on AI, especially as use cases mature from theoretical to applied across clinical and operational workflows.

• AI as a Strategic Bet:
  Even in an environment of more cautious capital deployment, AI remains a favored category, attracting sustained interest across early- and late-stage deals.

• Implications for Operators and Investors:
  Healthcare executives and funders should view AI not as a speculative niche but as an increasingly mainstream component of their innovation and investment strategies.

• Signal for Market Maturity:
  The data reflects a maturing AI market in healthcare, where capital is concentrated on scaling proven applications rather than exploratory pilots.

Top health tech startups over the years

The trajectory of health tech over the past decade has not just been about the volume of startups or deal flow, it has been about the rise of category leaders, companies that began as scrappy startups and have now cemented their positions at the center of the healthcare ecosystem. 

This snapshot of the top 10 health tech startups by total funding tells a powerful story of scale and sectoral dominance. Names like Devoted Health and Radiology Partners, each commanding over $2 billion in total funding, highlight how digital-first care delivery, data-driven diagnostics, and consumer-centric models have attracted massive capital commitments. These are no longer just promising ventures; they are market-shaping players, defining the new operating model for healthcare in the U.S.

For healthcare executives and investors, this league table is both a reflection of past strategic bets and a roadmap for future opportunities. These companies have crossed the threshold from startup to scale-up to category leader, often expanding beyond their original value propositions into broader platforms serving payers, providers, and patients alike. What began as innovative point solutions have matured into end-to-end health services ecosystems, increasingly integrated with traditional healthcare infrastructure. 

Recognizing these frontrunners is crucial, not just for understanding where capital has flowed, but for anticipating who will set the pace in next-generation care models, data interoperability, and patient experience over the coming years.

Key takeaways from chart:

• Market Leaders Have Emerged:
  Devoted Health ($2.26B) and Radiology Partners ($2.07B) lead the field by a wide margin, reflecting strong market validation and aggressive scaling strategies.

• High Concentration of Capital:
  The top two players alone account for nearly half of the total funding among the top ten, illustrating a capital concentration trend toward proven, scalable models.

• Digital-First Care Dominance:
  Companies like Ro ($1.03B), Lyra ($906M), and Cityblock ($891M) show that direct-to-consumer and behavioral health models continue to attract substantial capital.

• Platform Expansion Play:
  Many top-funded startups are evolving beyond their initial niche—Devoted Health expanding from Medicare Advantage into broader senior services, or Ro moving from men’s health into pharmacy and diagnostics.

• Enterprise Solutions & Infrastructure:
  Olive ($902M) and Radiology Partners demonstrate investor appetite for operational and clinical infrastructure plays, supporting health systems with AI and automation.

• Behavioral Health Spotlight:
  Lyra and Hinge Health highlight sustained interest in mental and musculoskeletal health, sectors that align with employer benefits and chronic condition management trends.

• Signal for Future M&A and Partnerships:
  These well-capitalized leaders are not only growth stories but also likely acquirers and critical partners for health systems, payers, and life sciences companies.

• Strategic Insight for Investors:
  Future capital deployment should monitor these leaders' moves into adjacencies—vertical expansion and ecosystem integration are likely paths to further scale.

Health Tech Unicorns: A Market Matures, Momentum Moderates

The unicorn boom in health tech has been one of the defining narratives of the past few years, and this data tells the story of both its acceleration and subsequent deceleration. From Q1 2020 to Q2 2023, the total number of health tech unicorns surged from 37 to 98—more than doubling in just over three years. The bulk of this expansion was concentrated in the frenzied quarters of 2021, when a perfect storm of pandemic-driven urgency, investor optimism, and fast-tracked digital health adoption propelled a record number of startups across the billion-dollar valuation threshold. At its peak in Q1 2021, the market welcomed an astonishing 16 new unicorns in a single quarter, a pace previously unseen in the healthcare sector.

However, as the chart also illustrates, that period of hypergrowth has given way to a more sobering reality. New unicorn creation has slowed dramatically, with only one new entrant recorded in Q2 2023. Yet, importantly, the total number of unicorns has continued to rise, albeit at a decelerating pace. For healthcare executives and investors, this reflects a broader market normalization. The emphasis is shifting from valuation hype to sustainable growth and profitability. The earlier cohort of unicorns now carries the weight of proving that these lofty valuations can translate into enduring value. For stakeholders, the lesson is clear: the era of rapid unicorn proliferation has matured into a phase of operational scrutiny and strategic scaling.

Key takeaway for investors:

• Rapid Unicorn Expansion (2020–2022):
  Health tech unicorn count grew from 37 in Q1 2020 to 90 by Q2 2022, reflecting unprecedented market enthusiasm and acceleration of digital health adoption.

• 2021: The Breakout Year:
  Q1 2021 saw 16 new health tech unicorns—a record quarterly high—catalyzed by pandemic pressures and fast-moving capital markets.

• Deceleration in New Unicorn Creation (2022–2023):
  After the 2021 peak, the pace of new unicorn creation fell sharply, with just 1 new unicorn in Q2 2023, signaling investor caution and more rigorous valuation discipline.

• Total Unicorn Growth Continues, But Slows:
  Even as new additions dwindle, the cumulative total of health tech unicorns has continued to inch upward, reaching 98 by mid-2023.

• Shift in Market Dynamics:
  Investors are increasingly prioritizing scale, profitability, and market leadership over fast valuations, reshaping expectations for late-stage startups.

• Signal to Operators & Investors:
  Existing unicorns must now validate their valuations through tangible outcomes and efficient growth, as the capital environment demands clearer paths to return.

• Implications for Market Strategy:
  Future unicorn emergence is likely to be more measured, favoring startups with proven unit economics, regulatory pathways, and integration with legacy healthcare systems.

Sources & References

Statista. Digital health startup deals. https://www.statista.com/statistics/1290778/digital-health-start-up-deals-in-the-us/

Fierce Healthcare. Health tech Startups funding. https://www.fiercehealthcare.com/special-reports/fastest-growing-health-tech-startups-funding-look-2024-and-past-decade

Signal Fire. Startups transforming healthcare. https://www.signalfire.com/blog/20-most-funded-startups-transforming-healthcare

Vention. Healthcare Unicorns. https://ventionteams.com/blog/healthcare-unicorns

BVP. State of Health Tech. https://www.bvp.com/atlas/state-of-health-tech-2024