Digital Health Funding Shifts: Mega-Rounds & The Rise of unlabeled Raises in 2025
The digital health landscape is undergoing a significant funding evolution. While overall funding rounds are down compared to earlier in the year,the size of those rounds is dramatically increasing.This trend, coupled with a growing number of ”unlabeled” funding events, is reshaping how investors and healthcare enterprises evaluate and partner with digital health startups. Here’s a deep dive into the key shifts observed in the first three quarters of 2025, based on recent research from Rock Health.
The Rise of Mega-Deals & increasing Average Deal Size
Digital health companies are securing larger investments. The average deal size has climbed to $28.1 million in 2025, a notable increase from $20.4 million in 2024.
This surge is largely driven by “mega-rounds” – funding rounds exceeding $100 million. So far this year, 19 such rounds have been completed, already surpassing the total for 2024. Notable examples include:
* Ambience Healthcare: $243 million Series C to scale its AI-powered documentation platform.
* Judi Health (formerly Capital Rx): $400 million to accelerate its AI-driven health benefits platform.
* OpenEvidence: $210 million at a $3.5 billion valuation for its AI medical search tool.
These mega-deals now represent nearly 40% of total digital health funding, totaling $3.8 billion in 2025. This concentration of capital signals investor confidence in mature, high-potential companies.
The Persistent Trend of “Unlabeled” Funding Rounds
A curious trend that emerged during the pandemic continues to shape the fundraising landscape: unlabeled raises. These are funding rounds completed without a conventional Series A or B designation.
Initially, these were seen as a temporary fix for companies with high valuations needing capital but not yet hitting traditional milestone markers. However, unlabeled raises remain prevalent.
* 35% of funding rounds in 2025 have been unlabeled. While down from 44% in 2023, this is substantially higher then pre-2021 levels.
This lack of clear labeling creates ambiguity. Two companies announcing unlabeled raises might potentially be in vastly different positions – one extending runway due to fundamental challenges, the other poised for rapid growth. This makes it harder for both investors and potential enterprise partners to accurately assess a startup’s readiness for scale.
The Shrinking Middle Market: Fewer Series B Rounds
The challenges aren’t limited to labeling. Companies are also finding it harder to secure Series B funding.
* Only 30 Series B rounds were recorded through Q3 2025. This is a sharp decline compared to over 60 each year for the past four years.
Combined with the rise of unlabeled raises, this “lost middle” further complicates the landscape. It creates uncertainty about which companies are truly ready to scale and hinders informed investment decisions.
Where is the Money Flowing? Focus on Workflow solutions
Funding is increasingly concentrated in specific areas. Digital health tools focused on improving clinical and non-clinical workflows are attracting the most investment.
* 42% of sector funding in 2025 has gone to workflow solutions. This includes AI-powered documentation tools, revenue cycle management products, and similar offerings.
This focus on augmenting existing healthcare processes is driving consolidation. Startups are increasingly looking to partnerships and acquisitions to expand their capabilities.
Increased M&A Activity
The desire to quickly add functionality is fueling a surge in mergers and acquisitions (M&A).
* M&A deal volume is up 37% from last year. 166 acquisitions have been completed so far in 2025, compared to 121 for all of 2024.
This trend suggests a strategic shift towards building comprehensive solutions rather than relying solely on organic growth.
Implications for Investors, Startups, and Healthcare Enterprises
These shifts have significant implications for all stakeholders:
* Investors: Due diligence must be more rigorous, focusing on underlying fundamentals rather than relying on traditional round designations.
* startups: Clear communication of milestones and a well-defined path to scale are crucial, especially when pursuing unlabeled raises.
* **Healthcare
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