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Diving briefs:
Venture capital investment across the healthcare sector slowed down in the first half of the year, but health technology fundraising was a bright spot, according to a report released Tuesday by Silicon Valley Bank. Although overall healthcare investments and trading numbers have declined, US and European health technology startups raised $8.2 billion in 358 deals, the highest recorded first half in the segment since early 2022. Performance was driven by increased funding for businesses using AI, particularly in management and back-office use cases. “From a VC perspective, these business models are very sustainable and have a clear path to profitability,” said Jackie Spencer, Head of Relations Management for Life Sciences and Healthcare Banking. SVB.
Dive Insights:
Overall, the first half of 2025 was a challenge in healthcare fundraising. According to SVB, sector funding is on track for the lowest capital that has been closed for over a decade.
Healthcare companies, including biopharma, health technology, medical devices, diagnostic and tools startups, are behind this year. US and European companies pushed $26.7 billion with 1,318 transactions earlier this year.
One of the challenges in investing and fundraising this year is macroeconomic uncertainty, including trends that have been taken over from last year, Spencer said.
“In 2024, we spoke about the interest rate environment and uncertainty regarding inflation and international conflicts, as the reason for the many drawbacks in funding and investment,” she said. “These things still exist, right? Interest rates are still high.”
Additionally, investors and startups have new financial questions. Tariffs could be a major financial blow to companies procuring non-US components, according to SVB, but cuts to the National Institutes of Health could hamper future innovation.
The health technology segment faces its own uncertainty, from the impact of Medicaid cuts in the recently passed tax and policy laws to increased health costs for Medicare benefits, to increased health costs for Medicare advantages, to increased health costs for Medicare advantages.
However, according to SVB, the segment has been doing well so far this year. Only 60% of health technology funding is related to companies using some form of AI, Spencer said.
AI back-office use cases have become a major focus of investment. According to SVB, tools aimed at reducing administrative tasks rather than clinical tasks accounted for 44% of AI funding in the first half.
“It has obvious use cases and clear cost savings that are ultimately shown to technology buyers,” she said. “Needless to say, the healthcare back office is very complicated and very old-fashioned. It's ripe for confusion.”
Health Tech has seen two first public releases this year, virtual musculoskeletal company Hinge Health and chronic care management company Omada Health after a long drying spell in digital health IPOs.
Still, the IPO market is likely to be “very selective,” Spencer said. Health technology companies that have been published as low-performance over the past decade still value sector performance and may be restraining new companies, according to the report.
For other exits, Health Technology has already notched several elevated mergers and acquisitions this year, spending as much as 2025 in private M&As as it has last three years.
Non-traditional buyers like venture companies with available cash are one path for M&A, Spencer said. For example, Waystar, a healthcare payments company released in 2024, recently signed a decisive agreement to purchase AI-backed revenue cycle management company iodine software.
Additionally, private equity companies are still actively purchasing and rolling up points solutions, Spencer added.
“We expect M&A to be a bit of a variation on the story,” she said.
