5 Key Trends in Healthtech: Strategic Insights for Investors and Operators

The post-pandemic tailwinds have faded, capital has become more selective, and valuation exuberance has given way to rationalization. Yet for healthcare investors, PE sponsors, and corporate development teams, this is not a downturn to wait out—it’s a market to engage with more strategically than ever before.

Healthtech’s macro tailwinds remain intact: aging populations, chronic disease burden, cost pressures, workforce shortages, and the digitization of care delivery. But the capital markets’ shift toward operational discipline, validated models, and cash efficiency is filtering out noise and forcing clarity. The question is no longer “who raised the most”—it’s “who’s built something that works.”

This report highlights five defining trends that are shaping healthtech’s evolution in this new era. First, artificial intelligence is no longer a headline—it's the backbone. In 2024, AI-enabled startups captured 42% of digital health funding, embedding themselves into clinical workflows and infrastructure layers alike. From diagnostics to decision support, AI is transitioning from hype cycle to health system necessity.

Second, the capital stack is recalibrating. Only 37% of healthtech deals were up rounds last year, and undisclosed rounds are rising—a sign that many valuations are being reset behind closed doors. Still, the sector is proving resilient: companies that endured down rounds in 2023 saw 46% median valuation increases on their next raise. For dealmakers, the key isn’t to avoid volatility—it’s to price risk accurately and spot rebound trajectories.

Third, M&A activity is back—this time with sharper logic. Healthtech saw 200 M&A transactions in 2024, 69% of which were venture-to-venture. That’s not a sign of weakness; it’s a strategy. Sponsors and strategics alike are using consolidation to accelerate access to capabilities, clinical datasets, and payer relationships. In a tougher funding market, exit velocity comes from ecosystem integration—not just IPOs.

Fourth, Europe’s breakout moment is here. The continent posted a 27% YoY funding increase in digital health, the fastest globally, driven by supportive regulation and strong uptake in telehealth and AI. With U.S. dealflow normalizing, allocators are increasingly treating Europe not as a side bet—but as a core market.

And finally, strategic partnerships are cooling—at least in volume. With a 28% drop in H2 2024, partnerships are no longer table stakes. Instead, they’re being redefined as higher-stakes, revenue-aligned, and longer-cycle engagements. This changes how early-stage companies prove traction, and how corporate buyers prioritize relationships.

The message across these trends is clear: healthtech isn’t pulling back—it’s growing up. Business models are maturing, capital is recalibrating, and strategic clarity is replacing speculative heat. For those navigating this shift with clear eyes, the next cycle in healthtech may be less noisy—but far more investable.

Trend 1: AI-Powered Healthtech—From Hype to Core Infrastructure

In 2024, AI-driven healthtech solutions secured 42% of digital health funding, marking a significant shift from experimental applications to essential components in healthcare delivery. This surge is evident in the proliferation of AI-powered diagnostics, clinical decision support systems, and workflow optimization tools.

Notable investments include Eko Health's $41 million Series D funding to enhance AI-driven cardiac screening tools and Sword Health's valuation reaching $3 billion, underscoring investor confidence in AI's role in healthcare.

Strategic Takeaway: AI integration is transitioning from a competitive advantage to a standard expectation in healthtech. Investors should prioritize companies with proprietary data, regulatory clearances, and demonstrable clinical outcomes.

Trend 2: Valuation Reset Becomes the New Normal in Healthtech

Venture-stage healthcare is deep into a valuation recalibration. Across devices, diagnostics/tools, and even once-hot categories like healthtech, down or flat rounds are increasingly common, reflecting a tougher funding climate. In 2024, only 37% of healthtech deals were up rounds, down from 39% the year prior.

Interestingly, healthtech has been more stable than other sectors—up rounds only declined 2% YoY, compared to steeper drops in diagnostics and devices. But this may be misleading: many companies that raised large rounds in 2021–22 haven’t re-entered the market yet, leaving valuations artificially buoyed.

The rise of undisclosed rounds, particularly in biopharma and healthtech, signals that founders are increasingly keeping down-round terms quiet. Still, there’s resilience in the model: firms that survived a down round in 2023 saw a median 46% valuation rebound on their next raise.

Strategic Takeaway: Healthtech is holding up relatively well in a tough market—but don’t mistake silence for strength. Investors should diligence cash runways, not just last round valuations.

Trend 3: M&A Activity Intensifies Amidst Market Consolidation

The healthtech sector witnessed a significant uptick in M&A activity in 2024, with 200 transactions, 69% of which were venture-to-venture deals. This consolidation trend is driven by the need for scale, diversification, and integration of complementary technologies. 

Companies like Transcarent and Datavant are leveraging acquisitions to expand their service offerings and market reach, positioning themselves favorably for potential IPOs. 

Strategic Takeaway: M&A is becoming a critical strategy for growth and competitiveness in healthtech. Investors and operators should monitor consolidation trends and identify opportunities for strategic acquisitions or partnerships.

Trend 4: Global Expansion of Digital Health—Europe Leads in Growth

Europe emerged as the fastest-growing digital health market in 2024, achieving a 27% year-over-year increase in funding, totaling $4.8 billion. This growth is attributed to supportive regulatory environments, increased adoption of digital health solutions, and strategic investments in AI and telemedicine. 

In contrast, the Asia-Pacific region experienced a decline in funding, highlighting regional disparities in digital health investment and adoption.

Strategic Takeaway: Investors should consider regional dynamics when evaluating healthtech opportunities, with Europe presenting a robust environment for digital health innovation and investment.

Trend 5: Strategic Partnerships Retreat Amid Shifting Priorities

Digital health partnerships, once a core lever for go-to-market and co-development, saw a notable contraction in 2024. While over 3,100 partnerships were announced globally, deal volume fell 28% in H2 2024, marking the sharpest half-year decline since 2020.

The retreat signals shifting priorities: corporations are pulling back from exploratory collaborations and narrowing focus to proven, ROI-driven initiatives. Notably, 40% of 2024 partnerships concentrated in Health Management, Patient Solutions, and TechBio, aligning with funding flows and regulatory tailwinds in those categories.

Regional dynamics are also telling. North America remains dominant, but partnership activity is flattening. Europe and APAC contributed a greater share of new deals in 2024—particularly in precision health and virtual care.

Strategic Takeaway: The post-COVID boom in digital health alliances is waning. Investors and operators should treat partnerships as strategic differentiators, not volume signals, and prioritize alignment with commercialization timelines.

Conclusion: From Reset to Reinvention—Positioning for Healthtech’s Next Cycle

The turbulence in healthtech over the past two years has not been a crisis—it’s been a reset. The flush of pandemic-driven capital has faded, valuations have come down to earth, and the “growth at any cost” era has given way to measured execution. Yet beneath the noise, a more investable, durable healthtech ecosystem is emerging—one built on stronger fundamentals, clearer clinical validation, and a disciplined path to profitability.

The trends laid out in this report point to a sector in transition, not retreat. AI’s integration into care delivery is not a speculative story—it’s now embedded infrastructure. Firms leveraging AI for diagnostics, care triage, and patient engagement are attracting the lion’s share of funding because the returns are increasingly measurable. The next wave of winners will be defined not just by their algorithms, but by the quality of their proprietary data, their ability to navigate regulation, and their integration into provider workflows.

Valuations, meanwhile, have undergone necessary compression. Down and flat rounds are no longer taboo—they’re survival mechanics. The median 46% valuation rebound for companies that weathered a down round and came back to raise again is a crucial signal: in healthtech, long-term value is still on the table for disciplined operators. For investors, this is a moment to double down on diligence, recalibrate expectations, and identify companies that can grow through efficiency, not just capital burn.

On the M&A front, strategic consolidation is accelerating, not stalling. Whether it’s venture-backed roll-ups or sponsor-led vertical integration, the logic is clear: in a tighter capital environment, scale and adjacencies provide defensibility. The majority of healthtech M&A in 2024 was venture-to-venture—this isn’t a retreat from innovation, it’s a re-assembly of the stack. For sponsors and strategics, it’s an opportunity to acquire proven capabilities at recalibrated prices.

Geographically, the map is redrawing. Europe’s emergence as the fastest-growing digital health region is a reminder that global allocation strategies must evolve. With supportive regulation, rising public-private partnerships, and clear pathways to reimbursement, the EU market presents differentiated opportunities for scale—especially in AI, digital therapeutics, and remote care. Ignoring this shift would mean missing the next frontier of healthtech innovation.

Finally, partnerships—long a cornerstone of healthtech growth—are becoming more strategic, selective, and scrutinized. The 28% drop in H2 partnership activity shows a market that’s more focused on ROI and alignment than headline volume. This is not a negative trend; it’s a maturation. Operators must now prove commercial value before courting distribution or co-development partners. For investors, the health of a company’s partnership pipeline is now a litmus test for product-market fit and GTM discipline.

As healthtech enters 2025, the speculative excesses have burned off—and what’s left is a sector full of durable innovation, stronger operators, and smarter capital. For those willing to look past the noise, this is not a downturn. It’s a new starting line.

Sources & References

CB Insights. (2025). State of Digital Health 2024 Report. https://www.cbinsights.com/research/report/digital-health-trends-2024/ 

Galen Growth. (2025). 2024 Europe Digital Health Funding Propelled to Record Highs by Mega Deals and AI. https://www.galengrowth.com/2024-europe-digital-health-funding-propelled-to-record-highs-by-mega-deals-and-ai/ 

Galen Growth. (2025). Key Trends that Shaped Digital Health Innovation in 2024: A Galen Growth Analysis. https://www.galengrowth.com/key-trends-that-shaped-digital-health-innovation-in-2024-a-galen-growth-analysis/ 

Healthcare Brew. (2025). How digital health VC funding evolved in 2024. https://www.healthcare-brew.com/stories/2025/01/15/digital-health-vc-funding-evolved-2024 

Silicon Valley Bank. Healthcare Industry Trends 2024 Annual Report. https://www.svb.com/trends-insights/reports/healthcare-investments-and-exits/