Q3 2025 market overview: Signals out of sync
Originally published October 6, 2025.
Updated October 15, 2025.
Digital health funding in Q3 2025 looked steady on the surface: $3.5B raised across 107 deals, bringing the year-to-date total to $9.9B across 351 deals—tracking ahead of last year’s pace. Capital is flowing, the IPO window has edged open, and mega deals continue to land. But what once looked like temporary detours—unlabeled funding rounds and high deal size variability—have proven more enduring, settling in as standing features of today’s market.
These dynamics are unfolding against compounding industry pressures: margin strain for health systems, new policy priorities, and AI’s shift from pilots to embedded infrastructure forcing tougher questions about integration, governance, and ROI. In this environment, every move feels weightier, and whether through bigger swings or smaller more frequent bets, startups, investors, and enterprises alike are under pressure to make their decisions count.
Against this backdrop, workflows and infrastructure stood out, attracting several of the quarter’s largest financings and partnerships. While not the whole story, healthcare’s “operating layer” offers a sharp lens, showing where digital health innovation is gaining traction and where competitive dynamics between startups and incumbents are most visible. In this piece, we take stock of Q3’s steady surface belying choppier undercurrents, and trace how funding rounds, mega deals, and the workflow race are redrawing the market map.
Capital concentration
In Q3 2025, the U.S. digital health sector logged $3.5B in venture funding across 107 deals. This brings year-to-date funding to $9.9B across 351 deals, surpassing 2024’s total through Q3 ($8.4B).
Deal volume slowed this quarter (107, down from 120 in Q2 and 124 in Q1 2025), but fewer financings yielded larger checks. The average deal size this year reached $28.1M, up from $20.4M in 2024. Mega deals have been a defining force. Nineteen $100M+ financings have now closed in 2025, already surpassing the full-year 2024 count with a quarter still to go. Strive Health ($550M)1, Judi Health ($400M), Ambience ($243M), OpenEvidence ($210M), Aidoc ($150M), Eight Sleep ($100M), and Inspiren ($100M) all secured $100M+ rounds in Q3. Together, these outsized rounds account for 39% of total funding, contributing a whopping $3.8B of 2025’s $9.9B thus far (with Oura’s anticipated $875M Series E still on deck).
This concentration bears significant impact upon the overall market, by funneling dollars into a narrower set of companies and reinforcing the dominance of familiar investors. The Goliath mega funds2 we highlighted in 2024 continue to show up in many of these rounds. Nearly 80% of mega deals this year had a mega fund on the term sheet—with Andreessen, Kleiner Perkins, and General Catalyst leading the pack. This concentration is reshaping what scale and maturity look like, with mega deals pulling regular benchmarks off course and leaving startups and investors to navigate a market where the usual signals no longer line up.
Blurring benchmarks
A few dynamics are adding to the haze: unlabeled raises, a thinning Series B pipeline, and variable check sizes are all making traditional stage-based benchmarks more opaque.
Losing the label
We first flagged the rise of unlabeled financings in H1 2023—a particularly complex and challenging moment in capital markets. Though public markets were on a bumpy upswing from the trough of late 2022, private capital markets were still resetting after the heady days of the pandemic peak. In 2023, unlabeled deals looked (to us, at least) like a temporary feature of a market in transition—spiking when startups with pandemic-era valuations needed capital but didn’t yet meet benchmarks for their next labeled raise. In mid-2024, we noted that 40% of fundraises were unlabeled bridge or extension rounds, down from a peak of 55% in Q4 2023, and we suggested the dip could mark a return to normal fundraising cadence. But we were wrong.
That return to normal hasn’t materialized. Through Q3 2025, 35% of 2025’s financings remain unlabeled—slightly below the 44% share in 2023 and close to the 37% in 2024, but still far above the single-digit levels that defined the pre-2021 market. What once looked like a stopgap has now become routine. For founders, unlabeled rounds offer a pragmatic way to extend runway. The tradeoff is less clarity in the market: these raises weaken the benchmarks investors and founders rely on to underwrite growth and complicate how enterprises assess which startups are ready to partner at scale. Two companies announcing unlabeled raises may be in very different positions—one extending runway on shaky fundamentals, another preparing for strong growth—yet they look the same from the outside. The effect is a noisier pipeline that’s harder to read.
The “murky middle”
Even when rounds are labeled, the path through the middle is murky. Series B deal flow has thinned, with just 30 raises through Q3 2025, compared to an average of 63 annually over the past three years. And so far this year Series B deals make up a smaller portion of financings, just 9% (30 deals), down slightly from 13% (64 deals) last year. Meanwhile, every other stage has either held steady or gained share. The shift is subtle, but it comes with a sharp rise in average check size: Series B rounds averaged $51.6M through Q3 2025, up from $29.3M in 2024—the steepest increase compared to any other stage.
While fewer startups are reaching Series B, those that do are stretching the range of what a B round can be. Series B deal sizes spanned $11M–$210M ($199M)—capped by OpenEvidence’s raise—the widest spread and largest check we’ve seen at this stage since 2021. The middle of the market includes both modest checks and breakout raises, as potential paths to growth increasingly diverge.
Series B has traditionally been the checkpoint where startups show they can convert early traction into real growth. Take agentic AI startup Assort Health, which raised a $76M Series B to expand patient-communication automation across more specialties—just five months after its $22M Series A. But the road to mid-stage rounds isn’t always so clear (or rapid). The Series B signals outlined above—fewer, more variable deals—indicate a market still investing in growth but with greater selectivity about who earns that backing. Paired with the confounding factor of unlabeled rounds, the financing path forward for many companies has become less straightforward, leaving investors and buyers with murkier cues about who’s ready to scale.3
“There’s a set of companies raising quickly at high valuations—and then there’s everyone else. For those navigating the tougher path, the playbook is to find the moat and double down on clear differentiators. We’ve seen companies break through when they hit a meaningful milestone—like landing a major distribution deal, getting FDA clearance, or proving commercial traction—that becomes the hook for the next round.”
– Becca Shmukler, Partner, Million Lives Fund
Winning the workflow
If the usual funding signals feel blurry, one theme has become clearer: activity is clustering around the workflows and infrastructure that power healthcare delivery. In H1 2025, we pointed to breakout players like Abridge and OpenEvidence as proof points of digital health’s transition from promise to practice. By Q3, the sprint to launch AI scribes has widened into a contest over who will own the broader workflow stack. Clinical workflow and non-clinical workflow are now 2025’s two most-funded value propositions, together capturing 42% of sector funding. The gap is striking: a $1.3B lead separates these top two funded value propositions from the rest of the field, putting workflow tools in a league of their own.
Startups are heading horizontal
A growing group of startups is using financings, partnerships, and acquisitions to push into adjacent workflows. Abridge’s partnership with Highmark Health extends prior authorization into visit notes, while TransformativeMed’s collaboration with Vantiq brings handoff, discharge, and decision-support functions directly into the workflow platform. On the M&A side, deal volume is up 37% from last year, with 166 acquisitions logged so far through Q3 (already topping 2024’s 121 total). Many of these deals are startups buying other startups to build horizontal breadth. Judi Health’s (formerly Capital Rx) acquisition of care navigator Amino Health4 and subsequent raise, for example, pushed the company further into patient navigation and benefits access, while Smarter Technologies’ acquisition of Pieces Technology enabled the startup to integrate visit note automation workflows. And at a category level, EHR and clinical workflow assets now represent the largest share of 2025 deals (16%, up from 11% in 2024)—evidence of how central workflow expansion has become. These moves turn point solutions into platforms, but breadth alone doesn’t guarantee staying power. Without proof of impact, platforms risk being seen as feature bundles that incumbents can easily replicate. To stand out, some startups are publishing ROI data, forming joint ventures with health systems, or tailoring their models for specific specialties—moves that signal traction before incumbents reset the baseline.
“We’ll continue to see consolidation and powerful platforms emerge, but there’s also room for specialized solutions in areas like specialty care that demand very specific technology. In terms of where things are headed, it’s going to be both directions. It’s not either-or—it’s both greater breadth and depth.”
– Julie Wroblewski, Co-Founder and Managing Partner, Magnify Ventures, speaking at Rock Health Summit 2025
Incumbents are doubling down
Incumbents are accelerating that reset by folding once-differentiating workflows into core systems. With Art, Penny, and Emmie, Epic integrated clinician support, revenue cycle automation, and patient-facing AI into its EHR. Oracle is moving in parallel with an AI-enabled patient portal tied to its EHR and revenue cycle suite, while Innovaccer’s launch of Gravity signals a bid to play an AI-first conductor, routing models, data, and workflows onto a common platform instead of leaving health systems to wire each point solution on their own. Meanwhile, athenahealth’s launch of ambient tools for mid-sized providers reinforces the same playbook. The result is a reset: what was novel quickly becomes standard, and incumbents’ data advantage compounds with every use. But layering more into already complex systems can frustrate users and slow iteration, ultimately leaving room for startups that win on clearer ROI or sharper focus on overlooked workflows.
From noise to new markers
What looks like steadiness is really a market splitting in two. Mega deals are keeping the headline numbers up, but the middle is thinning and more startups are falling off the map. The few that break through are raising faster and bigger than ever, but the bar has shifted—proof of scale, resilience, and trust is expected up front. As 2025 enters its final quarter, the story is not whether digital health is attracting capital (it is), but which companies can demonstrate the durability and impact needed to advance in a market where every move carries more weight.
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Footnotes
- Strive Health recorded a mix of Series D ($300M) and Debt ($250M) funding in 2025.
- Venture capital firms with at least $500M to deploy are often referred to as “mega funds.”
- A prior version of this article mentioned that startups are taking longer to get to Series B funding rounds than in prior years. We have amended the article to reflect that in 2025, fewer startups are raising Series B deals than typical in prior years, and with more variable check sizes.
- Amino Health is a Rock Health portfolio company.