Health Tech Investment Finds Its Floor as AI and Value-Based Care Lead Next Wave
After a heated boom and a painful reset, health tech funding is stabilizing. Investors are pivoting to AI with clear ROI and platforms that enable value-based care, while exits skew toward strategic M&A and PE add-ons.
A market reset gives way to cautious momentum
In the Health Tech sector, Health tech investing is emerging from a hard reset. After the 2020–2021 surge, capital retreated in 2022 and 2023 as rates rose, public comps deflated, and late-stage valuations recalibrated. The result: leaner rounds, tighter diligence, and a renewed premium on profitability and evidence. While the exuberance is gone, the floor is higher than pre-pandemic levels and the pipeline of experienced repeat founders is deeper.
Analysts tracking the sector describe 2023 as a year of stabilization rather than freefall, with deal volume normalizing and dry powder still ample. Global digital health funding fell sharply from 2021’s peak but showed signs of bottoming out in 2023, according to industry reports. Early 2024 activity pointed to selective reopenings at the growth stage, particularly where unit economics are clear and enterprise demand is visible.
Where capital is concentrating: AI at the bedside, ops-tech in the back office
The term “AI” appears in a growing share of pitch decks, but capital is concentrating where the path to reimbursement or enterprise budgets is shortest. In clinical settings, imaging triage, ambient documentation, and decision support are gaining traction as buyers seek measurable productivity and safety gains. The regulatory signal is increasingly constructive: the FDA’s roster of AI/ML-enabled medical devices has grown steadily, giving investors more confidence in regulated software routes to market.
On the services and operations side, investment is flowing into care navigation, revenue-cycle automation, prior-authorization tools, and clinical trial enablement—areas where workflow savings can be quantified within a budgeting cycle. Virtual and hybrid care is also in a second act: the froth of undifferentiated telehealth has faded, replaced by specialty lines (behavioral health, musculoskeletal, cardiometabolic) tied to outcomes-based contracts. Utilization has settled at a durable baseline, and the long-term spend at risk remains large—US virtual care and near-virtual models could still put a meaningful share of ambulatory spend in play, McKinsey estimates.
...