Last week, CB Insights released its Q3 2025 “State of Digital Health” report. The report shows how the healthtech sector is still in its transition phase.
Global funding and deal activity are hitting multi-year lows, signaling the post-peak correction in digital health isn’t quite done yet.
Here’s everything the report packs.
A tough quarter for funding
For the second quarter in a row, digital health funding has dropped.
According to the report, digital health companies raised $4.5 billion in Q3 2025, down 14% from the previous quarter. The number of deals also slipped 11% to 289, marking the lowest deal count in five years.
Even the big-money rounds are losing their shine. Mega-rounds ($100 Mn+) now account for just 34% of total funding, compared to nearly half in Q2. It’s another sign that investors are tightening their filters and prioritising validation over velocity.
Investors shift to maturity
CB Insights’ data shows a growing investor preference for mid- and late-stage companies. Mid-stage deals made up 20% of all activity, their highest share in five years.
The average investment is now much larger, too. $23 Mn for mid-stage and $47.5 Mn for late-stage rounds. Investors are concentrating capital into fewer, more proven companies.
Meanwhile, early-stage deals are slowing, reflecting investors’ growing caution about backing untested ideas.
M&A activity surges, driven by AI consolidation
The report signals an active consolidation across the market in Q3 ’25. M&A activity soared to 55 deals, the highest since early 2023.
There is a strong trend of companies growing through acquisitions, as established players look to deepen their AI capabilities and data assets.
In fact, three of the five largest deals involved AI-enabled companies, such as Iodine Software ($1.2 Bn) and Thirty Madison ($500 Mn).
The AI unicorn wave
Even amid a funding slowdown, AI continues to deliver standout success stories.
CB Insights tracked four new unicorns in Q3, UltraGreen.ai, Ambience, Enveda, and Thyme Care, doubling the previous quarter’s count.
Each of these companies represents a different corner of healthcare innovation, but with one unifying thread: AI is built into their core product.
- UltraGreen.ai (Singapore) is developing fluorescence-guided surgery tools that use AI to improve surgical precision in real time.
- Ambience (US), an AI-powered clinical documentation platform, is transforming how physicians capture and summarize patient interactions.
- Enveda (US) applies AI-driven discovery models to unlock new drugs from natural compounds.
- Thyme Care (US) uses data intelligence to personalize care coordination for cancer patients.
Together, they showcase how AI has evolved from a buzzword to a proven value driver, attracting investors even in a cautious market. CB Insights highlights this as a sign that the next generation of unicorns will be deeply data-native.
Regional shifts: Europe gains ground, US share slips
CB Insights notes a clear geographic rebalancing. Europe captured 27% of all global digital health deals, its largest share in four years, while the US share dropped to 49%, a multi-year low.
Still, the US continues to lead in deal value, with median deal sizes at $9.5 Mn compared to Europe’s $4.1 Mn, underscoring the region’s strength in scaling mature companies.
Medtech dominates public exits
When it comes to exits, medtech companies led the way. Three of the four IPOs this quarter came from this category, including HeartFlow ($1.5 Bn) and Carlsmed ($398 Mn).
CB Insights interprets this as a sign of strong investor appetite for medical device innovation despite broader market caution.
Where talent is growing fastest
Beyond funding, the report also analyzed headcount data, offering a glimpse of where digital health innovation is most active. The fastest-growing categories by hiring include:
- Healthcare developer toolkits (+52% YoY)
- Healthcare humanoid robotics (+30%)
- Healthy behavior rewards platforms (+27%)
These areas align with where funding and strategic interest are shifting. Toward AI, automation, and scalable patient engagement tools.
How CB Insights report compares with Galen Growth and Rock Health reports
The CB Insights report echoes trends seen in our recent analyses from Rock Health and Galen Growth, both of which also tracked a global funding pullback in Q3 2025.
- Rock Health reported that US funding hit a multi-year low. However, investors are doubling down on startups improving clinical efficiency, particularly AI tools reducing clinician burnout and digital mental health platforms with proven outcomes.
- Galen Growth similarly noted that the Asia-Pacific region’s funding numbers look strong on the surface, but that growth was driven mostly by a few large corporate deals, not early-stage innovation.
Together, the three reports tell a consistent story. The digital health market is undergoing a correction, not a collapse. It’s pushing capital toward validated models and measurable impact.
The takeaway from CB Insights
CB Insights concludes that digital health’s funding reset is “well underway.” The market has moved past the stage of speculative bets and into a new phase defined by strategic capital and AI-driven consolidation.
To win in this environment, digital health companies need to prove real-world traction, clinical evidence, and operational efficiency, or risk being left behind.
-By Alkama Sohail and the AHT Team
