The digital-health sector is facing a pivotal inflection point in 2025, as many startups that thrived during the funding boom now confront dwindling investor enthusiasm and a sharp shift toward AI-driven businesses. At the recent HLTH Conference in Las Vegas, investment bankers from firms like Baird and JPMorgan described a “come to Jesus moment” for healthcare tech companies: merge with competitors or risk collapse.
Startups that once grew rapidly on virtual-care or consumer-health models are now struggling under the weight of high valuations from 2021, rising debt, and a scarcity of fresh capital. Some are turning to mergers as a survival strategy—however, many of these deals are occurring at steep valuation markdowns. For example, one virtual-care company that raised at a $1 billion valuation is now being acquired for roughly half that amount.
Meanwhile, there is a stark contrast within health-tech: while many “old-school” digital-care companies stumble, startups focused on AI for hospital systems, revenue management, and clinical workflows are seeing surging interest. Investors are funneling money toward platforms that promise high-impact AI applications in healthcare operations, rather than purely consumer-facing tools. This bifurcation is reshaping where value is perceived and created in the industry.
The implication for founders, investors and healthcare executives is clear: mere growth in users or visits is no longer enough. Companies must demonstrate sustainable economics, differentiated technology (especially around AI), and strategic scale—often achieved via consolidation. The market is no longer forgiving of standalone bets lacking defensible moats. In short: adapt or exit.
