What's Happening?
Digital health companies are increasingly turning to unlabeled funding rounds as they navigate a challenging market environment, according to Rock Health's latest analysis. In the third quarter of 2025, digital health firms raised $3.5 billion across 107 deals, with 19 rounds exceeding $100 million. Despite surpassing 2024's funding levels, the market shows signs of uncertainty, with a decrease in series B deals and longer timelines between funding rounds. Unlabeled rounds have become a common strategy for companies that have not met targets for their next raise, bridging gaps in funding. The prevalence of these rounds has decreased from 55% in Q4 2024 to 35% in 2025, yet they remain a significant part of the industry's future.
Why It's Important?
The reliance on unlabeled funding rounds highlights the challenges faced by digital health companies in securing traditional investment. This trend could impact the transparency of company performance, making it difficult for investors and health systems to assess the health of these businesses. The extended timeline between series A and B rounds suggests a tougher environment for startups to achieve growth milestones. The decrease in series B deals indicates potential difficulties for mid-market companies, which traditionally use these rounds to scale. This shift may lead to a consolidation in the industry, with larger incumbents like Epic and Oracle doubling down on their offerings, potentially stifling innovation from smaller startups.
What's Next?
As the market continues to evolve, digital health companies may need to adapt their strategies to secure funding and achieve growth. The focus may shift towards achieving significant milestones, such as major distribution deals or FDA clearance, to attract investment. Companies that can demonstrate clear differentiators and commercial traction may have better chances of securing future funding. The industry may also see increased partnerships and acquisitions as companies seek to expand their offerings and capture more of the workflow process. The role of incumbents in providing startup-like products could further complicate the landscape, potentially leading to increased competition and innovation.
Beyond the Headlines
The trend towards unlabeled funding rounds raises questions about the long-term sustainability of digital health startups. As these rounds become routine, the industry may face challenges in maintaining investor confidence and ensuring transparency. The complexity of integrating new solutions into existing systems could frustrate users and slow down innovation. This environment may create opportunities for startups that can offer clear ROI and focus on overlooked workflows, potentially reshaping the competitive landscape.
