Digital health has developed rapidly within the last couple of years. Startups and large technology firms are developing apps, devices, and platforms that aim to enable people to manage their health. More people are increasingly using blood sugar monitoring, online therapy, and other tools. With this rapid development, the investor mentality has altered as well. There is now a mass of health tech organizations that are planning an IPO. Meanwhile, there is the trend of larger companies acquiring smaller ones in the digital health arena. These new IPOs and an increase in mergers are defining the future of the industry.
IPO Interest is Still Strong, but More Careful
Early into the pandemic, digital health companies had raised billions. The number of digital health companies initiated public flotation in the US in 2021 amounted to 23. They, in aggregate, raised approximately 7 billion dollars. However, until 2022, things were slower. There are also companies whose stocks depreciated following the initial public offering. Investors were more hesitant.
Nevertheless, the IPOs are not completely dead. Other digital health firms are yet to undertake IPOs. They are waiting only to have a better timing. Promising rapid growth is no longer enough to guarantee that investors are dripping with good profits. A firm that is capable of demonstrating consistent revenue, evident user expansion, and effective management will have the opportunity for a successful IPO.
CB Insights reported that digital health funding decreased in 2023 to 15.3 billion US dollars and 29.1 billion US dollars in 2021. Yet the situation concerning IPO activity is expected to change in 2025 when the market situation will become favorable. Mental health apps, AI-powered diagnosis tools, and virtual care services are looking forward to even more IPOs, analysts predict.
Stronger Focus on Mergers and Acquisitions
The market is being shaped by mergers and acquisition (M&A) besides the IPOs. A large number of the major healthcare firms are acquiring smaller startups. This enables them to expand quicker and to cover more users.
That is, in 2022, CVS acquired Signify Health to the tune of 8 billion dollars. Amazon bought One Medical for nearly $4 billion. These deals show that large players want to build complete digital health platforms. By adding new tools and services, they can serve patients better and also stay ahead of their competition.
According to Rock Health, digital health M&A activity increased by 25% in 2023 compared to 2022. Experts say this trend will continue in the next few years. Companies that offer remote care, patient data tools, or AI systems are the most attractive targets.
Companies Must Prove Their Worth
The days of fast funding with no questions asked are over. Now, investors want to see results. Companies hoping for a strong IPO or a buyout must show they are stable, useful, and growing.
They must also show that they help patients and make care easier. For example, a company that helps doctors find patient data faster can lower mistakes and save time. If the company can prove this with numbers, it will have better chances of success.
A 2024 survey from Deloitte showed that 78% of digital health investors now ask for clear data on cost savings and patient outcomes before funding a company. That number was only 52% in 2021. So the shift is real.
Mental Health and AI Are Key Areas of Growth
Some parts of digital health are growing faster than others. Mental health is a top one. More people now use apps for therapy, stress support, and group counseling. In 2023, mental health startups got over $4 billion in funding.
AI in health is also growing. Some tools now help doctors read scans or predict diseases. Others help users track their health or give alerts for risky symptoms.
Companies in these areas are more likely to get investor interest. They are also more likely to be bought or go public in the next few years. Startups that combine AI and care tools for mental health may be the most in-demand.
Regulations Are Getting Stricter
As digital health grows, rules around it are also changing. Governments now ask companies to follow stronger data privacy rules. They must protect user info and follow health laws.
For example, in the US, HIPAA rules must be followed by all health companies. The FDA is also getting involved. If a company uses AI for diagnosis, it must meet safety standards. This means companies need to spend more on legal support and data systems.
In Europe, the Digital Services Act and new AI laws are adding more layers of control. Companies that want to go public or get acquired must show that they follow all rules. This will be a big factor in future IPO and M&A activity.
Big Tech Will Stay Involved
Companies like Apple, Google, and Amazon are not going away. They have money, users, and strong systems. Apple’s Health app is growing fast, and it now connects to hospitals. Google is working on AI to support diagnosis. Amazon’s health service for workers is growing too.
These big players will keep buying smaller startups to add more features to their tools. Smaller companies may also try to grow quickly so they can sell to these larger firms. This cycle will push more M&A in the space.
What This Means for Startups
For new digital health companies, the message is clear. Growth alone is not enough. They must prove that their service works well, helps users, and follows all rules. Strong partnerships with hospitals, clear business models, and simple tools are key.
They should also prepare for longer paths to IPO. Instead of rushing to go public, many may choose to build stronger products and then either go for an IPO or be acquired by a bigger player.
Final Thoughts
The digital health space is changing fast, but not in the same way as before. It is moving from fast money and quick launches to careful growth and smarter deals. IPOs are not gone, but companies need to show strong data and business value. Mergers and buyouts are rising, and big companies are leading the way. The future will favor companies that make real impact, use tech wisely, and follow the rules.
