Rock Health’s digital health Q1: more money, fewer deals, more additions and partnerships in ‘leapfrogging’

There’s a small uptick and some optimism in the air for US digital health deals after all. After a 2024 that realistically was a ‘down round’ or Back To 2019, 2025 is picking its way through the New Reality of Global 52-Card Pickup, powered by a new US government and still-defining AI technology. Let’s unpack what Q1 was like in Rock Health’s view:

• Funding was $3.8 billion across 122 deals, with an average deal size of $24.4 million. Compared to Q1 2024, total investment was up ($2.7 billion) as was the average size ($20.6 million) but number of deals were down (133).
• Q1 funding also exceeded Q4 2024 funding in a pattern typical of the past few years.
• 83% of deals were seed, Series A, and Series B rounds, not much different than 2024’s 86%. There were a few exceptions listed by Rock Health. By far the largest was Hippocratic AI’s $141M Series B but also Achira’s $33M seed, and Open Evidence’s $75M Series A. MSK player Vori Health sported a $53 million Series B in March
• There were only 5 Series D or larger deals but three were jumbo sized: Innovaccer ($275M), Abridge ($250M), and Qventus ($105M), which pulled the average up to $105 million, nearly double that of FY 2024.

Rock Health is mum on unlabeled or funding not disclosed deals, such as the ones TTA noted through the quarter: Summer Health -Caraway, Neuroflow-Quartet Health, Iris Telehealth-InnovaTel, Dispatch Health-Medically Home, and Wysa-April Health.  It also doesn’t provide its usual analysis of healthcare value propositions and clinical indicators.

An interesting analysis in the shorter-than-usual announcement breaks down an approach they’ve dubbed ‘leapfrogging’, defined as ways companies can acquire knowledge or shift to respond to market dynamics:

1. Tapestry Weaving. It’s a quaint way of saying that capabilities can be bought through M&A. (Business can be bought that way too–Transcarent closed its $621 million buy of enterprise care navigator Accolade today.) 
2. Modular Tech Stacks. This type of tech design allows companies to switch out or add in tech as the market changes or better tech emerges.
3. Channel Partnerships. Companies, by adding partners, add capability at low cost and reach, though the logistics of partnering, the integration cost and quality of service aren’t easy lifts.
4. Engaging Disruptors. Companies invested in certain standard processes can expand by allying with their disruptors, versus viewing them as competitors. 

What’s not mentioned in the report are the high profile failures this quarter: 23andMe’s bankruptcy, Walgreens’ sale to Sycamore Partners, and Veradigm’s failure to sell itself.  Given the past few months, we’ll be doing a lot of ’embracing uncertainty’ this year!  Also FierceHealthcare