TLDR:
– Silicon Valley Bank reports that AI investments dominate the healthcare industry, with 1 in 4 dollars invested in healthcare going toward AI companies
– Since 2022, healthcare companies leveraging AI have outpaced those not utilizing it in terms of valuations and funding
According to a new report by Silicon Valley Bank, venture capital investment in Artificial Intelligence (AI) is dominating the healthcare sector, with 1 in 4 dollars invested in healthcare going toward companies leveraging AI. The report highlights that seed and series A pre-money valuations for healthcare companies utilizing AI have been outpacing those not using it since 2022. In 2023, $7.2 billion of U.S. VC dollars were invested in AI healthcare companies, representing 21% of total VC healthcare investment. In 2024, $2.8 billion has already been invested in AI healthcare companies, with projections for $11.1 billion in VC capital to be deployed this year, the highest since 2021. The report also delves into the challenges, trends, and emerging technologies in healthcare.
The report found that most of the investments in healthcare AI were going towards administrative uses, with startups focusing on virtual assistants, clinical note-taking, and revenue cycle operations receiving the bulk of funding. Companies like Abridge, Rad AI, and Tempus AI have raised substantial amounts to develop AI solutions for medical note-taking, radiology, and precision medicine, respectively. While administrative AI faces fewer regulatory hurdles than clinical AI, healthcare providers and payers are still in the early stages of integrating AI into their operations. Diagnostic imaging and oncology-focused companies have also seen significant investment in the clinical AI space.
However, some VC investors remain cautious about generative AI in healthcare due to past experiences with inflated valuations. Many investors believe that a focus on building sustainable businesses and solving real problems should take precedence over chasing growth at all costs. Companies like Black Opal Ventures and Ascension Ventures are taking a cautious approach to investing in generative AI technology, focusing on companies providing essential tools and infrastructure for AI applications. A survey of healthcare technology VCs conducted by GSR Ventures found that most investors are taking a middle ground approach to generative AI, adapting their investment strategies somewhat in response to the evolving technology.
