TLDR:
- Healthcare AI startups have raised about $60 billion in venture capital funding over the past decade.
- Only over 5% of companies selling to health systems have matured beyond seed and early-stage funding rounds.
According to a report by Flare Capital Partners, the majority of venture capital funding for healthcare AI startups has been collected in the last five years, with companies selling to insurers or life sciences firms creating value more quickly than those selling to health systems. However, companies targeting health plans and life sciences companies have higher operating margins and resources to scale AI products. The analysis reviewed over 4,000 venture capital deals, revealing that health systems are a significant market for AI startups, with over $23 billion raised from 2014 to 2023. Clinical care startups have received nearly half of this investment, but face challenges in reaching later funding stages due to liability risks and the need for high levels of accuracy and reliability.
AI tools tackling financial or back-office work were found to be more likely to reach Series C or higher funding rounds, especially those handling revenue cycle management or patient scheduling. Clinical operations and throughput companies were identified as some of the most mature, despite not raising as much capital as other categories. Healthcare AI startups selling to health systems, health plans, and life sciences companies have raised around $60 billion over the past decade, with significant investment in the last five years. Insurers have focused on care management, clinical operations, member self-service, care navigation products, network management, and automating claims operations and processing using AI tools.
