AI driving uptick in venture capital investment in healthcare

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Venture Capital investment in healthcare grew to $23 billion in 2024, up from $20 billion in 2023, as artificial intelligence established itself more firmly in the healthcare sector, according to the latest market insights report from Silicon Valley Bank (SVB).

AI continues to take center stage, especially across biopharma, with 30% of healthcare investment in 2024 going to companies leveraging AI, SVB found.

Biopharma AI saw more than $5 billion worth of investment in 2024, numbers showed. The sector has seen a 300% increase in investment since 2023, surging past 2021's total capital invested by nearly $2 billion.

Investment was largely driven by mega deals, with deals over $100 million accounting for 71% of total 2024 investment in biopharma AI, according to the report.

"In 2025, we could see a steady yet modest increase in both the volume and value of investments across various healthcare sectors," said Jackie Spencer by statement, Spencer is head of Relationship Management for Life Science and Healthcare Banking at Silicon Valley Bank and author of the annual Healthcare Investments and Exits Report. "However, despite this growth, IPO activity is likely to remain subdued as market conditions continue to stabilize and investors remain cautious. Advancements in AI are poised to revolutionize drug development and clinical trial management, driving efficiencies, precision, and speed in bringing new therapies to market."

WHAT'S THE IMPACT

Among the report's other highlights, seed rounds rose to 40% of all deals as investors look forward. Among all companies receiving a seed deal in 2024, 35% are leveraging AI – up from 25% in 2023.

Also, valuations saw a 1.5 times median increase among companies raising after a down round, data showed.

Investments in Dx/tools are slowly rising. Liquid biopsies and precision diagnostics companies are showing strength, combining their close relationship to the success of precision therapy with a relatively untapped potential to collect and aggregate data, SVB said.

On the device front, hospitals might turn out to be the key to reviving a slow device startup space, with new IPOs largely focused on the acute care space. Advances in imaging and monitoring tech are restoring some of the interest that's been lost from wearables and home care, SVB said.

THE LARGER TREND

According to a November Define Ventures survey, more than half of health system leaders and insurance executives are calling artificial intelligence an "immediate priority," and 73% of organizations said they were growing their financial commitments to the technology.

The survey found 73% of organizations have established governance structures, which can align AI incentives with organizational values.

The primary focus areas for these governance committees include identifying and prioritizing use cases (91%), establishing ethics and safety guidelines (87%), and setting data policies (84%).

Three-quarters of U.S. healthcare providers and payers increased their IT spending this past year, with artificial intelligence, cybersecurity and IT infrastructure among the chief areas of investment, according to a study by Bain & Company and KLAS Research.

Adoption of AI is gaining traction, with 15% of providers and 25% of payers reporting an established AI strategy in 2024, the report said.

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.