If the momentum of investment continues, this year could surpass year-end totals seen in 2019 and 2023 ($8.2B and $10.7B, respectively), two years that can serve as comparable periods outside the pandemic, according to Rock Health's H1 2024 digital health funding report released this week. 

Digital health startups in the U.S. raised $5.7 billion across 266 deals in the first half of 2024.

Seed, Series A and Series B funding accounted for 84% of investments, with Series A funding being most prevalent. 

Of those Series A raises, 38% went to startups leveraging artificial intelligence, and 34% of the total digital health funding seen in H1 went to companies utilizing AI. 

The rise of unlabeled deals continued in H1 2024 from early 2023, with 40%, or 107 deals, in H1 being unlabeled, compared to 44% in 2023. 

The number of unlabeled deals has gradually increased since 2019, with 4% seen that year, rising to 7% in 2020, 19% in 2021 and 22% in 2022. 

Unlabeled deals can occur "when startups need access to capital but don’t meet benchmarks for their next labeled raise and/or are trying to delay tough conversations on topics like valuation," the report said.  

Unlabeled raises have declined in 2024, decreasing from 47% in Q1 of this year to 33% in Q2, which Rock Health previously predicted would occur. 

The top funding spot by value proposition went to digital health companies focused on disease treatments, totaling $1.1 billion, while mental health topped the list of highest-funded clinical indications, with $682 million raised. 

Three exits by digital health companies were seen in H1 2024, including those from the Nasdaq or NYSE, such as revenue cycle management company Waystar, remote pregnancy monitoring company Nuvo and AI-powered data company Tempus AI.

The three exits were the first seen in 21 months within the digital health sector. 

Acquisitions of digital health companies by fellow digital health firms dropped in H1 2024 to 34 deals, as compared to the 83 deals seen in all of 2023. However, PE firms acquired ten digital health startups so far this year, more than the total seen in 2023 and on track to surpass 2021 and 2022 totals. 

"The digital health sector continues to demonstrate resilience and adaptability. Funding momentum (especially at the early stage) and the tapering of transition measures like unlabeled rounds hint that we might be returning to more 'normal,' sustainable venture patterns," the report's authors wrote. 

"The first half of 2024 proved that digital health founders and investors have their eyes on the prize, which gives us confidence in what’s to come."