10 reasons why Healthtech founders need to Dual Track Fundraising and M&A in 2025

10 reasons why Healthtech founders need to Dual Track Fundraising and M&A in 2025

Healthtech founders in 2025 face a volatile market shaped by economic shifts, regulatory scrutiny, and investor caution. Dual-tracking fundraising and mergers & acquisitions (M&A) is a strategic approach to maximize opportunities and mitigate risks.

Here are 10 reasons why this dual-track strategy is critical in today’s current market:

Limited Exit Opportunities: Exits are scarce, with M&A activity and IPOs down significantly. In 2024, more healthtech companies that raised mega-deals in 2021 went out of business than went public. Dual-tracking increases the chance of a successful exit by exploring both M&A and fundraising simultaneously.
Investor Caution and Downward Valuation Pressure: Investors are prioritizing profitability over growth, with a focus on earlier-stage deals. Later-stage startups face valuation pressures, as seen with the pullback in $100M+ deals. M&A can provide an alternative liquidity path if fundraising rounds fall short or require down rounds.
Regulatory Scrutiny on M&A: Antitrust concerns are blocking major deals, like UnitedHealth’s $3.3B acquisition of Amedisys in 2024, which the DOJ challenged due to competition issues. Fundraising offers a fallback if M&A deals get stalled or blocked by regulators.
Capital-Intensive Business Models: Healthtech often requires significant capital to scale, with companies like Lyra Health raising over $900M. Dual-tracking ensures founders can secure funding to sustain operations while negotiating M&A deals that might offer strategic resources or scale.
Market Consolidation Trends: The healthcare industry is consolidating, with larger players acquiring innovative startups to enhance digital capabilities. For instance, Best Buy acquired Current Health for $400M in 2021 to expand into remote patient monitoring. Pursuing M&A alongside fundraising positions founders to capitalise on this trend.
Prolonged Sales Cycles and Cash Burn: Long sales cycles in healthcare, especially when targeting hospitals or payers, strain cash reserves. Fundraising provides a lifeline to extend runways, while M&A can offer immediate financial stability through acquisition by a larger player with established revenue streams.
Strategic Synergies Through M&A: Acquirers are seeking startups with complementary technologies or niche solutions. For example, Commure merged with Athelas in 2023 to strengthen its AI medical scribe offerings. Dual-tracking allows founders to explore these synergies while securing funds to keep operations running.
Economic and Policy Uncertainty: Market volatility, driven by tariffs, federal policy shifts, and a pro-business stance expected in 2025, creates uncertainty. Fundraising ensures operational continuity, while M&A can provide stability through acquisition by a larger, more resilient entity.
Access to Diverse Resources: Fundraising provides capital, but M&A can offer access to infrastructure, customer bases, and talent. For instance, Optum’s $3.2B acquisition of a home care company in 2021 expanded its in-home medical care capabilities. Dual-tracking maximises access to both financial and strategic resources.
Flexibility in Negotiation: Dual-tracking strengthens a founder’s negotiating position. If fundraising discussions falter, an M&A offer can be leveraged to improve terms, and vice versa. This flexibility is crucial in a market where 2024 digital health funding dropped to $10.1B from $10.8B in 2023, signalling tighter capital conditions.

By dual-tracking, healthtech founders can navigate today’s challenging market with greater resilience, balancing the pursuit of growth capital with strategic exit opportunities. If you’re a founder considering this approach, sharing more about your startup’s stage or focus could help refine this strategy further.

Nelson Advisors > HealthTech M&A

Nelson Advisors specialise in mergers, acquisitions and partnerships for Digital Health, HealthTech, Health IT, Healthcare Cybersecurity, Healthcare AI companies based in the UK, Europe and North America. www.nelsonadvisors.co.uk

We work with our clients to assess whether they should 'Build, Buy, Partner or Sell' in order to maximise shareholder value and investment returns. Email lloyd@nelsonadvisors.co.uk

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