What are the key issues founders should be thinking about in HealthTech in 2025?

What are the key issues founders should be thinking about in HealthTech in 2025?

Founders in healthtech in 2025 need to navigate a complex landscape shaped by economic pressures, technological advancements, regulatory shifts, and evolving market demands. Here are the key issues they should focus on, grounded in current trends and projections:

Navigating the VC Liquidity Crunch

The ongoing venture capital liquidity crunch, with negative net cash flows for VC firms ($32.6 billion in 2024), means funding is tighter. Founders must prioritise clear ROI, with 94% of VCs in 2023 emphasising measurable outcomes (e.g., 2-5x ROI, 12-18 month payback periods).

Focus on profitability over growth, as investors favour companies with proven traction. Early-stage startups may struggle, so founders should explore alternative funding like grants or strategic partnerships.

Prepare for longer investment horizons (10-15 years) due to a weak exit environment—muted IPOs and slowed M&A activity require sustainable business models.

Leveraging AI While Addressing Risks

AI is a bright spot, with AI biopharma capturing $5.6 billion in VC investment in 2024 (300% increase from 2023). Founders should integrate AI for use cases like diagnostics, clinician note automation (e.g., Suki), or coding (e.g., CodaMetrix).

However, regulatory scrutiny is rising. The EU’s AI Act and U.S. efforts to regulate AI in healthcare (e.g., FDA guidelines) demand transparency and accountability. Founders must ensure compliance, especially around data bias and patient safety.

Address workforce concerns—clinicians fear job displacement, so solutions should augment, not replace, human roles.

Overcoming Buyer Fatigue and Proving Value

Health systems and payers face “point solution fatigue,” with budgets strained post-COVID. Founders must demonstrate tangible value, like cost savings or improved outcomes, to secure adoption.

Focus on high-impact areas like care delivery tech, which could save $270 billion in the U.S. if fully adopted. Solutions addressing workforce shortages (e.g., reducing clinician burnout) are particularly attractive.

Build trust through clinical validation—peer-reviewed studies and real-world evidence are critical to convince skeptical buyers.

Adapting to Regulatory and Policy Changes

Regulatory complexity remains a hurdle. In the US, evolving reimbursement policies (e.g., CMS updates on telehealth) require founders to stay agile. In Europe, stricter data privacy laws (e.g., GDPR enforcement) impact digital health solutions.

Interoperability is non-negotiable. The 21st Century Cures Act mandates seamless data exchange—solutions must integrate with existing EHR systems like Epic or Cerner.

Monitor global variations: India’s healthtech sector, for instance, faces additional challenges with fragmented infrastructure and affordability concerns.

Addressing Health Equity and Underserved Populations

The liquidity crunch risks widening health inequities, as funding flows to scalable, profitable solutions over those serving underserved groups. Founders should balance investor demands with societal impact.

Solutions targeting rural or low-income populations (e.g., affordable telehealth, remote monitoring) can differentiate a startup, especially if paired with government or NGO partnerships.

Cultural competence in tech design—ensuring solutions are accessible across languages, literacy levels, and tech access, is critical.

Building Resilient Operations Amid Economic Uncertainty

Economic downturns amplify scrutiny on burn rates. Founders should optimize operations, focusing on lean teams and efficient scaling.

Diversify revenue streams—relying solely on VC funding is risky. Explore B2B models (e.g., selling to health systems) or B2C subscriptions where feasible.

Prepare for consolidation: a slowed M&A market creates opportunities for stronger startups to acquire weaker competitors, as seen in recent healthtech trends.

Talent Retention and Clinician Buy-In

The Great Resignation’s ripple effects persist—healthcare faces a projected shortage of 124,000 physicians by 2034 (AAMC data). Founders must prioritize clinician-friendly tools to reduce burnout, not add to it.

Retaining tech talent is also key in a competitive market. Offer equity, mission-driven work, and flexible policies to attract and keep top talent.

Engage clinicians early in product development for feedback and buy-in, ensuring solutions fit real-world workflows.

Cybersecurity and Data Privacy

Healthcare data breaches hit a record high in 2023, with 133 million records exposed (HIPAA Journal). Founders must prioritize robust cybersecurity—ransomware attacks on hospitals are surging.

Compliance with HIPAA (U.S.), GDPR (EU), and emerging global standards is non-negotiable. Patients demand transparency on data use, especially with AI-driven tools.

Invest in secure infrastructure early; a single breach can sink a startup’s reputation and finances.

Founder to Founder Perspective

Founders must balance short-term survival with long-term impact. The pressure to show quick ROI can stifle innovation in areas like preventive care or health equity, which have slower returns but greater societal value. Over-reliance on AI without addressing ethical concerns (eg, bias in algorithms) risks backlash from regulators and users. Conversely, the crunch is a chance to double down on efficiency and real value—startups that solve pressing problems (eg, workforce shortages, cost reduction) will thrive.

In 2025, healthtech founders should focus on proving ROI to secure funding, leveraging AI while navigating regulations, addressing buyer fatigue with clear value, and ensuring operational resilience. Prioritising health equity, clinician buy-in, and cybersecurity will set them apart in a competitive, cash-strapped market.

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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