2024 marked a pivotal year for European HealthTech, characterised by significant advancements in funding, innovation and strategic partnerships. Global healthcare demand is intensifying and digital health solutions offer essential efficiencies. Yet, this progress was tempered by economic headwinds, liquidity constraints and the ongoing challenge of scaling impactful solutions. Let’s unpack the year’s key developments and what they mean for the sector moving into 2025.

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What's next: starting point of a rebound?

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Funding resurgence amid challenges: European digital health funding reached $3.5 billion in 2024 up 19% year-over-year in Q3 alone¹. This resurgence in funding, particularly in the UK, Germany and France reflects a path toward a renewed investor confidence. Early-stage ventures still face substantial challenges, with only 25% securing funding in the past 18 months..This resurgence in funding, particularly in the UK, Germany and France reflects a path toward a renewed investor confidence. Early-stage ventures still face substantial challenges, with only 25% securing funding in the past 18 months.

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‍AI everywhere: Artificial Intelligence continues to dominate, driving advancements in diagnostics, personalised medicine and PharmaTech. Companies like Sword Health, Nabla, and Aignostics are at the forefront. Within this environment, companies leveraging AI for drug discovery and drug development (PharmaTech or TechBio) are thriving. Companies in the sector attracted $1.76 billion in funding, examples include Bioptimus (FR) €35m seed round and Healx (UK) $47m Series C.

The European HealthTech ecosystem is maturing, with multiple emerging leaders. These companies, showcasing scalability and market traction, are driving investor and corporate interest. However, consolidation is not solely about valuable exits but also reflects market adjustments. Many acquisitions result from insufficient funding for solutions that have seen initial adoption but have yet to scale significantly. As this trend accelerates into 2025, the landscape will likely see a mix of strategic integrations and market corrections, streamlining competition while providing exit opportunities for select high-growth ventures.‍

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Balancing profitability and growth - the startup dilemma is alive more than ever: startups face growing pressure from investors to demonstrate proven and reliable business models, including a clear path to breakeven, while simultaneously maintaining high spending to support rapid market growth. This creates an inherent tension between the push for profitability and the need to scale aggressively in competitive markets. Successfully navigating this dual expectation requires strategic prioritization, efficient capital allocation, and the ability to balance operational discipline with the flexibility to capture market opportunities. Only startups that can effectively manage this balance are likely to attract sustained investor confidence.‍

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Evolving reimbursement models, potentially a game changer for DTx: regulatory frameworks like Germany’s DiGA and France’s PECAN are setting the stage for widespread adoption of reimbursable digital health solutions. Germany has approved 64 digital health apps under DiGA, including Vivira, HelloBetter, Kranus Health, generating over €125m in revenue². PECAN is in its nascent stage, with broad adoption dependent on streamlined approval process and patient engagement.‍

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Collaboration as a survival strategy: in a funding-constrained environment, strategic partnerships have become essential for digital health startups seeking to scale. Collaborations increased by 13% in 2024 with pharmaceutical companies leading as partners in 22% of cases¹. These alliances allow digital health companies to leverage the resources of established players and facilitate faster market entry. Additionally, venture-to-venture partnerships, now 20% of total collaborations, are helping startups share resources and expand market access (e.g. Owkin and Proscia).

As Apheris and BMS, biopharma partnerships stand out, representing 21% of collaborations in the first half of 2024¹. Biopharma companies increasingly turn to HealthTech startups to integrate innovative technology into drug discovery and development. Platforms that optimize R&D processes - reducing costs and streamlining clinical trials - are particularly appealing, emphasizing a focus on AI and data to enhance efficiency and accelerate timelines.

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M&As are surging: with IPO markets largely closed, M&As have become the primary exit strategy, accounting for over 85% of exit value in 2024³. This consolidation trend shows the sector’s shift towards capital efficiency and strategic buyouts. However, while strategic acquisitions are positive indicators of sector maturity, only a few deals like Exscientia, Endomag, have exceeded €100m limiting the perception for the moment of the sector asa high-return investment domain.

Most acquisitions focus on integrating complementary technology components (“building blocks”) into larger corporate solutions rather than acquiring fully profitable, self-sustaining businesses with long-term viability. This trend supports incremental consolidation within the sector but still falls short of creating large, standalone revenue-generating entities. Nevertheless, these acquisitions lay a foundation for future growth and may eventually lead to more substantial exits as integrated solutions gain traction.

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A wave of innovation amid economic challenges, poised for transformative growth in 2025

European HealthTech in 2024 has been a dynamic mix of innovation potential and economic challenges. While overall funding levels have improved, growth remains concentrated in specific areas such as AI-driven research solutions, digital therapeutics, and biopharma partnerships. The increased focus on patient-centric platforms and operational efficiency suggests a shift towards scalable, impactful solutions - essential in today’s economic climate. For investors, focusing on ventures with strong clinical evidence, adaptable business models, and a clear path to profitability is crucial. The HealthTech sector is adapting, driven by economic pressures and the transformative potential of digital health solutions.

As we look ahead to 2025, Europe’s HealthTech ecosystem will need to balance rapid innovation with a clear path to breakeven - focusing on margins, restructuring, sales efficiency, and sustained top-line growth. Clinical evidence will play an ever-greater role, not only to secure reimbursement under schemes like DiGA or PECAN but also to convince and educate end-users. AI-driven applications in pathology or ultrasound will continue to push diagnostic precision, while digital therapeutics will evolve on the strength of proven, reimbursable clinical outcomes. Meanwhile, PharmaTech ventures may adopt biotech-like value creation models, where scientific validation and regulatory milestones guide investor confidence, albeit with higher inherent risk. Collaborative approaches - between startups, corporates, and even competitors - will be pivotal, driving both cost efficiencies and broader market reach. Taken together, these trends suggest a more disciplined yet opportunity-rich environment, setting the stage for strategic growth and tangible healthcare impact in 2025.

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Sources:

[1] Galen Growth Blog: Europe Digital Health Funding Soars 19% YoY as AI Ventures Thrive and Partnerships Surge in Q3 2024, Oct. 25 2024

[2] Earlybird Carlsquare: Digital Health Report, Ongoing dynamics in the VC and European M&A market, Oct. 2024

[3] PitchBook HealthTech Market Report Q2 2024, Sept. 26 2024

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