Healthcare Startups Set for Increased M&A Activity Amid Funding Crunch

Investor caution has left many healthtech startups struggling for capital, with funding levels remaining nearly half the average in 2021 and 2022.

India’s healthcare startup ecosystem is expected to witness a surge in mergers and acquisitions (M&A) in 2025, as funding remains tight and revenue multiples decline.

According to W Health Ventures, an early-stage healthcare-focused investment firm, cash-strapped startups will become attractive acquisition targets for well-funded companies and private equity players.

The diagnostics segment is likely to see the most consolidation, with large pathology chains acquiring smaller, hyperlocal labs and radiology centers to expand their reach.

Care delivery companies specializing in fields such as IVF, eye care, and oncology may also experience exits as their promoters sell to private equity-backed platforms, said Namit Chugh, principal at W Health Ventures.

Funding Challenges Drive Acquisitions

Investor caution has left many healthtech startups struggling for capital, with funding levels remaining nearly half the average in 2021 and 2022.

The report noted that 70% of early-stage healthcare startups have not raised a funding round since then, as investors wait for firms to achieve product-market fit before committing capital.

“With low cash reserves, many startups will become lucrative acquisition targets for late-stage, well-funded companies, and global private equity firms,” Chugh explained.

He added that private market revenue multiples have dropped by 60% from 2022 levels, making acquisitions significantly more attractive for buyers.

Strategic Tie-Ups & Acqui-Hiring on the Rise

The trend of strategic mergers is already evident. Earlier this year, Wysa, an AI-powered mental health chatbot backed by W Health Ventures, merged with US-based April Health to integrate AI-driven mental health support into primary care.

Among different M&A models, acqui-hiring—where the focus is on acquiring talent rather than just the business—could gain traction.

This approach would allow startups to expand service lines while securing experienced teams, further strengthening their capabilities.

“We foresee more such transactions in 2025, including acquisitions via our portfolio companies,” W Health Ventures stated.

Challenges for Quick-Commerce Healthcare Ventures

While consolidation is set to reshape diagnostics and care delivery, quick-commerce healthcare ventures could face major struggles.

Pharmacy quick-commerce startups are engaged in aggressive cash burn battles, competing against local pharmacies through speed and discount wars.

Additionally, inventory management issues and regulatory hurdles further add to their challenges.

“By the end of 2025, at least a few quick-commerce healthcare players will likely exit the market,” the report warned.

It also questioned the long-term viability of the model, stating, “Aside from critical patients, does anyone really need medicines in ten minutes?”

W Health Ventures Expands Investment Portfolio

Since 2021, W Health Ventures has been investing from its $100-million Fund I in healthtech startups such as:

- BeatO, a personalized diabetes management platform

- Mylo, a parenting community

- Wysa, an AI-powered mental health firm

- Reveal Healthtech, a healthcare AI and engineering services provider

The firm is now in the process of raising its second fund, targeting another $100 million, to further invest in innovative healthcare startups navigating a rapidly evolving market landscape.

Stay tuned for more such updates on Digital Health News.