Pandemic-Era Boom Fades as Digital Health Founders Warn of Funding Pressures, Operational Overreach, and Growing Demand for Measurable ROI
AMSTERDAM, NL / ACCESS Newswire / June 17, 2025 / Black Book Research today released the findings of a new study presented at HLTH Europe, surveying 54 early-stage digital health startups operating across the European continent. The data highlights significant headwinds facing the sector, including investor pullback, cross-border scalability challenges, and increasing demands from health systems for evidence-based ROI.
According to the study, 62% of early-stage startups are currently relying on bridge or extension rounds to remain operational amid tightening venture capital markets. 41% report they face existential risk if they do not secure additional investment or rapidly demonstrate commercial traction within the next 6-12 months.
"The fundraising bar for Series A has shifted dramatically since 2022," said Doug Brown, Founder of Black Book. "Venture capital firms are demanding later-stage metrics at earlier phases. Without meaningful revenue or real-world impact data, HIT startups are stuck in a precarious holding pattern."
Pandemic-Era Winners Now Facing Burnout
Startups in digital therapeutics and telehealth, two sectors that saw hypergrowth during the COVID-19 pandemic, are now particularly vulnerable. Black Book found that 55% of these companies report unsustainable burn rates, with many struggling to align fixed costs with normalized market demand. Additionally, 48% report difficulty demonstrating clear return on investment (ROI) to health system buyers, a trend contributing to delayed procurement decisions and dropped pilots.
"The urgency that once propelled rapid adoption of virtual care and digital treatments has given way to stricter scrutiny," said Brown "Without robust, data-driven value propositions, vendors are losing relevance in today's outcome-oriented environment."
Distress M&A and Strategic Retrenchment Becoming Commonplace
As revenue plateaus and valuations reset, 39% of surveyed startups say they are actively considering distressed mergers, acquisitions, or internal downsizing. "This mirrors the challenges faced by larger European firms like Doctolib, which despite early momentum, has encountered mounting difficulties balancing growth with profitability."
Unique Challenges for European Digital Health Startups
The report highlights three structural barriers uniquely burdening European digital health ventures:
Fragmented Health Systems: Pan-European scale remains elusive. Varying regulatory standards, reimbursement models, and EHR interoperability frameworks mean digital health companies must localize extensively, inflating go-to-market costs and slowing adoption.
Funding Environment: Since peaking in 2021, health tech funding in Europe has fallen sharply, with growth-stage and late-stage startups most affected. Many institutional investors have redirected capital to biotech, AI infrastructure, or U.S.-based ventures offering faster growth potential.
Demand for ROI and Operational Maturity: European health systems now demand rigorous clinical and economic validation. Startups that overbuilt during the pandemic without a sustainable model are finding themselves deprioritized in vendor evaluations, especially those unable to provide credible cost-saving or outcomes-improving data.
Black Book's findings reflect a market in transition. While digital health remains a priority in long-term healthcare transformation strategies, early-stage companies are calling for better alignment of reimbursement policies, pan-EU regulatory support, and funding mechanisms tailored to the health innovation lifecycle. "The European market doesn't suffer from a lack of ideas," said Brown. "It suffers from systemic frictions that stall even the most promising innovations from reaching scale."
Black Book presented the report in conjunction with HLTH Europe as part of its ongoing independent global research initiatives.
About Black Book Research
Black Book Research is the industry's source for unbiased, crowd-sourced client experience, satisfaction, and loyalty polling across healthcare technology, outsourcing, and managed services sectors. Black Book is not sponsored by vendors, investors, or associations and maintains full independence in its research methodology including HLTH.
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SOURCE: Black Book Research
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