Healthcare VCs predict more AI transparency investment, private equity M&A, and a quiet year for IPOs in 2026

After a strong year for healthcare funding, VCs plan to back different kinds of AI startups in 2026. Investors expect AI startups focused on decision transparency and cost savings to draw more funding. VCs don't anticipate many IPOs next year, but PE firms could bring liquidity through AI buys. It's been a hot year for healthcare deals - but some investors are predicting a shift in which startups will capture VC attention next year. 2025 saw a welcome surge in healthcare venture funding as investors rushed to back top AI startups. Last December, VCs predicted huge funding rounds for AI scribe startups like Abridge and Ambience Healthcare ; indeed, both Abridge and Ambience landed hundreds of millions of dollars in venture funding this year. Investors also said in December 2024 that they anticipated a race for those startups to expand beyond AI health scribing into other product lines, like medical coding and billing. That pressure intensified in August, when medical records giant Epic announced it was releasing its own AI tools , including for clinical documentation, in competition with its closest startup partner Abridge. With Epic in the mix and tech giants like OpenAI working on their own healthcare AI plays , VCs told Business Insider that they're expecting different profiles of healthcare startups to grab funding next year as companies focus on cost savings, securing patient and provider trust, and ensuring high-quality data. "AI has diffused nicely for passive listening in clinical settings, and administrative simplification," said Dan Mendelson, the CEO of Morgan Health, JPMorgan's healthcare investing arm. "AI now needs to show savings to payers by helping consumers make good choices and reducing the burden on clinicians." Investors are also watching for more healthcare exits in 2026. Two venture-backed digital health companies went public this year: Hinge Health in May, and Omada Health in June. VCs weren't optimistic that 2026 would bring a deluge of new public healthcare companies, but they're looking forward to what many said should be an active year for healthcare M&A. AI behind the scenes This year, investment surged for AI startups tackling administrative burdens for large health systems. AI scribe startups Abridge and Ambience Healthcare notched $5.3 billion and $1.25 billion valuations, respectively, while AI-powered medical knowledge platform OpenEvidence hit a $6 billion valuation with its own raise. Many such startups have expanded into coding and billing to help hospitals capture more revenue from health insurers. But in 2026, insurers could use AI to fight back, said Todd Cozzens, cofounder and managing partner of Transformation Capital. Cozzens said that many insurers have already partnered with large organizations such as Palantir and Anthropic on custom AI solutions. Next year, he expects those payers to contract with more specialized AI platforms trained on complex clinical data, like providers are already doing. "It's a zero-sum game in the end, but like with the nuclear weapons arms race, a lot of money is going to be spent here, and doing nothing is no longer an option for...

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