Macro-financial distortions
To understand the magnitude of the correction expected in 2026, it is necessary to analyse the financial anomalies of previous years: in 2024 and 2025, capital allocation became progressively disconnected from market fundamentals, creating an unbalanced and vulnerable ecosystem, according to the Nelson Advisors report. For example, in the first three quarters of last year, the digital health sector had raised $9.9 billion, exceeding the previous year’s pace. Almost 40 per cent of this capital, however, went into just 19 ‘mega deals’ exceeding $100 million. Deals such as Strive Health ($550 million), Judi Health ($400 million) and Ambience Healthcare ($243 million) took up the bulk of the available cash.
“This concentration signals a ‘flight to safety’ on the part of closed-end fund investors and venture capitalists, who have preferred to focus on a few perceived winners, leaving the ‘middle class’ of start-ups without resources,” the report reads. So much so that in Q3 2025, Series B rounds were half the historical average, with just 30 deals, creating a bottleneck in the companies’ growth path.
Of further concern is the rise of ‘unlabelled’ rounds: in 2025, around 35 per cent of digital health funding took place without a specific round series or start-up valuation. Historically, these rounds represent an attempt to postpone the recognition of a valuation, analysts point out. Next year, when these financing instruments expire, investors will have to choose between converting the loans on penalising terms or writing off the investment, with the risk of a wave of forced liquidations.
On the macroeconomic front, there is also the so-called ‘maturity wall’ of corporate debt expected in 2026. “Start-ups that have resorted to venture debt during the zero-rate era will face much higher refinancing costs. In a scenario of rates hovering around 3.5 per cent, as predicted by Vanguard, even companies with good products but high burn rates (the rate at which the company consumes available cash) could be pushed towards bankruptcy,” the report highlights.
The operational crisis: ‘death by pilot’
If finance can sustain a company for a few quarters, it is the operational reality that decrees its survival. For many healthcare AI start-ups, 2026 will mark the end of the pilot era, according to the report, which points out that healthcare systems have been inundated with experiments in recent years: digital scribes, predictive algorithms, decision support tools. However, the conversion of pilots into actual contracts with client companies has remained minimal. Moving from proof of concept to production requires deep integrations with electronic health records, rigorous cybersecurity controls and a tangible ROI. By 2025, healthcare executives have begun to openly declare ‘pilot fatigue’, initiating a drastic reduction in vendors, analysts point out.
