Funding Dynamics Are Evolving
The venture funding environment continues to stabilize, with investors increasingly eyeing high-potential industries including digital health and AI. In addition, we are finally seeing a loosening of capital markets coupled with the potential for some high profile exits in the digital health space in 2025. Although private capital remains selective, startups with clear value propositions and measurable impact are still finding success.
At the same time, potential policy changes from the new federal administration—whether in the form of shifts in research funding, tax incentives, or regulatory oversight—could influence the funding landscape. Startups should focus on becoming capital ready and engaging with federal initiatives and seeking out public-private partnerships to diversify their capital sources. As with private markets, Return on Investment (ROI) for solutions should be the focus on new solutions aiming to achieve adoption in the greater market.
The federal government has made targeted investments in regional innovation, with a strong emphasis on the life sciences sector. These investments, such as those highlighted in the NSF’s Regional Innovation Engines program and the EDA’s Regional Technology and Innovation Hubs initiative, are designed to stimulate economic growth by fostering innovation and commercialization, creating jobs, and driving local prosperity. Notably, several billion dollars have been allocated to consortia solutions across key tech hubs, including the NSF-supported Piedmont Triad Regenerative Medicine Engine and EDA-supported Wisconsin Biohealth Tech Hub. Additionally, the Minnesota MedTech Hub 3.0, funded by the EDA, is positioning the state as a leader in medical technology innovation. These investments are paving the way for new breakthroughs and opportunities in life sciences, directly benefiting regional economic vitality.
Regulatory Clarity: An Opportunity to Innovate
Evolving regulatory frameworks could significantly shape 2025. Startups should view potential regulatory updates as opportunities to align with emerging standards, proving their commitment to not only safety, security, efficacy, and impact, but also their own capital efficiency and ROI to the end user and the nation. Early engagement with policymakers and industry groups will be key to successfully navigating these changes.
Under the new administration, we expect a loosening of regulations in areas that may benefit startups, particularly in industries like telemedicine, digital health, and health data technology. Eased restrictions on interstate licensure, expanded telehealth reimbursement, and broader acceptance of digital health solutions could fuel growth in these sectors, opening up new avenues for innovation.
Key areas where startups could benefit from deregulation include:
- More Market Flexibility: Startups offering flexible, cost-effective solutions could capitalize on regulatory changes that make it easier to offer non-traditional insurance plans, telemedicine services, and new care models.
- Opportunities in Digital Health: Digital health companies could benefit from more lax regulations around telehealth, data sharing, and AI applications.
However, deregulation carries its own risks:
- Market Uncertainty: The rollback of the Affordable Care Act (ACA) provisions or changes to Medicaid could create instability for startups in the health insurance or Medicaid-adjacent markets.
- Increased Competition: Loosening regulations may lead to heightened competition, as larger companies take advantage of relaxed rules, potentially outpacing smaller startups.
- Health Inequality: Startups focused on serving low-income or Medicaid-dependent populations may find it harder to navigate regulatory changes that reduce government spending or alter reimbursement models.
Startups Are Proving Their Resilience
Entrepreneurship is thriving, despite the backdrop of economic and policy uncertainties. Startups continue to showcase their incredible adaptability, reimagining business models, tapping into alternative funding sources, and tackling some of the world’s most urgent challenges.
For over 60 years, the Science Center has supported startups through fluctuating economic cycles, shifting policies, and changing regulations. As we enter a new chapter that has yet to be written, we remain confident in the resilience and ingenuity of startup founders. History has shown that periods of change often bring new opportunities for growth. Our industry-leading acceleration programs will continue to guide emerging digital health, medtech, and health tech companies from around the globe through customer discovery, stakeholder engagement, capital readiness, and market adoption. We are eager to continue helping startups navigate this landscape with resilience and vision, just as we have done for six decades.
Looking ahead to 2025, the adaptability of startups will remain a key driver of progress. By staying agile and mission-focused, they will turn challenges into opportunities, fostering growth in ways we can only begin to imagine.
Looking Ahead: A Year of Possibility
While the direction of new policies and priorities remains uncertain, we are confident that startups will continue to rise to the occasion. The Science Center has spent over six decades supporting entrepreneurs through periods of change, and we are ready to help startups seize opportunities and tackle challenges that 2025 will bring.
If you are an entrepreneur charting your course, we invite you to explore how the Science Center can help enable your success. Together, let’s make 2025 a year of bold innovation and lasting impact.
