Predictions For 2025, After a Manic 2024

For nearly 11 years now, Aequitas Partners has been laser-focused on building the best teams in healthcare. Working across stages, from pre-seed, to venture and private equity-backed and beyond, we have now seen several boom and bust cycles in the Digital Health space, and the profound impact that broader macro-economic conditions can have on hiring in a nascent industry. We talk daily with industry leaders about what we’re seeing and hearing, who’s hiring and for what, who’s not and why. As we look ahead at the hiring trends we see for 2025, cautious optimism for a hiring-filled year fueled by a significant increase in private capital deployment has us excited about turning the page on a challenging 2024.

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2024 Reflections

As an organization, we're still reflecting on and unpacking 2024, a tumultuous year filled with ups and downs and unpredictability. In fact, that might be the best word to sum last year up - unpredictable. Perhaps that's cheating with the benefit of hindsight, but as last year wore on, it became increasingly clear that the market was going to correct itself when it was ready, not when we all willed it to. Throughout much of the year, capital in Digital Health remained hard to come by, and expensive. Pockets of deals got done at times, often creating a false sense that the market was opening up, only for things to quiet back down. Predictions back in January '24 of interest rate cuts in late Q2 or early Q3 saw summer come and go with none. By the time the Fed moved on rates, we were strikingly close to the election, allowing election uncertainty and angst to be the new reason to "wait and see." All the while, nearly two years' worth of pent-up energy in every category kept building - capital still needed to be deployed, hiring needed to be done, leaders looked for signals that it was the right time to start their next career chapter, and companies needed to grow. 

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As the leaves turned, with three interest rate cuts in relatively quick succession, alongside the election coming and going without much drama, the floodgates for both funding and executive hiring seemed to have opened. Q4 was a flurry of activity - one of our busiest on record - with more search starts spiking across companies of all stages, as well as multiple functional areas. We are accustomed to busy fourth quarters, but this was unprecedented, with partners wanting to kick off new engagements even just a few days before Christmas. The industry felt to have momentum unseen in seven quarters. Time will tell if this was a momentary backlog clearing, or a trend line, but it gave us cause for cautious optimism. Which brings us to 2025.

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2025 Predictions

Our first prediction is that a backlog of private capital will be deployed across all stages. The aforementioned burst of funding and hiring in Q4 carried right into Q1, coupled with big announcements that we think are signs of things to come. Already in January we saw massive Series B and C deals (Innovaccer, Truveta, Qventus, Evergreen Nephrology) and encouraging M&A activity (Transcarent's take-private of Accolade; Health Catalyst's acquisition of Upfront). 

A more favorable interest rate environment should grease the skids for M&A, while also making venture debt more affordable. A familiar refrain among PE investors in the trailing period was that the bid-ask spreads were too high and money was too expensive. Easing there should lead to more PE deals, and subsequently better downmarket liquidity potential for late-stage venture and growth equity assets. Historically, there is a direct correlation between fundraising and hiring, and we expect this period to be no different. We believe it will also be fueled by the fact that, funding aside, there are large numbers of leaders who have been looking for the right time to start their next career chapter. Greater exit potential will give organizations the confidence to double down on growth and innovation, requiring them to topgrade leadership teams, and make sure they have the right executives in the right chairs to position them for exit. This could be the biggest year for executive transitions since the Great Resignation.

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The second prediction is that the pace of M&A and consolidation will increase. Not all exits will be good exits. There still remains a fair number of venture stage organizations on life support. Quiet, inside rounds were a consistent theme in 2024, but it's safe to assume that many of those companies are still on the clock. This will dovetail with the consolidation theme, as companies that are struggling will find low-multiple exits, alongside others in crowded categories who will find that 1+1=3 in a merger of equals that compete for the same shrinking market share. The reality is, Digital Health was due for a correction in the 2020 timeframe, but COVID's forced ubiquity of telemedicine brought renewed interest to the entire segment, driving up valuations, effectively kicking the can down the road on an inevitable correction, but not before raising the height from which we would fall. We believe that as painful as this period has been and may be, our industry will be healthier and ready for the next wave of innovation because of it. Consolidation will lead to personnel redundancies in many cases, putting talented people back on the market for their next role. This often affects People leaders, Growth leaders and the Finance function, but can vary from one situation to the next.

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Third, and with a slightly murkier picture, we see potential for the IPO window to open back up in 2025. With some discreet filings near the end of last year (Omada Health, Hinge Health), and chatter about others, it could be an interesting year on this front. Time will tell if market and regulatory conditions are favorable, and it will be curious to see how public markets treat the next wave of healthcare entrants, after many incumbents struggled with revenue models, unit economics and profitability under the watchful eyes of a different type of shareholder. In the run-up to IPO, we commonly see leadership change at the CEO and CFO seats, with Boards looking to bring in operators with experience taking a company public and being able to transition to public market ownership seamlessly. There are instances of shrinking org charts as companies try to boost their bottom line to be more attractive to the market. 

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Our fourth prediction for 2025 is that Growth leads the way. In fact, it already has. Our Q4 '24 and Q1 '25 starts showed a prevalence of needs up and down the revenue function. From C-suite growth leaders to first commercial hires, companies at a variety of stages are starting to invest in growth again. This is also reflected throughout our near term pipeline, and is a great signal to see. Compared with the same period a year ago, this is a much more offensive posture, whereas back then CFO hiring was top of the heap, typically a more defensive posture. That wasn't a bad thing - organizations recognized the value that sophisticated financial leadership brought, particularly in tough markets, but it's good to see growth stage companies getting back to smart growth.

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How This Impacts Hiring

If these trends hold in the first half of the year, we would anticipate seeing a following emphasis on hiring in Product, Tech and Ops. As growth leaders hit the ground and find success, organizations will see execution risk, and need to shore up operations, implementation and delivery, as well as iterate on and advance their product and technology roadmaps. Product and Technology as functions had tough years in 2023 and 2024, so there is solid talent here that's ripe and ready for the next challenge.

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One byproduct of the consolidation we're seeing will be both a competitive market for talent, but also less talent dilution, as more smart people aggregate around fewer companies and problems, ideally moving those organizations further and faster. While it won't mimic the irrational frenzy of 2021, we anticipate a lot of executive movement and competitive recruiting cycles. The difference here is that with fewer clear high quality prospective companies, it's unlikely that candidates will see the volume of choice they did in 2021 that led to runaway compensation, and crazy packages. One big reason for the competitive nature of the cycle we’re heading into, is that the recent industry headwinds have separated strong companies from the weaker ones. With strengthened balance sheets, we can bet on many of the companies that have closed rounds recently to invest heavily in hiring, and they’ll have the ability to compensate very competitively. We already saw via our 2024 Digital Health Executive Compensation Study that comp was up nearly across the board in 2024, and we expect to see that tick up again this year as organizations compete. 

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In spite of the differing opinions on the success and health of value based care as a segment, companies that are enabling VBC through technology, or have figured out care delivery unit economics with a capital-light approach are poised to grow fast and hire significantly. Broadly speaking, tech-enabled services organizations that are post-Series A and $10M+ in ARR look poised to capture a lot of talent as they run to scale from $10M to $30M+ and a Series B that looks more attainable in light of the uptick in later stage rounds. There also seems to be a resurgence of high growth companies reshaping the employee benefits landscape, albeit in many cases through channels, i.e. payer or broker/consultant. We’re keeping an eye on that segment too, anticipating a fair amount of hiring there.

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Our industry is growing up and maturing around us. It’s easy to forget that Digital Health is still relatively nascent, and that the path won’t be linear. There has been a fair amount of adversity over the last 4 years, but there’s reason for cautious optimism as we watch 2025 unfold. If we can avoid a backslide on inflation, see a favorable interest rate environment continue or improve even further, we could see a strong deal environment, and the cascading effects that come with it. That said, we’re watching closely to make sure that the recent flurry of activity is a trend and not a fad, as we think about our own growth this year. As you can imagine, we talk about this with folks across the industry all day every day, so if you want to tell us what you’re seeing, challenge these view points, or just talk shop, we’d love to hear from you.