Healthcare investors are torn on Trump's second term

• While many tech VCs are optimistic about Trump's second term, some healthcare investors feel stuck.
• They're torn between the promise of long-awaited exits and potential threats to healthcare access.

Some healthcare-focused VCs are torn about what Donald Trump's presidential win could mean for their portfolios.

Six healthcare investors expressed mixed feelings about Trump's win — largely rooted in a tension they feel between the potential for big deals to come back and policies that fear could restrict healthcare access to many patients.

Trump could make sweeping changes to healthcare policy in his return to the presidency. He's said he'll let Robert F. Kennedy Jr. "go wild" on health initiatives in the new administration, which could see the former presidential candidate making good on his desires to ban fluoride from public water systems, "get toxins out of our food," and inject vaccine skepticism into federal decisionmaking, among other initiatives.

While Trump is unlikely to try again to repeal the Affordable Care Act, he may seek to boost Medicare Advantage plans, cut Medicaid spending, and reorganize federal agencies, from the Food and Drug Administration to the Centers for Disease Control and Prevention, according to an interview Kennedy Jr. gave from Trump's Florida estate shortly after the election.

After a three-year IPO desert for digital health startups, healthcare investors are desperate for the exit opportunities that a second Trump presidency could usher in. But some of Trump's proposed health policy moves are making investors nervous about their potential impacts on startups building in care areas like women's health and Medicaid, as well as on doctors and patients.

Compared to Trump's first term, "I think you're going to see a more systemic overhaul of the infrastructure that administers our healthcare system, and that could happen relatively quickly," said Michael Greeley, cofounder and managing partner of Flare Capital Partners. "It's the unknown of those moves that makes it really hard to make a long-term investment decision."

Healthcare exits on the horizon

In the three years since 2021's healthcare funding boom — during which 21 healthcare startups went public — only four digital health startups have gone public in total, with mixed success.

A number of healthtech startups have been waiting on the sidelines for their chance to IPO — and Trump's election should boost their odds, healthcare investors told BI.

The lower corporate taxes and deregulation a second Trump term could promise are already amplifying public market optimism. A number of tech and finance giants, from Tesla to JP Morgan Chase, saw their stocks soar Wednesday morning. By midday Friday, the S&P 500 index had risen 3.6% from Tuesday's close.

Some startups, including physical therapy startup Hinge Health and diabetes startup Omada Health, have already signaled their intentions to IPO when the digital health markets reopen.

Several other late-stage startups are moving towards the exits, too. Maven replaced its chief financial officer in October with an executive with public market experience, BI reported. Sword Health has said it's planning to IPO as soon as the second half of 2025.

The healthcare M&A market looks ripe for more activity. Big deals could be on the horizon, including the proposed mega-merger of health insurance rivals Cigna and Humana. Bloomberg reported in October that the insurers had resumed talks of combining after previously shelving the deal last December.

The Cigna-Humana merger was expected to face significant antitrust scrutiny from the Federal Trade Commission, led by Lina Khan since 2021. She could be removed as the FTC's head early in Trump's second term — and with relaxed M&A regulations, "anything is possible," said What If Ventures founder Stephen Hays.

Investors said they also expect to see increased private equity involvement in healthcare through more investments and acquisitions. Healthcare VC has been calling for consolidation in overcrowded areas of healthcare like behavioral health for years. Additional interest rate cuts could help facilitate PE-backed mergers, or even rollups of multiple solutions, in the many fragmented areas of digital health and healthcare services, said a Boston-based healthcare investor.

Reverberations in women's health and Medicaid

While healthcare investors remain optimistic about what a second Trump term could mean for late-stage startups, VCs said his win could have consequences for key areas of the industry.

Reproductive rights remained a top concern throughout the election cycle. Founders of women's health companies and their investors previously expressed concerns to Business Insider about what a second Trump term could mean for their businesses.

While Trump has said he wouldn't sign off on a national abortion ban, experts have raised worries that the president-elect could impose more restrictions on birth control access and abortion pills delivered by mail. Demand for abortion pills, emergency contraception, and related treatments exploded on Wednesday as patients rushed to stockpile the drugs in fear of potential restrictions.

In the wake of the election, women's health investors are dismayed but hopeful that the sector will largely remain untouched by federal policy changes and that VCs will be able to use their capital to push care forward even in the face of policy threats.

"In our conversations with others, there is a shared resoluteness to continue to pledge investment and develop innovation in historically underfunded categories (e.g. contraception & abortion access, menstruation & hormonal health, maternal health & fertility, menopause & aging)," said Carli Sapir, the founding partner of Amboy Street Ventures, in an email to Business Insider. "Every dollar and ounce of effort toward these areas now speaks volumes for future impact."

Medicaid could also be targeted in Trump's second term. Experts think Trump could cut Medicaid funding and enable states to refuse to expand their Medicaid coverage. Those changes could impact dozens of startups innovating in Medicaid, as well as the millions of patients covered under Medicaid plans, said Jordan Nof, a cofounder and managing partner at Tusk Venture Partners.

And if the House of Representatives goes red along with the Senate, experts expect the subsidies that help people pay for health insurance under the Affordable Care Act to disappear after they expire at the end of 2025. Without those subsidies, tens of millions of people will see their premiums significantly increase, potentially making coverage prohibitively expensive for many.

If fewer patients can afford to be insured, the healthcare system is certain to see rising spend associated with increased hospitalizations from otherwise avoidable health problems — a consequence with far-reaching implications across healthcare and the companies building in the sector.

A boon for healthcare AI and Medicare Advantage

Trump's victory could have a positive impact on several big areas of healthcare investment.

For one, Trump is expected to restrict the government's involvement in AI regulation. That means AI companies, including healthcare AI companies, will keep soaring with fewer guardrails.

Without federal AI safety efforts, the healthcare industry will likely move to self-regulate new technologies, especially in more contentious areas like clinical decision support, Flare Capital Partners' Greeley said. Some of those efforts are already underway, including by groups like the Coalition for Health AI, which includes top academic medical centers like Mayo Clinic and Johns Hopkins Speaker alongside tech companies like Microsoft.

Still, "there'll be temptations around the margins to more rapidly deploy technologies that aren't yet determined to be safe," Greeley said.

Medicare Advantage plans are also expected to be boosted by a returning Trump administration that's likely to move to further incentivize commercial health insurance. That could be good for the few young insurers clamoring for market share in Medicare Advantage, like Devoted Health and Alignment Healthcare, and the many startups working to improve payment processes between insurers and providers. (An increased share of Medicare Advantage plans in the Medicare market might not be good for patients, however, since Medicare Advantage plans deny claims more frequently than traditional Medicare.)

And while Robert F. Kennedy Jr's potential appointment to a key health role in the Trump administration worries some healthcare experts, his focus on "food as medicine" could yield some interesting federal projects and perhaps add momentum to the nutrition startups gaining traction, said Chrissy Farr, a managing director at Manatt, Phelps and Phillips, and a general partner at Scrub Capital.

"He's been given carte blanche, apparently, to take this on. Coupled with GLP-1s, I could see America really doing something interesting around food in the next couple of years," Farr said.