Our Take
Jack Euston is right that the buyer discipline spreading across healthcare M&A will widen the gap between premium acquisitions and unsellable inventory, but his three-to-five-year bet assumes strategics have actually learned from Walmart Health and VillageMD—a bet they haven't yet earned.
Why it matters
If you're running a healthcare startup or deciding whether to fund one, the exit calculus has flipped from revenue growth to operational margin and AI-driven workflow embedding. The next 18 months will sort companies into acquirable assets and walking wounded.
Do this week
Founders: audit your unit economics and AI deployment against acquirer criteria (margin expansion, workflow integration) before raising your next round, not after exit timelines compress.
The exit market splits, not expands
Healthcare startup exits are improving but remain highly selective. Jack Euston, co-founder and general partner at Fountain Health Partners, distinguishes the current environment from the 2021 playbook: "The market has shifted from 'well-funded growth story gets acquired' to 'workflow-embedded, margin-relevant businesses get acquired.'"
The IPO window cracked open with Hinge Health and Omada Health exits, but hasn't widened much. Hold periods remain stretched. Euston notes that today's buyers (Walmart Health shutdowns, Walgreens' VillageMD write-down, Amazon's One Medical struggles) are now disciplined, but this doesn't mean lower prices across the board. Instead, it creates a two-tier market: premium prices for premium assets, very little interest in everything else.
Euston forecasts 2028-2031 will be "meaningfully better than current headlines suggest" for strong companies. Much of the challenged 2021 vintage will have exited or failed by then. Companies funded in 2026 typically have cleaner capital structures and more realistic growth expectations, reducing noise when they approach exit.
AI becomes the margin separator
Buyers increasingly view AI not as a feature but as an engine for margin expansion. Companies that embed AI to measurably improve margins and simplify workflows will be well-positioned for capital, customers, and exit opportunities. Those using AI superficially or remaining undifferentiated point solutions are much more likely to get commoditized.
This dynamic sharpens the divide between sustainable and growth-at-all-costs strategies. The buyer world for middle-market healthcare companies could expand, Euston argues, but only if those companies meet the new criteria: operational discipline, workflow embedding, and margin relevance. The misconception that disciplined buying equals across-the-board price cuts misses the pattern: selectivity means premium multiples for the right asset, zero interest in the rest.
Build for the exit environment that will exist, not the one today
Euston emphasizes that firms launching today are not investing into the current exit environment but into what exists in three to five years when portfolio companies are ready to transact. The calibration is straightforward: AI that expands margins and simplifies workflows wins; growth metrics that require continued capital burn lose.
For founders, this means auditing whether your AI deployment is operational (margin-expanding, workflow-simplifying) or cosmetic (feature-list padding). For investors, it means distinguishing between companies built for disciplined exit and those still optimized for the 2021 playbook. The sorted 2021 vintage will be gone by the time your current bets mature, but only if those bets were made with eyes on margin and workflow, not runway.