The Scarlet Annual Letter 2025

What we saw this year, and what we see coming next

In 2025 we worked with the most ambitious teams building medical AI. Seeing the products of so many innovative companies means we have a unique vantage point on where the market is going, and we’d like to share what we see with you.

This year, teams building medical devices enjoyed a triple AI tailwind:

• More new device ideas have been unlocked
• Generating high-quality regulatory submissions got faster
• Regulatory assessments got faster

Better technology is getting to the people who need it sooner, and we expect that to accelerate in 2026.

A new way to build

The most innovative teams are building differently. The traditional medical-device development cycle is a multi-year waterfall that emphasises up-front design, development, and data generation — followed by a protracted regulatory-approval process and a long procurement cycle to sell a big product.

Now, the most innovative teams build smaller MVPs with strategic risk-benefit profiles, enabling rapid regulatory approval. These simpler products have shorter procurement cycles, and can be iterated quickly to product-market fit.

Next year we expect this to yield a significant increase in devices reaching the market and providing real value to patients.

How AI is showing up in clinics

Radiology is the original breakout medical-AI category and continues to flourish. Over the last 12 months, more startups in the space spotted unaddressed niches, received funding, and built new products to address them. While scale-ups built out multi-device radiology suites, shipping frequently.

We encountered radiology clinics that prefer to buy AI, as well as clinics that deploy their own in house. The latter is an example of two new types of AI-first healthcare provider:

• Vertically integrated, bricks-and-mortar providers with proprietary technology — we saw this in radiology and next-generation preventative-health clinics
• Virtual clinics with AI clinicians — we saw AI companies become accredited healthcare providers and operate virtual clinics delivered by regulated AI medical devices

The AI physio and the AI therapist are already here. Expect entrants in more specialities to follow in 2026. These products will increase the amount of care delivered without reducing the number of practitioners in demand.

Consumer-grade innovation

We saw successful consumer-health innovations, including scale-ups driving $100M+ revenue. We also saw the world’s largest technology companies building medical AI on top of consumer devices, as well as other types of organisation (like insurance and pharmaceutical companies) pursuing opportunities to provide more value to their customers with medical AI.

Many of these companies are poised to distribute these products next year through existing channels.

Clinicians beginning to benefit

We also saw ambient scribes become a breakout success, proving their value and delighting clinicians. Adoption has been extremely fast.

More broadly on the clinical workflow, we also worked with EHR and back-office healthcare-software vendors layering medical AI on top of their platforms.

We see a clear path in the coming 12 months for innovators to build clinical agents that coordinate care flows — for example, by phoning patients, ordering and interpreting tests, triaging, and then diagnosing, prescribing, and escalating appropriately.

Innumerable niches with vast growth potential remain totally unaddressed. There’s an enormous amount of medical AI to build.

If you’re excited about making progress in 2026 towards abundant healthcare, feel free to get in touch with us.

James & Jamie