2014 Midyear Digital Health Funding Update: Obliterating Records

At the end of the first quarter, we were optimistic that 2014 would be another record year for digital health funding. What we didn’t expect was that in just six months, 143 companies would have successfully raised $2.3B. Not only are there more companies receiving funding, but the average deal sizes are also up to $15.6M compared to last year’s $10.0M. (Note: Our venture funding statistics only include deals above $2M.)
01_Aggregate Digital Heatlh Venture Funding (2011-2014YTD)

This explosive growth in digital health funding represents 168% year-over-year growth. All this excitement has led to concerns regarding a potential bubble so it’s important to put this into perspective. Yes, we’re excited about the $2.3B in digital health funding, but we know this could be considered a small number relative to tech companies receiving a $1.2B round of capital or being acquired for $2.0B prior to a product launch. For those concerned about an overall venture bubble—it’s always hard to tell from the inside, but for context, we’re still a ways off from the frothy 1999-2000 period.
03_Venture Bubble in Context
So where’s all this money going? Almost 50% of all funding this year came from six categories—payer administration, digital medical devices, analytics and big data, healthcare consumer engagement, population health management, and personalized medicine. The most popular category, payer administration, was under the radar last year with only $47M in funding. However, it saw a whopping 354% growth as payers increasingly turn to technology for improved solutions and cost savings. Healthcare reform is a strong tailwind into the space, underpinning at least four of the top six categories here as the entire industry needs to rethink its business models.
04_Top 6 Categories
Not all funding is going so swimmingly though. Success rates for crowdfunding platforms (Indiegogo, Medstartr, and Kickstarter) are down almost 50% versus 2013. Indiegogo continues to be the most popular platform for digital health campaigns but we’re excited to see if Kickstarter’s lower barrier for project acceptance will help level the playing field.
As companies in this space continue to grow and scale, we expect more multi-billion dollar exits over the coming years. So we’ve created the first Digital Health Public Company Index to track the progress of the sector in the equity markets.
08_The Digital Health Public Company Index Performance
2014 is proving to be quite the year for digital health. We can’t wait to see what the second half of the year has in store!

Interested in this data? Get it here.