Q1 2014 Funding Update: Another record quarter for digital health

Q1 2014 saw quite a few exciting milestones for healthcare — POTUS broke his goal of getting 7 million Americans signed up on the exchanges, three digital health companies debuted in public markets, and digital health venture funding saw its best quarter yet.

Digital health is increasingly whetting venture appetites — January set a record month in deals and dollars, and building off that momentum, the first quarter of 2014 set an all-time record for digital health funding in a single quarter. Nearly $700M in funding poured into the space, paving the way for the biggest year ever for the industry. Q1 2014 experienced a mind blowing 87% year-over-year growth versus Q1 2013. Yea, we’re excited too. (Note: As always, our venture funding statistics only include deals above $2M).

Digital Health Funding in Q1 2014

Investors are growing increasingly comfortable with digital health, and the deal sizes are growing in response. The average deal size this quarter increased to $13.1M, up from an average of $10.0M for all 2013 deals. Some new categories broke onto the top charts this quarter, joining the returning heavyweights, analytics and big data. Key themes we saw thrive in the first quarter were improving patient care and enterprise cost-savings.

Top digital health categories by funding amount

The top 5 companies that won over the hearts (and wallets) of investors this quarter:

  • MedHOK (Medical House of Knowledge) is a platform for care, quality, and compliance designed for health plans and ACOs ($77.5M from Bain Capital Ventures and Spectrum Equity)
  • MindBody provides a suite of marketing tools, scheduling, analytics, networking and point of sales services for alternative health, beauty, and wellness providers. ($50M from Montreux Equity Partners, Bessemer Venture Partners, Institutional Venture Partners, Catalyst Investors, and W Capital Partners)
  • Health Catalyst is a data warehousing company for hospitals ($41M from Sequoia Capital, Norwest Venture Partners, Kaiser Permanente Ventures, Sorenson Capital, CHV Capital, and Partners Healthcare)
  • Voalte develops smartphone communication alternatives to help improve care coordination for the healthcare industry ($36M from Bedford Capital)
  • Specialists On Call provides emergency telemedicine consultations ($32M from Warburg Pincus)

California’s domination of digital health funding continued in the first quarter, representing 32% of all funding in the quarter, and in contrast to many previous quarters, Massachusetts was surpassed by Florida in terms of funding.

California Continues to Rule

The quarter also saw three digital health IPOs, the results of which were somewhat mixed as the public markets have had more time to evaluate the companies.

  • Castlight Health was by far the most watched digital health IPO of 2014, quickly climbing nearly 150% on its first day of trading and surpassing $3B in market value. Today, the stock has cooled a bit, trading at under $25 a share and closer to a $2B market cap.
  • Care.com also had a successful debut, soaring 43% on the open. However, things haven’t been quite as rosy since, with the stock falling below its initial offering price of $17 and currently trading below $16.
  • Everyday Health finally had its public offering, nearly two and a half years after withdrawing its initial filing in November 2010. While the stock was down a few percent on the opening day, it is currently trading slightly above its initial offering price at $14.

Finally, we can’t forget crowdfunding. From what we can gather, this form of alternative funding seems to have lost some momentum in the first quarter of the year, with only $780,000 coming in across both successful and failed campaigns. Indiegogo is holding its spot as the de facto platform for digital health crowdfunding, hosting 77% of all campaigns that represented 89% of all dollars. Here’s the breakdown for Q1 2014:

  • Total campaigns (closed in the quarter): 43

  • Total dollars raised: $780,036

  • Overall success rate (% of campaigns reaching goal): 23% (versus 40% in 2013)

2014 isn’t lost however—we’re tracking 10 campaigns currently in progress that have already brought in almost $1M, nearly all of which is from Healbe Gobe.

Want to see for yourself? Get data on all the deals, companies and investors here.