In 2014, digital health saw a record year of funding with over $4B, more than doubling funding in 2013 and matching the total of the previous three years combined. The big question entering 2015 was whether or not this growth would continue and it’s still too early to tell. In the first quarter, digital health experienced a 80% TTM YoY growth as venture capitalists invested over $630M. This is 15% more than the average of the past 16 quarters, though the average deal size has returned to the historic mean of $10M. (Note: Our venture funding data only includes disclosed US deals over $2M. Companies that are sector-agnostic with a healthcare vertical are excluded.)
This past quarter, deals by stage were consistent with the past 4 years. Seed and Series A rounds accounted for 60% of deals. As the industry grows out of nascency, we expect digital health companies to mature as well and seek later stage funding. Twenty-one percent of funding went towards Series B rounds with ClassPass’ $40M and Collective Health’s $32M leading the pack.
Top Six Categories
The top six categories accounted for 61% of the quarter’s funding. Given the underlying technology trends permeating in healthcare and healthcare reform, it’s no surprise that analytics / big data, healthcare consumer engagement, digital medical device and population health management reappeared at the top. Digital diagnostics and EHR / clinical workflow tools both re-entered the scene. Clinical workflow solutions saw nearly $63M in funding, reflecting the continued need for streamlined efficiencies that not only help improve care but also are “physician-centric.”
It was a record quarter for M&A activity with 42 deals announced, nearly half the deals tracked in 2014 (95 M&A deals total). Eleven acquisitions had a disclosed aggregate value of over $1.1B. Digital health companies were the leading acquirers with 19 deals that ranged from EHR and clinical workflow to clinical trial management. Deal highlights include:
- Under Armour acquires MyFitnessPal: For $475M, Under Armour has brought nutrition-tracking platform MyFitnessPal into its family. MyFitnessPal reports to have 80 million registered users, which Under Armour hopes will enable them to develop stronger relationships (aka brand loyalty) with their athletes and encourage healthy, active lifestyles. The end game for all of this? To sell more apparel and footwear.
- Athenahealth acquires RazorInsights and webOMR: Athenahealth is making moves to enter the hospital EHR with two acquisitions in 2015. First acquisition of the year was RazorInsights, a cloud-based EHR and financial solutions for rural, critical access and community hospitals, followed by webOMR, a web-based clinical application and EHR developed by Beth Israel Deaconess Healthcare.
- Fitbit acquires FitStar: For at least $17.8M, Fitbit has acquired FitStar. FitStar’s two fitness coaching apps had collectively more than 3 million downloads. Entering the fitness coaching space seems to be quite a natural expansion for Fitbit. Not only do they have overlapping target demographics, the acquisition also helps Fitbit offer differentiated software to complement its portfolio of biosensing wearables.
With a flurry of exits, we have no doubt that digital health will continue to capture investor (and buyer) attention.
Interested in our digital health funding data? Dive in here.
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