Research10/1/14

Q3 funding update: Digital health rakes in $3B

Teresa Wang

Three quarters into 2014 and digital health funding has officially passed the $3B mark. Up from $2.3B since midyear, total 2014 dollars raised has steadily increased in Q3 with over 100% YoY growth. It’s worth noting that the growth slowed in the third quarter compared to Q2—and is more in line with Q1.

The average deal size for the year dropped $2.5M per deal to $13.1M since the midyear mark, though the average deal remains 31% larger than 2013. (Note: As always, our venture funding data only include deals above $2M).

Venture funding of digital health companies 2011 through Q3 2014

Investor dollars continues to flow toward improving patient outcomes and reducing costs. Telemedicine, which earned its place in the top six categories in 2014 so far, aims to deliver on those two values as well. The top three deals this quarter were diverse (though all topped out near the $50M mark). Proteus Digital Health raised another $52.0M, Teladoc raised $50.3M, and Chunyu raised $50.0M—all contributing to one of the major funding categories.

Top six trends of digital health Q1 through Q3 2014

One category that did not make it to the top charts for absolute dollars raised—but takes the cake for growth—is digital therapies. Digital therapies include any software or hardware designed to deliver a specific clinical outcome in a therapeutic area or multiple therapeutic areas. These companies leverage technologies to bend the infamous healthcare cost curve by delivering improved, cost-effective care.

Total venture funding for digital therapies from 2011 through Q3 2014

California continues to dominate the digital health funding space, representing 37% of all funding year to date. Together, New York and Massachusetts account for the following 20% of funding dollars, taking the silver and bronze after California.

Q3 was an extremely active quarter for digital health companies in the M&A markets with nearly 20 deals announced. Digital health targets were acquired by a diverse group of institutions, ranging from traditional tech to medical device companies to providers. Deal highlights from Q3 include:

  • Cognizant agreed to acquire Trizetto for $2.7B. Trizetto develops a core administrative solution (i.e., management of enrollment, eligibility, billing and claims processing) for payers, and in recent years has created more collaboration between payers and providers. Cognizant hopes to combine its existing portfolio of capabilities and leverage Trizetto’s technologies to help improve operational efficiencies.
  • Google acquired Rock Health portfolio company Lift Labs. Lift Labs makes a high-tech spoon that reduces tremor to make it easier for people with neurodegenerative tremors to eat. The team joined Google X, where they will continue to sell and develop the Liftware spoon that could potentially lead to other technologies and diagnostic tools used to monitor tremors.
  • HCA, who manages 164 hospitals and 114 surgery centers, acquired PatientKeeper in an attempt to improve patient care and satisfaction. PatientKeeper is a provider of software and mobile applications that help physicians access patient information.

With over $3B in digital health funds raised this year, we’re optimistic that 2014 will finish off strong and continue to provide new and existing digital health companies with capital to make an impact in healthcare.

Check out our digital health funding database here!

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