The Rock Report: State of Digital Health 2011

The recent FDA regulatory chatter spurred a lot of internal conversation at Rock Health. What will it mean for our startups, and the digital health space in general? After doing some digging, we realized that there is very little consolidated data around the perceived barriers to entering the space, and the funding environment. While we’re not professional researchers, we were curious enough to scrape Capital IQ, Crunchbase and NVCA for investment and company data, and decided to put together a survey with our most burning questions for entrepreneurs.  110 of them responded, and their answers were just as interesting as the questions themselves. Here are a few highlights, followed by the full presentation:

Venture funding in digital health

• 35 digital health companies received over $2M in funding in 2011.
• There are five main themes we noticed amongst funded digital health startups: consumer web, personal health monitoring, data analytics, data sharing and physician social networks.
• The majority of investment is happening in California, which is responsible for 11 of the 35 companies that received over $2M in funding.
• The number of healthcare technology deals more than doubled from 2005 (52) to 2010 (138).
• 77% of VCs think that healthcare IT investment dollars will increase in 2011.

Entrepreneur Survey

• The reasons for starting a digital health company were varied, with lack of innovation and frustration cited as common reasons for entering the space.
• Nearly 100% of respondents identified funding as a somewhat or very challenging barrier.
• Over 60% think that consumers will pay for their products.
• Entrepreneurs are building B2C companies despite the majority of VC dollars going to B2B ventures.