VC funding in health technology levelled off in 2015
January 19, 2016
Venture capital funding in the health IT sector fell slightly globally in 2015 after 2014’s record year, according to consultancy Mercom Capital Group
In its annual funding and mergers and acquisition (M&A) report for the digital health sector, it found that VC funding, including private equity and corporate VC, in the sector totalled $4.6bn in 574 deals in 2015, slightly below 2014's record $4.7bn in 670 deals. This made it, it said, still a big year for the sector. Total corporate funding in health IT companies including debt and public market financing (including IPOs) totalled $7.9bn.
Since 2010, the sector has received $13.4bn in VC funding and almost $7bn in debt and public market financing including IPOs, bringing total funding to $20.4bn.
"After an incredible run from 2010 to 2014, VC funding into health IT companies levelled off last year," said Raj Prabhu, CEO and co-founder of Mercom Capital Group. “We are beginning to see a slowdown in early stage deals, a sign the sector is beginning to mature. We are also seeing funding trends shift from practice-focused to consumer-focused technologies and products. Apart from innovative technologies and solutions, business and revenue models are becoming more important."
Practice-centric companies raised more than $1.5bn in 171 deals. Consumer-centric companies grossed $3.1bn in 403 deals. Mobile health (mhealth) companies led with $1.1bn.
Areas with the highest year-on-year funding growth were comparison shopping with 615 per cent, scheduling and appointment booking with 370 per cent and wellness with 126 per cent.
Technology areas with the highest funding in 2015 were scheduling and appointment booking at $790m, mhealth apps at $750m, telemedicine $439m, wellness $386m, data analytics $294m, wearables $277m and comparison shopping $232m.
The top-funded health IT technologies since 2010 are mhealth apps at $1.4bn, scheduling and appointment booking $1.1bn, wearables $1bn, telemedicine $929m, clinical decision support $899m, data analytics $810m, practice management $691m and wellness $671m.
Top VC funding rounds in 2015 were Guahao's $394m raise, NantHealth's $200m round and ZocDoc's $130m raise.
A total of 909 investors participated in VC funding for healthcare IT companies in 2015. The top VC investors in 2015 were New Enterprise Associates and Rock Health with nine deals each.
There were 55 accelerator and incubator deals in 2015. A total of 27 countries had health IT VC funding deals in 2015. There were 219 M&A transactions in the sector in 2015. And 27 companies made multiple transactions.
"M&A deal activity was also flat year-over-year but, unlike funding, most of the companies acquired were practice focused as opposed to consumer focused," said Prabhu.
Mobile health apps led M&A transactions with 22, followed by practice management with 18 and data analytics companies with 17. Top disclosed M&A transactions included the $1bn acquisition of Merge Healthcare by IBM, the acquisition of Altegra Health by Emdeon for $910m and the $500m acquisition of Virtual Radiologic by Mednax.
Seven digital health IPOs raised $2.2bn in the year. Fitbit led the pack with $841.2m.