Proving the Business Case for the Internet of Things

Wearables, sensors, analytics, mhealth and telemedicine lead VC funding this year

Steve Rogerson
April 19, 2016
Wearables and sensors were the top funded area globally by venture capitalists in the healthcare sector in the first three months of this year, according to Mercom Capital Group.
Wearables and sensors attracted US$260m, followed by data analytics companies at $197m, telemedicine at $171m, mhealth apps at $120m, and consumer health information and education with $100m.
Venture capital (VC) funding, including private equity and corporate venture capital, in the health IT sector increased 27 per cent quarter over quarter, coming in at $1.4bn in 146 deals compared with $1.1bn in 145 deals in the final quarter of 2015; it was also up 74 per cent compared with the same quarter of last year. Total corporate funding raised in the sector including VC, debt and public market financing for Q1 2016 came to $1.5bn.
“The Health IT sector is off to an impressive start this year with significant funding activity in the first quarter led by wearables, data analytics and telemedicine,” said Raj Prabhu, CEO and co-founder of Mercom Capital Group. “Data analytics and telemedicine companies reached a significant milestone, each crossing $1bn in funding raised to date. Health IT public companies, meanwhile, continued to underperform.”
Healthcare practice-centric companies received 42 per cent of the funding in Q1 2016, raising $569m in 49 deals compared with $360m in 44 deals in Q4 2015. Consumer-centric companies received 58 per cent of the funding this quarter, bringing in $796m in 97 deals compared with $711m in 101 deals in Q4 2015.
There were 53 early-stage deals in the quarter at or below $2m, including 14 accelerator and incubator deals.
The top VC deals this quarter included the $175m raised by Flatiron Health, $165m raised by Jawbone, $95m raised by Healthline, $70mn raised by Health Catalyst, $46m raised by Invicro, and $40m raised by Higi.
A total of 318 investors, including three accelerators and incubators, participated in healthcare IT deals this quarter. A total of 27 investors participated in multiple rounds this quarter. Chicago Ventures, Jazz Venture Partners, Jump Capital, Lux Capital, Sequoia Capital, Social Capital, Tribeca Venture Partners and UPMC were involved in the greatest number of funding deals with three each.
Health IT VC funding deals were spread across 16 countries in Q1.
There were two IPOs (initial public offerings) this quarter; Oneview Healthcare and Senseonics together accounted for $91.5m.
There were 58 merger and acquisition (M&A) transactions – nine disclosed – in the health IT sector this quarter compared with 53 transactions, of which 13 were disclosed, in Q4 2015. This quarter had the highest recorded number of M&A transactions in a single quarter.
Mhealth apps companies were involved in the most M&A transactions with nine, followed by practice management companies and personal health companies with seven each, data analytics companies with five, EHR companies with four, and telemedicine companies with three.
The top five disclosed M&A transactions were the $2.75bn acquisition of MedAssets by Pamplona Capital Management, the $2.6bn acquisition of Truven Health Analytics by IBM, the $950m acquisition of Netsmart Technologies by Allscripts, the $140m acquisition of Centrak by Halma, and the $119m acquisition of Medical Director by Affinity Equity Partners.
A total of 615 companies and investors were covered in the report.
• According to a report from Tractica, worldwide shipments for healthcare wearables will increase from 2.5 million in 2016 to 97.6 million units annually by 2021. By the end of that period, the market intelligence firm forecasts that the global healthcare wearables market will account for $17.8bn in yearly revenue.