Digital health investing on track to hit record year in 2017

Steven Loeb · July 11, 2017 · Short URL:

There was $6.5B invested in the first half of 2017, already making it the third biggest year ever

Digital health has been one of the most exciting spaces in tech over the last few years, with advancements in wearables, telahealth, big data and electronic health records. These are changes that will have a huge effect, not only on the lives of millions of people, but on the entire U.S. economy. 

There has been an explosion in digital health funding, starting back in 2014, and this year is on track to be the biggest yet, according to a report from StartUp Health Insights.

In the first half of 2017, there was $6.5 billion invested across 306 deals. The second quarter alone saw $3.8 billion in funding.

That amount of funding already makes it the third largest year ever for the digital health space, behind only the $7.2 billion invested in 2014 and the $8.3 billion invested last year. That amount of funding comes with another six months left to go, so it seems more than likely that 2017 will become a record breaking year. 

If funding continues on this pace, this puts it on path for $13 billion in 612 companies. That would be a 57 percent increase in the amount of money invested over 2016.

Interestingly, with nearly the exact same number of deals year-over-year.  That can be explained by the an onslaught of so-called "mega deals," or those over $100 million. There have been 10 of them already this year, which is already tied for the most in any prior year. Basically, the number of companies is staying the same, but the rounds are getting bigger. 

The mega deals so far in 2017 have included: $914 million raised by Grail; $600 million raised by Health Outcomes; $500 million raised by Zenefits and Good Doctor; $130 million raised by Flatiron Health; and $220 million raised by Human Longevity.

The deals have been so big, in fact, that StartUp Health Insights says in its report that four of the deals raised in the first six months of this year rank in the top 11 made since 2010. 

All of this suggests that the market has begun to mature, with companies starting to raise later rounds, That can be seen in the fact that there were a greater number of Series A deals, 68, than seed deals, 46, in the first half of the year. 

When it comes to the most active sectors, big data/analytics easily leads the pack with $1.2 billion raised, though it has lower average deal size than education/training, as only 30 big data companies were funding. The $622 million for education/training was invested in a scant four companies, giving the sub- section an average deal size of $156 million.

There was also $571 million invested in personalized self/quatified-health companies, and $579 million invested in patient/consumer experiences.

The report also listed some of the most active venture capital firms in the digital health space, including GV and Khosla Ventures, with seven each, GE Ventures and Accel Partners with six each, and Flare Capital Partners, Temasek Holdings, Sequoia and Norwest Venture Partners, which each invested in five digital health companies so far this year. 

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