2017 Digital Health Funding For Emerging Companies Setting Records

2017 is setting records for the funding of digital health emerging companies according to two recent reports. Two leading digital health stakeholders StartUp Health and Rock Health published separate reports in the last two weeks highlighting the record number of digital health deals, total investments, and number of deals over $100 million—all great news for the thousands of digital health emerging companies making their way in the health ecosystem. StartUp Health is New York-based organization that brings together a community of innovators, investors, and advisors to help health care-focused companies through various stages of development. Rock Health is a full-service fund based in the Bay Area that supports a wide diversity of digital health emerging companies. Interestingly, while the organizations track funding differently, their reports essentially come to the same conclusion—the funding outlook for digital health emerging companies is as robust as it has ever been.

StartUp Health tracks companies that enable health, wellness and the delivery of care through data/analytics, sensors, mobile, internet-of-things, genomics and personalized medicine. It looks at various levels of funding from accelerator to private equity funding. StartUp Health’s Insights 2017 Mid-Year Report shows that 2017 has surpassed previous years in overall funding and number of new and unique investors focused on digital health. Among the highlights of the report:

• Q2 2017 had a total $3.8 billion invested—larger than the total annual funding for 2010 and
• 2011 combined;
• Mid-year funding stands at a little over $6 billion—setting a record for the most funding by the halfway point of any year;
• 10 deals over $100 million in the first half of 2017 (tied for most deals in any full year);
• Approximately 60 percent of deals are considered early-stage (seed and Series A);
• Mega deals are a trend with 4 deals from 2017 making the top 11 of all deals since StartUp Health began tracking funding in 2010;
• As expected, funding is most significant in the Bay Area with the Northeast (Boston and New York City) and Chicago also the focus of major deals and funding. Growing digital health hubs include Austin, Minneapolis-St. Paul, Denver, and Seattle;
• Close to 600 unique investors so far in 2017—almost as many as all of 2015; and
• No IPOs in the digital health space so far in 2017.

Rock Health’s Digital Health Funding 2017 Midyear Review shows similar trends although the numbers are different. Rock Health only analyzes US-based digital health deals of $2 million or more, and does not include any information on certain biotech or software companies not focused exclusively on healthcare. Among other things, Rock Health’s Report notes:

• $3.5 billion invested in 188 digital health companies—a record for total amount invested and number of companies funded in a half-year;
• A record 7 deals over $100 million;
• While most venture investment flows to the Bay Area, none of the seven $100 million deals are Silicon Valley-based;
• New York and Illinois join California in the top tier of funding each raising over $500 million while Florida, Georgia, and Massachusetts are in the second tier ($100-$500 million);
• The top three funded categories are consumer health information, digital gym equipment, and healthcare consumer engagement; and
• No IPOs in the digital health space so far in 2017.

Interestingly, Rock Health’s Report notes that as the transition to value-based care continues, “the need for innovation that significantly transforms care delivery is as pressing as ever. There will be continued urgency to offer better care at lower costs for patient populations.” In addition, the Rock Health Report underscores the importance of the increasing consumerization of health care in which patients are seen as consumers. Ultimately, there is nothing to indicate that the momentum from the first half of 2017 will not continue throughout the year.