Digital startup health investments still robust
Wednesday, April 12, 2017
No matter how you slice it, 2017's startup deals are going well. In one analysis, more than $1 billion in deals have been done; even better, there may have been upwards of $2.5 billion already spent. Rock Health stats show the previous, StartUp Health shows the latter.
Across the course of the first quarter of 2017, there were 71 deals, according to Rock Health, while StartUp Health says its amount was collected across 124 deals — a major difference, but only because of funding methodologies, Healthcare Dive reports. Rock Health only reports funding rounds that exceed $2 million; and includes no non-U.S. deals. Rock Health also has different criteria for what it classifies as digital health company.
StartUp Health says we just left the busiest quarter since 2010 because of a "record breaking Series B funding round," otherwise the term would have been fairly modest, the group says. According to StartUp Health, driving the sector was the recent Grail deal — which Rock Health didn't count — at $914 million.
"While agreeing it was a strong quarter, the two organizations that track digital funding disagree on some of the details," the Dive news site adds. "Through StartUp Health's lens, the quarter represented an all-time high in funding for digital startups. Rock Health's report puts investments ahead of 2016, but lower than 2015."
Population health seems to be a key driver, with 25 deals recorded in Q1 2017. StartUp Health, therefore, claims this as a breakout quarter, and the firm points out that Los Angeles seems to be a big winner here and notes that it is "quickly becoming one of the nation's top digital health hubs." But Rock Health says more deals are actually taking place outside of California.
"AI, virtual reality, mobile connectivity, genomics and analytics are coming to change healthcare, and that is creating a wave of innovation like we've never seen," said Unity Stoakes, president of StartUp Health.
Likewise, big data and analytics were the biggest winners with 11 deals and $197.5 million, Rock Health points out. Other areas with strong showings were care coordination, telemedicine, hospital administration and wearables.
Rock Health notes that this quarter's venture activity also reflects optimism: "In Q1, we counted 71 digital health deals totaling more than $1 billion. Despite any regulatory uncertainty, it's business as usual for digital health funding."
Five deals more than $50 million were announced in the quarter. Investors in these growth rounds were a mix of institutional venture capitalists (KPCB, General Catalyst), corporate VCs (McKesson Ventures, Salesforce Ventures) and growth capital (Warburg Pincus, Goldman Sachs).
The companies behind the five largest deals have various users, but not a single product charges the healthcare consumer. PatientsLikeMe, a patient community, monetizes by selling de-identifiable patient data to partner companies. Livongo Health, a B2B2C diabetes management platform, sells only to health plans and employers and not directly to the end user.
"Telemedicine, with six deals in Q1 totaling $50.7M, deserves recognition because of recent trends in legislation and reimbursement," according to the Rock Health report. "Telemedicine reimbursement continues to evolve."
Every state allows coverage of telemedicine to some degree, so there's plenty of interest and ample opportunity to invest in the space.
"Digital health funding is shaping up to be on track with previous years," Rock Health says. "We hear that providers and health plans are delaying expenditures based on uncertainty, yet founders remain cautiously optimistic and feel well positioned for what comes next."
Predictions, thus, seem to point to a focus on controlling costs, investing in analytics to improve data integration, and increasing patient engagement and utilization of telemedicine.
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