Soon after StartUp Health, we have Rock Heath releasing its numbers for the first half of 2017, which too suggest this will be a great year for digital health companies. Overall, Rock has found that $3.5 billion was invested in 188 digital health companies, setting a record for the number of companies funded and total amount invested.
This spectacular figure was propelled by the record-shattering second quarter, and a record seven deals over $100M, with Outcome Health ($500M) and Peloton Interactive ($325M) bringing in the two single largest digital health deals ever. These two companies alone have pushed the average deal size to the largest on record at $18.7M — without them, the average deal size reduces to $14.5M. Also interesting is that none of the seven $100M+ deals are based in the San Francisco Bay Area, which continues to attract the majority of venture dollars.
The top six categories, accounting for 63% of all digital health funding, were Consumer Health Information ($757M – 8 deals), Digital Gym Equipment ($341M – 3 deals), Healthcare Consumer Engagement ($321M – 17 deals), EHR / Clinical Workflow ($276M – 11 deals), Analytics / Big Data ($240M – 16 deals) and Digital Therapies ($235M – 9 deals). Only one of these categories, analytics and big data, was on the top six category list from last year.
Geography-wide, digital health investments reached companies in 25 states, with California — most notably the San Francisco Bay Area — accounting for a third of all dollars invested. New York and Illinois joined California in the top tier of funding, with companies headquartered in each raising over $500M, respectively. Meanwhile, Florida and Georgia joined Massachusetts in the second tier of funding ($100-500M).
When it comes to investors, 331 of them completed deals during the first half of the year, and 138 of those investors (42%) are new to digital health. Meanwhile, institutional venture firms have been the most active, with 12 firms making three or more investments in H1 2017.
Looking at exits, Rock Health has found that the pace of M&A has slowed, dropping from 87 deals in mid-2016 to 58 deals closed by the 2017 midpoint. Notable transactions include McKesson's acquisition of CoverMyMeds for $1.1B, Teladoc's purchase of Boston's Best Doctors for $440M, and Castlight Health's purchase of Jiff for $135M. Also, Apple made an undisclosed acquisition of Beddit, the Finland-based sleep monitoring tech firm.
The top five exit categories include: payer administration, healthcare consumer engagement, analytics and big data, enterprise wellness, and life sciences tools.
So far, there were not digital health IPOs in 2017.
Rock Health reports only US-based digital health deals of $2M or more. It does not include healthcare services companies like One Medical and Oscar, biotech/diagnostic companies like Grail or Theranos, and software companies like Zenefits and Reputation.com that are not solely focused on healthcare. Also, Rock doesn't report international companies like German-startup Clue, even though many of their users and funders are US-based, and the same goes for grants, government funding, and non-dilutive crowdfunding.