This year will break all records both in terms of the amount of money raised and the number of deals, though the funding spike of the second quarter has steadied. During the third quarter, startups have raised $1.2 billion according to Rock Health, bringing the year-to-date figure to $4.7 billion.
Thus far in 2017, there have been 268 digital health funding deals across 261 companies, up from 240 deals during the same period a year before (Rock takes note of U.S. only deals that are $2M and higher). Also, we have seen a number of mega-sized deals in the first half of 2017, and in Q3 — only 23andMe has raised over $100M ($250M from Sequoia Capital). The second-largest deal came in at $70M for Tempus' Series C led by New Enterprise Associations and Revolution Growth.
When it comes to M&A activity, there has been a slowdown, with 83 deals so far in 2017. EHR and clinical workflow is both a top funded and most acquired category this year. In fact, since 2015, companies in this sector have been the most acquired type of companies, with nine acquisitions of this type thus far in 2017 and 66 total since 2015. Also on the list of most funded and acquired are healthcare consumer engagement companies.
Another thing to note, according to Rock Health, is slightly more geographic diversity in digital health funding. California still dominates with over a third of funding (38%) coming to companies headquartered in the state. Comparatively, Californian companies were bringing in 48% of funding dollars in 2014. Other high-funding hubs this year include New York and Illinois, which represent 15 and 14 percent of overall digital health funding activity, respectively.
Speaking of diversity, Rock Health has found that in Q3, 16 percent of the 74 funded companies are led by women CEOs. Comparatively, in H1 that number was at 11%. On average, the deal size for companies with a woman CEO in Q3 was $33.8M compared to $10.9M for men CEOs. This is due in large part because a woman, Anne Wojcicki, is the CEO of 23andMe. Excluding 23andMe's mega deal, the average deal size for companies with a woman CEO in Q3 was $13M.
Finally, Rock says that of the 462 unique investors this year, 45 percent (207) are investing in digital health for the very first time. The most prolific investors so far this year include: Kleiner Perkins Caufield & Byers, GE Ventures, F-Prime Capital, and Mayo Clinic with six deals each, and StartX, SoftTech VC, and Flare Capital Partners with five deals each.