Rock Health is joining StartUp Health with its figures for the quarter, suggesting digital health companies raised $1.3B in venture capital during the period, or $5.5B year to date. This puts the sector on track for the second largest funding year ever.
As with the overall VC industry, large deals are driving the funding trend in digital health. Investors are placing bigger bets on a smaller number of companies — average deal size in 2019 is $20.9M, up 32% from 2017 and in line with 2018’s $21.7M average deal size. In that sense, Rock Health anticipates the number of digital health deals in 2019 to be 5-10% lower than in 2018 which could be the first time deal count has declined year-over-year since it began tracking in 2011.
So far, 2019 has seen nine $100M+ mega-deals — roughly on par with the record eleven mega deals in 2018. Two of those mega deals hit in Q3 2019 — the online pharmacy Capsule which raised $200M; and Beta Bionics, the developer of an automated bionic pancreas, which closed two $63M rounds this year.
When it comes to IPOs, we’ve seen 5 companies going public this year, including Livongo, a chronic condition management platform; Health Catalyst, data and analytics technology and services for healthcare organizations; Phreesia, applications to help healthcare organizations manage the patient intake process; Change Healthcare, revenue cycle management, payment management, and health information exchange (HIE) solutions; and Peloton, live, on-demand fitness classes via its connected exercise bike, treadmill, and app.
Rock’s report emphasizes the following sectors of the digital health space:
- Behavioral health – in which 16 companies raised a total of $416M in Q3. Across 2019, four behavioral health companies raised rounds of $50M or more, including Talkspace ($50M), Quartet ($60M), Pear Therapeutics ($64M), and Calm ($88M at a $1B valuation).
- Women’s health – in which funding increased 812% across 2014-2018, with sixteen rounds of funding closed in 2018. Through Q3 2019, 10 women’s health companies raised a total of $177M. The three largest rounds in women’s health so far in 2019 include Nurx ($52M), The Pill Club ($51M), and Cleo ($27.5M).
Rock Health funding data only includes disclosed U.S. deals over $2M for digital health companies.