Venture capital funding, including private equity and corporate venture capital, into digital health companies in the first quarter of 2018 surged to a record $2.5 billion raised in 187 deals from $1.7 billion in 192 deals in the fourth quarter of 2017, according to a report from Mercom Capital Group.
The report from Austin-based Mercom, global communications and research firm, examines funding and merger and acquisition (M&A) activity for digital health for the first quarter of 2018. According to the report, venture capital funding in Q1 2018 was also up compared to Q1 2017 when nearly $1.6 billion was raised in 165 deals. The first quarter of 2018 was only the second quarter since 2010 in which digital health companies surpassed $2 billion in venture capital funding.
The digital health sector has now accumulated $28 billion in disclosed venture capital funding since 2010, according to Mercom. Total corporate funding for digital health companies, including venture capital, debt, and public market financing, came close to $3 billion in the first quarter of 2018 compared to $1.8 billion in the last quarter of 2017. U.S. companies received the most VC funding and had the most deals.
“Digital health VC (venture capital) is off to a record start in 2018 with $2.5 billion beating the previous record of $2.4 billion from Q2 2017. Several large deals over $100 million pushed the funding total up in the quarter, with activity powered by over 400 investors,” Raj Prabhu, CEO and co-founder of Mercom Capital Group, said in a statement.
According to the report, the top funded categories in Q1 2018 were: $679 million raised by data analytics companies, clinical decision support with $516 million, mHealth apps with $247 million, telemedicine’s $178 million, benefits with $160 million, and $146 million from electronic health record (EHR) companies.
There were 55 early-round deals in Q1 2018, including three accelerator and incubator deals, the report states. The top venture capital deals in Q1 2018 included: $240 million raised by Heartflow, $200 million from Helix, $200 million raised by SomaLogic, $146 million by PointClickCare, and Collective Health’s $110 million raise.
Looking at top venture capital funding rounds, the report states that a total of 412 investors (including one accelerator/incubator) participated in funding deals in Q1 2018 compared to 371 investors in Q4 2017, of which 13 were accelerators/incubators. Digital health VC funding deals were distributed across 24 countries in Q1 2018.
Drilling down into M&A activity, there were 48 M&A transactions (13 disclosed) in the digital health sector in Q1 2018 compared to 57 transactions (three disclosed) in Q4 2017. There was one IPO launched in Q1 from Chinese fitness tracker and smartwatch maker, Huami, which raised $110 million and listed on the New York Stock Exchange, the report states. Practice management solutions companies led M&A activity with seven transactions followed by data analytics companies with six transactions. Clinical decision support, mobile apps, and revenue cycle management companies were involved in three deals each, the report states.
The top disclosed M&A transactions were: the $1.9 billion acquisition of Flatiron Health by Roche; ABILITY Network’s $1.2 billion acquisition by Inovalon; Intermedix’ $460 million acquisition by R1 RCM; Clearlake Capital Group’s acquisition of ProVation Medical for $180 million; and the $100 million acquisition of Practice Fusion by Allscripts.