Digital Health Venture Funding Continues to Soar in 2014

In the first six months of 2014, digital health funding totaled $2.3 billion across 143 companies, according to a report from Rock Health, a company that provides funding and full-service support to start-up companies.

This explosive growth in digital health funding represents a 168 percent year-over-year growth. And not only are there more companies receiving funding, but the average deal sizes are also up to $15.6 million compared to last year’s $10 million, the report found.

In Q1 of 2014, Rock Health reported that nearly $700 million in funding poured into digital health companies, which represented an 87 percent year-over-year growth from Q1 of 2013.

However, the growth has led to concerns regarding a potential bubble in the market. “For those concerned about an overall venture bubble—it’s always hard to tell from the inside, but for context, we’re still a ways off from the frothy 1999-2000 period,” wrote Teresa Wang, manager at Rock Health.

Almost 50 percent of all funding this year came from six categories—payer administration, digital medical devices, analytics and big data, healthcare consumer engagement, population health management, and personalized medicine. The most popular category, payer administration, was under the radar last year with only $47 million in funding. However, it saw a 354 percent growth, now with $211 million in funding in the first six months in 2014 as payers increasingly turn to technology for improved solutions and cost savings. Healthcare reform is a strong tailwind into the space, underpinning at least four of the top six categories here as the entire industry needs to rethink its business models, Wang noted.

According to the report, the biggest digital health deal of 2014 so far was $135 million for NantHealth's interoperability and health IT platform, followed closely with $130 million in series B funding raised by Flatiron, a data analytics and software company.