VC Funding for Digital/Health IT Drops in Q1 2015

Venture capital funding for health IT and digital health companies dropped by 35 percent in the first quarter of 2015, according to a report from the Austin, Tx.-based consulting firm Mercom Capital Group.

VC funding for this sector totaled $784 million in the first quarter of 2015, according to the report. mHealth companies accounted for 36 percent of  total funding raised by digital health/health IT companies this quarter and also received the largest share (65 percent) of funding among consumer-focused companies, with $282 million in 56 deals (compared to $284 million in 41 deals in Q4 2014).

Though funding fell across all technology groups this quarter, mHealth was the only area where funding levels did not decline significantly compared to the previous quarter. A total of 112 investors participated in mHealth funding rounds in Q1, the report found. Within mobile health, mHealth app companies captured the largest share bringing in $220 million in 35 deals. Of that, wearable sensor companies logged $42 million in nine deals.

Last month, the Food and Drug Administration (FDA) released the final guidance on mobile medical apps, bringing some much needed clarity and certainty to the mobile health market. The final guidance confirms a light, hands-off approach to regulating mhealth apps, the report concluded. Mobile health companies have received more than $2 billion in over 500 deals since 2010. mHealth apps, in particular, have received about $900 million in more than 280 deals since 2010.

"Funding fell across the board with the exception of mobile health (mHealth), which was the bright spot this quarter. There was also significant M&A activity in the first quarter for mHealth companies. We have already seen 10 M&A transactions in Q1 compared to 21 in all of last year, which bodes well for exits in Mobile Health," said Raj Prabhu, CEO and co-founder of Mercom Capital.