2014 Brings New Era Of Digital Health Funding

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Rock Health releases its annual midyear funding report, a report that has been tracking trends in digital health startup funding since 2011. Each year since its inaugural issue, the report has brought a sense of excitement to the digital health startup community because it foreshadowed the possibility of yet another record breaking year. This year, however, is different. Readers will find no speculative discussions on the possibility of another record breaking funding year in 2014, because this year, the annual funding record has already been broken.

Rock Health reports that $2.3 billion has already been invested in the digital health sector thus far this year, easily surpassing last years record breaking $2 billion year. With six months to go, 2014 looks to be the year that health IT startups will get a warm welcome among venture fund managers.

Funding Trends

Digital health funding is outpacing all sector funding, software funding, healthcare funding, and far outpacing biotech and medical device funding. 143 companies have raised more than $2 million thus far in 2014. Payer administration tools and consumer-focused digital medical devices drew the most money, followed by data analytics platforms, patient engagement tools, and personalized medicine.

2014 has already seen four deals with funding totals over $100 million.

  • Nant Health raises $135 million from Kuwaiti private investors.
  • Cancer analytics startup Flatiron Health raises a $130 million Series B, led by Google Ventures.
  • Care coordination vendor Alignment Healthcare raised $125 million in a round led by General Atlantic.
  • Digital medicine startup Proteus Digital Health raised a $120 million round, led by undisclosed investors.

Outside of venture funding, Indiegogo remains the dominant force for crowdfunding digital health, with startups raising $2.3 million there compared to $286,000 on Kickstarter and just $66,000 on MedStartr. While Indiegogo remains the leader in the crowdfunding space, successful digital health campaigns have dropped 50 percent since 2013, perhaps because of an apparent increase in available VC funding.

Exit Trends

Medical device manufacturers drove a majority of acquisition activity during the first have of the year, highlighted by Medtronic’s $150 million acquisition of Corventis, which manufacturers a wearable cardiac telemetry system. Basis was acquired by Intel for $100 million. Other notable acquisitions this year include Facebook’s acquisition of Moves, Airstrip’s acquisition of Sense4Baby, and Flatiron’s acquisition of Altos Clinical.

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Four digital health companies executed IPO’s thus far in 2014, including: Castlight Health (raised $1.4 billion), Everyday Health (raised $500 million), Care.com (raised $400 million), and Imprivata (raised $400 million). Overall, returns on publically traded digital health stock is significantly underperforming the S&P500. Practice Fusion, Proteus Digital Health, and ZocDoc are Rock Health’s predictions for which companies will IPO next.


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