Digital Health Funding Hits $3 Billion

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Rock Health publishes its Q3 Digital Health Funding update which pegs funding in the digital health sector at $3 billion thus far in 2014, by far the highest its ever climbed. The report found that, compared to Q2’s unprecedented level of funding activity, things have slowed down somewhat and investment levels have returned to what they were at the beginning of the year. Still, each quarter of 2014 has been larger than any seen before.

Thus far, funding rounds in 2014 are 31 percent larger than they were in 2013, with the average round closing at $13 million. The biggest earners thus far have been: big data analytics ($381 million), digital medical devices ($280 million), patient engagement technologies ($238 million), payer administration tools ($223 million), population health management ($195 million), and telemedicine ($172 million). It’s clear that ACOs, even if they never manage to reduce costs or improve care, are at very least driving venture capital investments toward worthy startups working to keep people healthy and reduce inefficiencies in healthcare.

One subcategory that has not broken into the top earners ranks but saw the most significant growth is digital therapies. Companies, like Wellframe and Mango Health, that are targeting specific clinical problems or conditions and using technology to try and fix them. The digital therapies segment has raised $96 million thus far in 2014, a 32x increase since 2011.

Startup Health also published a Q3 digital health funding report today, but cited $5 billion in annual investments thus far, rather than the $3 billion that Rock Health reported. The conflicting reports prompted Rock Health to respond with a blog post titled "What Digital Health Is (And Isn’t)" in which it makes the argument that only technology-based companies are digital health companies, and that service based companies – even if they are technologically dependent – inherently are not digital health companies and shouldn’t be counted in funding reports. An example Rock Health used was One Medical, a chain of private practices that cares for its patient population with sophisticated population health and patient engagement tools. While funding for One Medical was included in Startup Health’s funding report, it was excluded from Rock Health’s because at its core, One Medical is still a private practice, which means it is a labor-intensive, service-based startup. In addition to including service-based healthcare startups in its report, Startup Health also includes deals that are smaller than $2 million, which Rock Health excludes because these early-stage investments often go unreported and there is no definitive way of tracking them.

Still, debating whether it’s $3 billion or $5 billion that has been invested thus far is a good problem to have, and these are certainly exciting times to be a digital health entrepreneur.


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