Digital Health Raises $4.3 Billion In New Investments, Matching 2014 Funding Levels

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Digital health startups attracted $4.3 billion in new investments during 2015, according to a recently published Rock Health report on funding activity in the digital health market. The investment total matches but does not top 2014’s record-setting levels, indicating that while funding opportunities are still strong in digital health, year-over-year investment growth has plateaued for the first time since Rock Health began tracking digital health investment activity. Overall, digital health accounted for seven percent of 2015’s total venture capital investment activity.

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This year brought 278 total investment rounds, fewer than in 2014, but as the market and its startups continue to mature there have been a larger number of late-stage, high-value investments which is drove up the average deal size and kept 2015’s funding levels on pace with 2014. The average funding round was worth $15.6 million this year, up from 2014’s $14.7 million. While seed and Series A rounds continue to account for more than 50 percent of all deals, late stage Series C and D rounds are now accounting for 25 percent of total investments, up from 2014. Another metric to measure the maturing digital health market is startup size. Average head count at digital health startups has climbed from 39 in 2013 to 44 in 2014 and now to over 50. 

NantHealth, ZocDoc, and 23andMe raised the largest investment rounds this year. NantHealth raised $200 million from Allscripts in a single-investor funding round that gives Allscripts a 10 percent ownership stake in the company. Emerging intact from its longstanding FDA issues, 23andMe raised $115 million to pivot the company so that it can focus on drug discovery services.

Consumer engagement, including vendors like ZocDoc, raised $613 million in 2015, the most across all digital health sub-sectors. Startups are racing to replicate the success of Uber and Airbnb in healthcare, building a thin technology layer that engages the consumer and facilitates care delivery. While major platforms are being deployed by Welltok, Audax Health, and others, no vendor has emerged as a leader in this race and VC’s are aggressively positioning themselves to have a vested interest.

There were 180 M&A deals in 2015, with an aggregate value of $3 billion and an average value of $157 million per deal. EHR and clinical workflow companies saw the most activity, with 34 acquisitions in 2015, up from just six last year. Five companies went public in 2015. Fitbit is performing well above its peers in this group, with December 8 share prices closing 62 percent above its IPO share price. Mindbody ended its year up 15 percent, and Teladoc is up four percent from its IPO. All others are trading at below IPO price.


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