Digital Health’s 2014 Funding Hits $4B, or $6.5B, Depending On Who You Ask

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For the last 4 years, Rock Health has been the go-to resource for tracking VC funding growth in the digital health sector quarter to quarter, and annually. By most accounts, this has not changed, and Rock Health is still the trusted source. However, last year Startup Health, an incubator and competitor to Rock Health, began publishing its own numbers on digital health funding, and in the latest releases, the 2014 funding totals, the two reports are billions of dollars apart. Both reports are showing double-digit growth over the 2013 year end funding totals, so its a good news day for digital health, but the differences between the two reports demonstrates that in the nascent digital health industry, not even our own “experts” really know what is digital health, and what isn’t.

Startup Health, a startup incubator working in the digital health sector, published a report earlier this week that puts year-end funding in digital health companies at $6.5 billion, a 125 percent jump over 2013’s 2.9 billion total. Interestingly, there were fewer deals in 2014 (459) than in 2013 (590) but this year we saw far fewer seed rounds, and far more Series A, B, and C rounds, suggesting that the sector, in general, is maturing. The average deal size was up as well, with early stage rounds (seed + Series A) averaging $4.6 million, mid-size deals (Series B + C) averaging $12.3 million, and late stage rounds averaging $17 million. Big data and population health led the year, with $1.46B and $1.14B in new funding, respectively. Geographically, digital health growth hotspots remain costal, with the majority of funding going to San Francisco, NYC, Los Angeles, Washington DC, and Boston. Surprisingly, Austin, TX was missing from the top 10 funding locations of 2014.

Rock Health will publish its own report on 1/1/2015 according to an early notification sent to HIStalk Connect. In that report, Rock Health will peg 2014 VC funding at just $4 billion, far less than Startup Health’s figures. Still, both companies agree that it was a three-figure year for funding growth, with Rock Health measuring a 120 percent increase in funding this year. Rock Health also concurs that the big winners in 2014 were big data and population health startups. Unlike Startup Health, Rock Health only counts 287 deals in its numbers, suggesting that its definition of “digital health” is more narrow than that of Startup Health.

In early 2014, Rock Health addressed the differences between its numbers and Startup Health’s numbers, without outright naming its competitors. Rock Health explains that, in its opinion, companies that rely heavily on digital health products, but do not themselves develop them, are not digital health companies. As a for instance, Rock Health brings up One Medical, a primary care chain that uses digital health tools to improve convenience and population health. Startup Health, in contrast, does count these fringe deals. Another major difference between the two reports is that Rock Health does not count any deals under $2 million, which means many seed rounds, and some Series A rounds, are left out.

Regardless of which report you go to for digital health funding, the consensus is clear: VCs have taken notice of the digital health market and see real value in funding its early stage startups.


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