Startup Health and Rock Health Q3 Reports Show Digital Health On Pace With 2014’s Record Funding Levels


Over the past week, Rock Health and Startup Health have both published their quarterly digital health funding reports, providing an in-depth look at funding trends within the market for Q3 2015. While each organization follows its own methodology for calculating total investments, the two reports conclude that 2015 funding levels are on pace to meet or exceed 2014’s record breaking year.

Rock Health’s Q3 report only includes US investments with a total value of $2 million or more. The report pegs 2015’s total annual investments at $3.3 billion, outpacing 2014’s $3.0 billion in total funding at this time. The new high-water mark for digital health investments was driven largely by a record-breaking average deal size of $15.8 million, compared to just $13.1 million in 2014. The reports also highlights an increase in late-stage deals. In 2014, deals at the Series D level or later accounted for only 11 percent of total funding rounds. This year, that figure has grown to 16 percent suggesting that as the digital health industry matures, VC are happily funding rounds late into the business development life cycle. Rock Health measured a nine-percent decline in overall deal count.

Startup Health’s report provides a different perspective on these trends. This report includes deals of all sizes rather than just those over $2 million, and consequently pegs overall investment numbers much higher. Its report puts 2015 digital health investments at $4.7 billion in 2015, compared to $5.0 billion at the same time last year. Startup Health also paints a more accurate comparison of early to late-stage investment activity, concluding that 64 percent of this year’s activity has gone to seed or Series A funding rounds, and 94 percent of all investments have gone to Series C or below funding rounds. This emphasis on early stage investment suggests that while the market is maturing, there is ample opportunity for newcomers.

Collectively, the two reports suggest that 2015 will finish out with about the same level of funding seen in 2014, which was a record-breaking year for the industry. The big ticket sub-sectors this year are patient engagement, wearables, fitness tracking apps, big data analytics tools, telemedicine, and tools designed for payers. Notably absent from this list is population health solutions, a leading sub-sector in 2014.

M&A activity has also been strong in 2015, with 146 exits thus far. Of those, only 44 deals were reported with disclosed financial figures, but based solely on those disclosures, the market has seen $5.1 billion in exit deals, suggesting that the markets exits are outpacing inbound investments at a pace that should please VCs and continue to drive new investment activity in the future.

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