8 ways to measure the surge in venture funding for HIT

Published
  • August 15 2017, 5:52am EDT

8 ways to measure the surge in venture funding for HIT

Expectations for digital health and health information technology remain high, particularly as measured by investment, and merger and acquisition activity. Mercom Capital Group, which tracks financial activity in the sector, says digital health and healthcare IT funding set all-time records for both a three-month and a six-month period, during the first half of 2017.

What follows are some of the key HIT trends as measured by activity in financing and M&A.

Second quarter 2017 surge

Global venture capital funding for healthcare IT and digital health companies reached $2.4 billion in 194 deals during the second quarter of 2017, a significant increase from $1.6 billion in venture capital raised in 165 deals during the first three months of the year. In the second quarter of 2016, $1.6 billion was raised.

Also, venture capital funding in the first half of 2017 was about $4 billion, up about 36 percent from the $3 billion raised in the first six months of 2016.

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Types of investment

In the second quarter of 2017, consumer-centric companies (developing technologies that involve use by or interaction with patients) raised $1.6 billion in 131 deals in the second quarter; by contrast, practice-focused companies (developing technologies primarily used by providers) raised $745 million in 63 deals.

Second quarter investment by types of companies

The top funded categories in the second quarter of 2017 were patient engagement ($669 million), mobile apps ($325 million), data analytics ($264 million) and electronic health records ($236 million).

2017 investment by types of companies

The top funded categories in the first half of the year were patient engagement ($684 million), data analytics ($458 million), mobile apps ($399 million) and healthcare appointment booking companies ($391 million).

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Top VC deals in the second quarter of 2017

* Outcome Health ($500 million)

* Modernizing Medicine ($231 million)

* PatientPoint ($140 million)

* Blink Health ($90 million)

* WuXi Nextcode ($75 million)

* ClassPass ($70 million)

Public market financing in the second quarter

Announced debt and public market financing for healthcare IT companies fell to $24 million in six deals in the second quarter of 2017, compared with $161 million in five deals closed during the first quarter of the year.

Merger and acquisition activity

In the second quarter, there were 41 M&A transactions (five that were publicly disclosed) involving healthcare IT companies, compared with 49 M&A transactions (seven disclosed) in the first three months of the year. By contrast, there were 52 M&A transactions (seven disclosed) in the second quarter of 2016.

For the year so far, mergers and acquisitions are down. In the first half of this year, there were a total of 90 such transactions, compared with 110 in the first six months of 2016.

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Largest M&A transactions closed in the second quarter (by disclosed amount)

• Teladoc acquired Best Doctors for $440 million

• Cochlear acquired Sycle for $78 million

• Athenahealth acquired Praxify for $63 million

• Nextgen Healthcare acquired Entrada for $34 million