Venture capital funding for health IT companies in the third quarter of 2015 continued to rise, with 148 deals totaling $1.6 billion.
That compares with 139 deals worth $1.2 billion in the second quarter, according to research firm Mercom Capital Group. “It was actually the best quarter so far this year and the second best quarter since 2010,” says Mercom CEO and co-founder Raj Prabhu, who adds that VC funding for health IT has reached almost $3.57 billion in the three quarters of 2015.
Most of the Q3 funding went to consumer-centric companies, which include mobile health, telehealth, rating/shopping, and personal/social health, which raised $1.2 billion in 106 deals. Of the consumer-centric vendors, rating and comparison shopping companies raised the most funds with $728 million, followed by mHealth ($319 million), personal health ($114 million) telehealth ($65 million), and one social health company that raised $25,000.
Healthcare practice-focused vendors, comprising health information management, service providers, revenue cycle management and security companies, raised $357 million in 42 deals. Of the practice-focused technologies, most of the funding went to HIM companies which raised $244 million, followed by RCM companies netting $74 million with service providers getting $39 million.
“The practice-focused group got much less funding—22 percent of all funding—compared to historical levels,” comments Prabhu, who argues that “most of these technologies are already adopted and installed in practices.”
The top venture capital deals in Q3 were the $394 million raised by Guahao, followed by ZocDoc ($130 million), Practo ($90 million), Kareo ($55.4 million), Grand Rounds, which was previously ConsultingMD ($55 million), and Remedy Partners ($50 million).
Mercom also reports that merger and acquisitions activity in the health IT sector in Q3 2015 totaled $3.2 billion, with 57 transactions compared to 53 transactions in Q2 2015. The top disclosed M&A transaction in the quarter was IBM’s $1 billion acquisition of Merge Healthcare.
Earlier this month, Rock Health—which funds and supports early stage healthcare companies—reported that three quarters into 2015, venture investments have outpaced 2014’s three quarter total with funding reaching $3.3 billion—representing 30 percent growth. In addition, the firm revealed that the average deal size is the largest yet at $15.8 million, although the deal count is down 9 percent compared to last year.
“The top six categories accounted for 56 percent of deal value through Q3, and have remained fairly consistent from the midyear, with the exception of enterprise wellness and EHR/clinical workflow solutions being replaced by personal health tools and tracking and payer administration technologies,” according to Rock Health.
For the first three quarters of this year, consumer engagement companies secured $489 million in funding, wearables/biosensing garnered $430 million, personal health tools/tracking companies raised $315 million, analytics/big data vendors secured $223 million, telemedicine companies raised $209 million, and payer administration brought in $164 million.
“2014 was an explosive year where everything basically doubled, but we don’t expect to see that kind of growth this year,” says Teresa Wang, strategy manager at Rock Health. “I would imagine us ending 2015 slightly above where we ended in 2014.”
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