Venture capital funding for digital health/health IT dropped by about 35 percent in the first quarter of 2015, with $784 million generated by 142 deals versus $1.2 billion from 134 deals in Q4 2014. In fact, Q1 2015 was the lowest quarter for VC funding since Q4 2013.
VC funding decreased across all technology groups with the exception of mobile health, which was the one positive category in Q1 2015, according to research firm Mercom Capital Group. Consumer-centric companies raised $437 million in 98 deals, of which mHealth companies captured $282 million, while telehealth companies brought in $65 million, scheduling, rating and shopping companies secured $47 million, and personal health companies received $40 million.
Mercom Capital Group also reports that practice-centric health IT companies brought in $347 million in 44 deals, including data analytics companies with $92 million, data warehousing companies with $70 million, health insurance exchange companies with $38 million, practice management solutions companies with $34 million, and service providers with $25.3 million.
Overall, there were 56 M&A transactions (14 disclosed) in the health IT sector in Q1 2015 compared to 52 transactions (nine disclosed) in Q4 2014. The top disclosed HIT M&A transactions for the quarter included: sports apparel maker Under Armours $475 million acquisition of nutrition-tracking platform MyFitnessPal; Huron Consulting Groups $325 million purchase of healthcare consultant Studer Group; Performant Financial Corporations $130 million buy of healthcare cost management solutions vendor Premier Healthcare Exchange; HealthStreams $88 million acquisition of credentialing, contact center and quality management software vendor HealthLine Systems; and Under Armours $85 million purchase of social fitness network Endomondo.
There was also significant M&A activity in the first quarter for mHealth companies, according to Raj Prabhu, CEO of Mercom Capital Group. We have already seen 10 M&A transactions in Q1 compared to 21 in all of last year, which bodes well for exits in mobile health.
2014 was a record year for digital health/HIT, according to Mercom Capital Group, with VC funds more than doubling to $4.7 billion including 670 deals, compared to $2.2 billion for 571 deals in 2013. While 2015 has gotten off to a slow start, analysts are predicting another record-breaking year for VC money.
In Q1, the top VC deal was the $70 million raised by healthcare data warehousing and analytics vendor Health Catalyst, followed by $55 million raised by analytics company Ayasdi, $40 million each raised by managed care solutions vendor Advance Health and fitness class online reservation system ClassPass, $38 million raised by software-as-a-service vendor Collective Health, and $30 million raised by search portal Practo.
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