Devices & Diagnostics, Health IT, Startups

Digital health funding hits $3 billion

The cash keeps flowing in digital health. Venture funding invested into the digital health realm […]

The cash keeps flowing in digital health.

Venture funding invested into the digital health realm has surpassed $3 billion through the first three quarters of 2014, up from $2 billion through midyear and up 100 percent over the year, according to the latest report from Rock Health.

But the average deal size for the year did drop by $2.5 million, reaching $13 million since the mid-year mark, according to the San Francisco-based incubator. Yet the average deal does remain larger, by 31 percent, compared to 2013.

Rock Health doesn’t include deals under $2 million, so the overall number is likely higher.

The bulk of the cash was directed toward “improving patient outcomes and reducing costs,” the report said. The top six funding themes remained fairly consistent in Q3, with analytics and big data outperforming all other categories, followed by digital medical devices, consumer engagement, payer administration, population health management, and telemedicine

But the top three deals this year, so far, have been diverse, with Proteus Digital Health raising $52 million, followed by Teledoc at $50.3 million and Chunyu at $50 million.

Digital therapies companies – which include any software or hardware designed to deliver specific outcomes in a therapeutic area – by far experienced the most growth, according to the report.

And California “continues to dominate” digital health funding, accounting for 37 percent of all funding year to date. New York and Massachusetts together accounted for 20 percent of all dollars.

Mergers and disquisitions activity in the third quarter “was extremely active,” the report said, with nearly 20 deals completed by a diverse range of companies “from traditional tech to medical device companies to providers.”

Among the highlights:
— Cognizant Technology Solution acquired TirZetto Corp from Apax Partners for $2.7 billion to expand in health-care industry software.
— Google acquired Rock Health portfolio company Lift Labs.
— And HCA, one of the biggest hospital systems in the country, acquired PatientKeeper, a software provider and mobile apps developer geared toward physicians.

“With $3 billion in digital health funds raised this year, we’re optimistic that 2014 will finish off strong and continue to provide new and existing digital health companies with capital to make an impact in healthcare,” the report said.

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