San Francisco and Boston accounts for the most investment in digital health and the largest volume of deals. But research from The Brookings Institution shows another way to size up digital health investment beyond these two bookends by looking at the proportion of VC money in metropolitan areas going to digital health.
The above chart in a report by Ian Hathaway and Jonahan Rockwell shows a striking contrast to what you’d expect. Instead of San Jose, Cambridge, Dallas and New York, we get San Luis Obispo, San Antonio, Nashville, St Louis and Cleveland at the top of the list.
It has to be said that San Luis Obispo is not exactly a VC mecca. The metropolitan area received $53.2 million in venture capital investment across five deals last year, according to the National Venture Capital Association. Mindbody, an online scheduling provider for yoga companies that also has a corporate wellness business, appears to have received the lion’s share of it with a $50 million fundraise last year. It followed that up with an IPO that raised more than $100 million in June.
Although one company propelling a city to the top of a nationwide map seems a bit flawed, it does show that there’s a lot going on beyond the major digital health investment capitals. Although San Antonio’s VC deal volume is pretty low — nine deals raised $109.6 million according to NVCA — Cleveland, St Louis and Nashville had considerably more. Among the digital health companies in San Antonio are Airstrip Technologies and MR3 Health.
As the report points out, for the past five years through 2014 the San Francisco area took in one-quarter of total venture capital funding and 23 percent of digital health funding—ranking first for both. But as both this report and the charts below from a Rock Health report (from slide 14 of the report on SlideShare) show, the areas where digital health deals are taking place have grown increasingly diverse.
As the Brookings report notes:
To be sure, the major VC hubs like California, Boston, and New York also generate the most digital health venture capital per worker. However, relatively high rates of digital health investment are also spread throughout the Rocky Mountain, Sun Belt, Midwest, and Southeast regions.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
I take the point that the Brookings report makes — just because a city has a lot of healthcare institutions and healthcare sector workers, it doesn’t necessarily follow that there will be much digital health investment in those areas.
“By contrast, metro areas with strong advanced service industries—like computer systems design, engineering services, and research and development services—are very likely to have high rates of digital health VC investment.”
But you can’t deny that certain regions that have major healthcare institutions do have a significant level of digital health activity like Dallas, Cleveland, New York, Nashville and Philadelphia.
Photo: (featured) Flickr user WoodleyWonderWorks
