Bazillions of VC dollars flowing in health IT

The cash just keeps flowing in health IT, as does M&A activity. According to Mercom Capital Group, venture capital in the health IT space reached $4.7 billion in 2014, up from $2.2 billion the year prior. Rock Health recently put the figure at $4 billion, although it’s count does not include deals under $2 million. […]

The cash just keeps flowing in health IT, as does M&A activity.

According to Mercom Capital Group, venture capital in the health IT space reached $4.7 billion in 2014, up from $2.2 billion the year prior. Rock Health recently put the figure at $4 billion, although it’s count does not include deals under $2 million.

A total of 670 deals took place in 2014 compared to 571 in 2013, according to Mercom.

On the M&A side, there are 219 deals completed over 2014, compared to 165 in 2013, with 21 companies making multiple transactions during the year, according to Austin-based Mercom. Driving the M&A deals were revenue cycle management companies, at 28 transactions, followed by practice engagement, at 24 and mobile health, at 21.

“Most of the M&A activity has been around larger, more established practice-focused companies,” said Raj Prabhu, CEO and co-founder of Mercom. “Even though mobile health related apps and wearables are getting significant funding, we have not seen a game-changing Instagram or WhatsApp-type transaction yet in the sector.”

The sector also brought in $2.1 billion in debt and public market financing including six IPOs, bringing the total corporate funding raised in the sector in 2014 to almost $7 billion, according to Mercom.

The fourth quarter of 2014 alone saw $1.2 billion in 134 deals compared to $956 million in 212 deals in the third quarter of 2014. Over the last five years, venture capital in health IT has reached $8.8 billion, Prabhu noted, adding that another $3.6 billion in the same time frame in public market and debt financing bring the total to $12.4 billion.

The financing, he said, is “largely driven by the HI-TECH and Affordable Care Act.

However, the enthusiasm in the sector shown by the VC community was not quite matched by the public markets when you look at market performance of companies that went the IPO route in 2014,” he added in a statement.

If January is any indication, 2015 looks to be much the same — Venrock’s Bryan Roberts said the sector shows no sign of slowing down, and an acquisition by athenahealth occurred just this morning.

Practice-centric companies raised $2.4 billion in 234 deals in 2014, including clinical decision support companies with $517 million, followed by data analytics companies with $367 million and population health management companies with $247 million.

Consumer-centric companies raised $2.3 billion in 436 deals. Mobile health companies were the largest recipient of funding bringing in $1.2 billion. Within mobile health, most funding went to 2earables with $526M million and mobile health pps with $507 million. Telehealth companies received $369 million, Rating and Comparison Shopping companies brought in $288 million.

The top two rounds in 2014 were raised by NantHealth, which brought in $320 million and $135 million in two separate deals; Flatiron Health raised $130 million. That was followed by Alignment Healthcare, which raised $125 million. Proteus Digital Health came in next with its $120 million raise (they also raised $52 million in another deal bringing their total to $172 million for 2014); China’s Guahao.com raised $100 million; Dedalus Group raised $89 million; and American Well brought in $81 million.

A total of 732 investors were involved in funding rounds for health IT companies in 2014. The top VC investors were Khosla Ventures and The Social+Capital Partnership with nine deals each, followed by Kleiner Perkins Caufield & Byers and Sequoia Capital with seven deals each.

Top investors in the sector from the past five years were Khosla Ventures with 21 deals, The Social+Capital Partnership with 18, Kleiner Perkins Caufield & Byers with 17, Sequoia Capital with 12 and Andreessen Horowitz with 10 deals.

There were 120 accelerator and incubator deals in 2014 compared to 139 in 2013. Top accelerator/incubator seed investors were Blueprint Health, Rock Health, Y Combinator, DreamIt Ventures, Sprint Accelerator, The Iron Yard and XLerate Health.

A record 29 countries participated in Health  IT VC funding activity this year. In the U.S., California led the way with 174 deals, followed by New York with 50, Massachusetts with 33, Florida with 22, and Texas with 21.