Health IT, Startups

Despite hype, AI did not exactly rake in investment dollars in Q1

StartUp Health's first quarter report this year reflects a rethink of how the organization presents the health tech investment landscape, aiming for a nuanced perspective.

A new digital health investment report from StartUp Health found that investors poured $2.8 billion into 191 deals. The report this year reflects a rethink of how the organization presents the health tech investment landscape.

One noticeable addition is a breakdown of deals beyond the general category companies fall into, using the delivery mechanism of the company’s value. It revealed that, despite the hype surrounding it, 24 companies enlisting artificial intelligence in machine learning and other forms raised $230 million, much less than other categories such as hardware/medical imaging ($421 million), genetic sequencing ($497 million), and web apps ($953 million). But this new methodology also means that the same deals were counted more than once if they also fit another category.

Another new segment broke down deals by specialty. The agnostic category is a little puzzling in this context — even if it is simply administrative software that could be used in any specialty the data would be more worthwhile if it just focused on normal specialties.

Oncology was the third largest category with $308 million raised across eight deals including Baltimore-based Personal Genome Diagnostics which raised $75 million for tissue-based and liquid biopsy technologies and Chinese genomics business Genetron Health, which raised $61 million and has research and development facilities in both North Carolina and Beijing. Philadelphia-based Oncora Medical had a $1.7 million fundraise for its personalized radiation treatment for cancer therapy. Israeli-based Nucleai which is working on a way to use artificial intelligence for computerized analysis of biopsies raised $5 million.

Other new additions to the report included a breakdown of deals by use cases for the company’s technology and the most active end users of the companies that raised money in the quarter. Given that clinical decision support has long been a fairly dominant category, it’s not surprising that providers topped the list with $1.4 billion going into 82 deals.

The investment landscape’s geography has also shifted. Although the Silicon Valley won’t be giving up the top spot anytime soon, New York City continues to hold onto second place for investment and deals after unseating Boston last year. In the first quarter, New York companies raised $349 million across 18 deals compared with Boston ($198 million across 11 deals). Baltimore also inched up the rankings with $92 million invested across four deals dominated by Personal Genome Diagnostics, cybersecurity vendor Protenus ($11 million Series B) and wound monitoring business Tissue Analytics ($5 million Series A). Phoenix bolstered its standing with $56 million in four deals. Mindset Medical, for example, raised just over $1 million last month for a web-based tool to help people check-in for doctor’s appointments and fill in electronic medical forms through the product.

StartUp’s report follows one published earlier this week by Rock Health. Although its numbers were a bit more conservative than StartUp, Mercom Capital Group CEO Raj Prabhu estimated that health IT companies raised $2.5 billion in the first quarter with clinical decision support, analytics tools and genomics accounting for much of the investments, in a phone interview. Like StartUp Health’s report, Prabhu said Mercom also sees more investment activity taking place in markets outside of the U.S.

“Five years ago most of the deals and money came through the U.S. We are seeing a lot more bigger deals in China than anywhere else.”

Mercom Capital is releasing its own take on first quarter health tech investment trends later this month.

Photo: CreativaImages, Getty Images

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