US Digital Healthcare Funding in Q3 2015: A Quick Insight for Startup ISVs

The third quarter of 2015 has once again demonstrated that digital health is increasingly in the spotlight for investment, especially when more valuable applications emerge for hospitals, doctors and consumers. Though 2014 was certainly a great year for digital health startups, with rapid market growth witnessed for many of them, we see strong signals to say that 2015-16 could be even better.

Q3 2015 Overview:

Digital healthcare continues to show the maturation of the market with a robust growth in dollar funding combined with large deals in the third quarter of this year. According to Rock Health, a venture fund dedicated to digital health stated that the overall 2015 funding has outpaced 2014’s record-breaking year, reaching $3.3B, representing a 30% trailing twelve months (TTM) growth. Here are some more interesting facts from Q3 2015:

• The average deal size was pegged at $15.8M
• The deal count reduced by 9% compared to last year, signifying larger investments in a single transaction
• 2015 had a slow start but it has caught up to the same levels as of Q3 2014
• The top 8 deals of Q3 is responsible for around 50% of the quarter’s funding value
• The early stage rounds have acquired more than 60% of total funding happened from 2015 till today, and the Series B and C rounds have shown a considerable rise in their share of total deals of the year

While it’s no wonder that the Bay Area continues to pull in the most funding year to date, the research data exhibits addition of new emerging markets to the list. For instance, Minneapolis and Salt Lake City, each taking in over $100M, shows the geographical diversification in investment opportunities.

Top Funding Categories:

Q3 2015 saw two new categories in the top six funded segments- personal health tools and tracking and payer administration, usurping enterprise wellness and clinical workflow solutions. The other four being Healthcare consumer engagement, wearable and biosensing, Telemedicine, Analytics and Big Data. The above categories  accounted for 56% of total deal value in the Q3 2015 period.

Top Investors: 

Digital healthcare has been a strong performer in the investment landscape from past few years, and continues to gain growing interest from top VC and corporate investors. HLM venture partners, NEA, Venrock, Altas Venture and Easton Capital are some of the top venture investors of 2015.

While GE ventures, Cambia, Kaiser Permanente, and Qualcomm remain in the top of the corporate investor ranks, 2015 saw addition of 330 distinct investors till the midyear, and  it is interesting to note that many of the most active venture investors were found returning to the healthcare domain in  2015.

“2015 has been a great year for creating and growing healthcare IT companies. We are thrilled by the progress made by so many companies and hopeful that all of this work helps more patients achieve better outcomes at lower costs sooner.” says Bob Kocher, MD, Partner, Venrock.

The bottom line:

The last couple of years has been successful, both for startups and investors of the digital health sphere. The digital health market’s evolutionary momentum still thrives and will certainly become an important part of this growing healthcare industry. With the market trends continuing on the current path, 2015 may probably be the year with the biggest amount of funding till date. It’s just a matter of watching who gets in the fastest and solves the biggest problem. Here’s to a great 2015 closing!

Harbinger’s healthcare domain expertise has made them a preferred partner for ISVs. Know more about our Healthcare IT services.