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Digital Health Funding 2017 Midyear Review: A record breaking first half

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As the digital health sector matures, investors are putting more money into more deals. In the first half of 2017, $3.5B was invested in 188 digital health companies, setting a record for number of companies funded and total amount invested.

What a difference three months can make! Just last quarter we described Q1 digital health funding as “business as usual.” Since then, it’s proven to be anything but.

There’s no two ways about it—Q2 2017 was a record-shattering quarter. Though uncertainty around national healthcare reform has dominated headlines, political volatility has not abated investor appetite for digital health. For entrepreneurs, clarity, rather than any particular policy agenda, provides the most confidence to foster innovation and growth. So we were surprised to see that amid one of the most uncertain periods in healthcare history, digital health investments saw their strongest quarter yet.

Halfway through 2017, there have been more digital health deals (188) and dollars invested ($3.5B) than ever before in a half-year. We’ve also seen a record seven deals over $100M, with Outcome Health and Peloton Interactive bringing in the two single largest digital health deals ever.

Perhaps even more exciting is what’s yet to come in 2017. Though no digital health companies have IPO’d yet this year, we’ll be keeping an eye on the robust pipeline of highly-capitalized companies that may be on the brink—particularly after the massive funding rounds filling companies’ coffers over the past few months.

Get the whole story! To view our comprehensive analysis of this historic half, purchase the full report here. Want access to every tracked digital health deal from 2011 to June 30, 2017? Dive into the data and download our digital health funding database. Or better yet—subscribe to get your hands on all of our research.

Dollars and deals

In H1 2017, we saw more, larger deals than ever before.

The pace of investment in Q2 comes as somewhat of an unsuspected twist—just last quarter, deals were tracking with, but not exceeding, prior years. Then second quarter hit, and funding skyrocketed to unprecedented levels, culminating in the most-funded half-year digital health has ever seen.

The growth spurt in funding dollars can be largely attributed to a few massive deals. However, the high number of companies funded signifies that the funding spike isn’t an anomaly based on a few deals, but rather, is an indication of investor excitement in the digital health sector. Although we saw some moderation in deal size last year, the average deal size this year is the largest on record at $18.7M. (Note: taking out the largest two deals, the average deal size reduces to $14.5M).

(As a reminder, Rock Health reports only US-based digital health deals of $2M or more. What’s not included? Healthcare services companies like One Medical and Oscar, biotech/diagnostic companies like Grail or Theranos, and software companies like Zenefits and Reputation.com that are not solely focused on healthcare. We don’t report international companies like German-startup Clue, even though many of their users and funders are US-based. We also don’t include grant or government funding, non-dilutive crowdfunding, or venture deals under $2M. Why? By comprehensively tracking companies within clearly defined parameters, our longitudinal data is more accurate and predictive.)

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Source: Rock Health
By: Halle Tecco and Megan Zweig on in News