Global VC Funding For Digital Health Sets New Half Year Record

Following on a strong performance in 2018, global venture capital funding for digital health companies hit $5.1 billion in the first half of this year, the highest it has ever been, a new report says.

According to a new report by global communications and research firm, Mercom Capital Group, VC funding for the first half of 2019 was $5.1 billion compared to $4.9 billion in 2018. However, there were fewer deals in the first half of 2019: 318 compared to 383 in the previous year.

The report focuses on funding and mergers and acquisitions (M&A) activity for the digital health (Healthcare Information Technology) sector for the second quarter and first half of 2019. The second quarter recorded a strong performance showing $3.1 billion in 169 deals. In the first quarter, $2 billion was raised in 149 deals.

Weak M&A activity not a cause for concern

“Funding activity was robust in digital health in the first half of 2019, while M&A activity was weak. Weak M&A activity has not affected investment activity over past years. We are in an ‘invest first and ask questions later’ environment where investors are more worried about missing out in this hot space,” Raj Prabhu, CEO of Mercom Capital Group, said.

Prabhu added that after a long break, several digital health companies were entering the initial public offering (IPO) market in the United States. “Successful IPOs could open the floodgates, whereas if IPOs fizzle out, it could shut the IPO exit path for many digital health companies.”

Breaking down the deals

The report said the top digital health VC deals in the first of 2019 were $250 million raised by Tencent Trusted Doctors, followed by $205 million raised by Collective Health, $200 million raised by Tempus, $170 million raised by Doctolib, and $100 million raised by Health Catalyst.

The report further breaks down funding stats, revealing that 821 investors participated in digital health funding deals in the first half of 2019. Also, 450 investors participated in funding deals in the second quarter of this year compared to 371 investors in the first quarter. 

The major corporate investors in the first half of the year included Amazon’s Alexa Fund, GV (formerly Google Ventures), Goldman Sachs, Merck, Wells Fargo, MassMutual Ventures, UnitedHealthcare’s Optum Ventures, Piper Jaffray, BlueCross BlueShield, Honda, Oracle, Merrill Lynch, Fidelity, and Cisco Investment among others.

Twenty-six different countries recorded digital health VC funding deals in the first half of the year. Of these, 21 recorded digital health VC funding deals in the second quarter.

In addition, the report says in the first half of this year, there were 91 digital health M&A transactions (16 disclosed) down from 116 transactions (26 disclosed) in 1H 2018.

“Notable M&A transactions in 1H 2019 were: Dassault Systemes acquired Medidata for $5.8 billion, Golden Gate Capital acquired a 51 percent stake in Ensemble Health Partners for $1.2 billion, Nordic Capital acquired a majority stake in ArisGlobal for $700 million, JPMorgan Chase acquired InstaMed for more than $500 million, Thomas H. Lee Partners (THL) acquired Nextech Systems for $500 million, and Hill-Rom Holdings acquired Voalte for $195 million,” a release accompanying the report said.

The top VC funded digital health categories in the second quarter of 2019 were telemedicine with $676 million, followed by analytics with $551 million and wellness with $304 million. There were 73 early stage deals in Q2 2019, compared to 48 in Q1 2019.

Wearable sensors also had a strong performance, raising $285 million in funding, while mobile wireless raised $264 million, and healthcare benefits brought in $208 million.

The report adds that since 2010, digital health companies have now raised over $40 billion in VC funding deals since 2010. U.S. digital health companies have raised approximately $30 billion to date.

Funding for digital health has had a strong performance in recent times. In its annual report for 2018, Mercom Capital Group said investments in the sector hit $9.5 billion, a rise of 32 percent compared to 2017, where there were deals worth $7.2 billion.