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Health IT VC Funding More Than Doubles in 2014

January 15, 2015
by Rajiv Leventhal
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Venture capital funding in the healthcare IT sector in 2014 more than doubled last year’s total, coming in at $4.7 billion, according a new report from consulting firm Mercom Capital Group.

The $4.7 billion included 670 deals, compared to $2.2 billion in 571 deals in 2013. 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, the report found. VC funding also increased in Q4 2014 with $1.2 billion in 134 deals compared to $956 million in 212 deals in Q3 2014.

“The healthcare IT sector had another phenomenal fundraising year,” Raj Prabhu, CEO and co-founder of Mercom Capital Group, said in a statement. “In the five years since we started tracking funding data, the sector has raised $8.8 billion in VC funding and another $3.6 billion in public market and debt financings bringing the total to $12.4 billion—largely driven by the HITECH 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.”

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.

Furthermore, consumer-centric companies raised $2.3 billion in 436 deals. mHealth companies were the largest recipient of VC funding bringing in $1.2 billion—within mHealth most funding went to wearables with $526 million and mHealth apps with $507 million. Telehealth companies received $369 million.

What’s more, there were 219 mergers and acquisitions (M&A) transactions in the health IT sector in 2014 compared to 165 transactions in 2013, with 21 companies making multiple transactions during the year, according to the report. Revenue cycle management companies led M&A activity with 28 transactions followed by practice management with 24 and mHealth with 21.

The top five disclosed M&A transactions included the $4.4 billion acquisition of MultiPlan by Starr Investment Holdings and Partners Group, the acquisition of TriZetto by Cognizant for $2.7 billion, and the $1.3 billion acquisition of Siemens’ health information technology business unit, Siemens Health Services, by Cerner.

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