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No “Trump Effect” on 2017 Health IT VC Funding, Report Finds

April 18, 2017
by Rajiv Leventhal
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Venture capital (VC) funding in the health IT sector almost doubled quarter-over-quarter, coming in at $1.6 billion over a span of 165 deals, compared to $845 million in 159 deals in Q4 2016, according to a funding and M&A report from Austin, Texas-based research firm Mercom Capital Group.

VC funding in Q1 2017 was also up compared to Q1 2016 when nearly $1.4 billion was raised in 146 deals. The digital health sector has now received $20 billion in VC funding since 2010, per the report. “Digital health funding is off to a fast start this year and there was no visible ‘Trump effect’ on investments in the sector, at least in the first quarter, and publicly-traded Digital health companies actually fared much better in Q1 than last year,” Raj Prabhu, CEO and co-founder of Mercom Capital Group, said in a statement that accompanied the report.

Healthcare practice-centric companies received 35 percent of the funding in Q1 2017, raising $574 million in 50 deals compared to $261 million in 42 deals in Q4 2016. Consumer-centric companies received 65 percent of the funding this quarter, bringing in $1 billion in 115 deals compared to $584 million in 117 deals in Q4 2016.

Drilling down, the top-funded areas in Q1 2017 were: appointment booking ($315 million); mobile wireless ($230 million); data analytics ($193 million); population health management ($115 million); telemedicine ($112 million); and social health network ($102 million). Further, the top VC deals this quarter included: $200 million raised by Hudong Feng Technology (Haodaifu); $115 million raised by Alignment Healthcare; $100 million raised by PatientsLikeMe; $90 million raised by Nuna; and $85 million raised by PointClickCare.

In all, a total of 306 investors (including four accelerators/incubators) participated in funding deals in Q1 2017 compared to 340 investors in Q4 2016, of which two were accelerators/incubators. Health IT VC funding deals were spread across 19 countries in Q1 2017.

There were 49 M&A transactions (seven disclosed) in the healthcare IT sector in Q1 2017 compared to 42 transactions (11 disclosed) in Q4 2016. Practice management solutions companies were involved in the most M&A transactions with six, followed by apps and data analytics with five each, then consulting and telemedicine with four apiece. Meanwhile, the top disclosed M&A transactions were: $1.1 billion acquisition of CoverMyMeds by McKesson; Eliza Corporation’s $170 million acquisition from Parthenon Capital Partners by HMS Holdings; Castlight Health's $134 million buy of Jiff; and HCI Group for $110 million by Tech Mahindra.

The growth of VC funding in this segment stems from a record year in 2016, when venture capital funding, including private equity and corporate VC, in the healthcare IT sector totaled $5.1 billion in 622 deals.

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