Report: Health IT Venture Capital Funding Increases to $5.1 Billion in 2016 | Healthcare Informatics Magazine | Health IT | Information Technology Skip to content Skip to navigation

Report: Health IT Venture Capital Funding Increases to $5.1 Billion in 2016

March 6, 2017
by Heather Landi
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In 2016, venture capital funding, including private equity and corporate VC, in the healthcare information technology (health IT) sector totaled $5.1 billion in 622 deals, a new record for the sector, according to an annual report from Austin, Texas-based Mercom Capital Group.

Mercom Capital Group, a global research and communications firm, recently released its “2016 Q4 and Annual Health IT Funding and M&A (mergers and acquisitions) Report,” for the healthcare IT and digital health sector. According to that report, venture capital funding in the health IT sector grew 9 percent year-over-year, to $5.1 billion compared to $4.6 billion raised in 574 deals in 2015. Corporate funding in health IT companies—including debt and public market financing—came to $5.6 billion, down 30 percent from 2015’s $8 billion.

Since 2010, the sector has received $18.5 billion in VC funding in 2,672 deals and about $7.5 billion in debt and public market financing (including IPOs), bringing total healthcare IT funding to $26 billion, according to the Mercom Capital press release about the report.

“Venture Capital funding bounced back after declining in 2015,” Raj Prabhu, CEO and co-founder of Mercom Capital Group, said in a prepared statement. “Digital Health public companies on the other hand continue to struggle.”

Drilling down in the sector, healthcare practice-focused companies raised $1.6 billion in 185 deals, accounting for about 32 percent of the total funding. That 1.6 billion is up from the $1.5 billion raised in 171 deals in 2015.

Consumer-centric companies raised about $3.5 billion in 437 deals, accounting for 68 percent of the total funding raised, and up from $3.1 billion in 403 deals in 2015.

The top funded areas in 2016 were:

  • mobile apps – $1.3 billion
  • wearable sensors – $592 million
  • data analytics – $574 million
  • telemedicine – $528 million
  • mobile wireless – $228 million
  • wellness – $218 million

Looking at the top VC funding rounds in 2016, the Mercom Capital report rounded up the top five—Ping An Good Doctor-$500 million; Chunyu Yisheng-$183 million; Flatrion Health-$175 million; Jawbone-$165 million, and Meet You-$151 million.

The average deal size in 2016 was $8.1 million, similar to 2015.

Thirty-five countries saw healthcare IT VC funding deals in 2016 compared to 27 in 2015. Within the United States, California companies continued to receive the most funding with $1.3 billion in 143 deals. New York was second with $440 million in 49 deals.

Mercom Capital also reports that a total of 1,115 investors (including accelerators/incubators) participated in healthcare IT VC funding in 2016 compared to 923 in 2015 Top VC investors in 2016 were Khosla Ventures (seven deals), then GE Ventures, Social Capital, and BlueCross BlueShield Venture Partners (six each), the report stated.

There were 22 accelerators and incubators who participated in 83 deals in 2016, compared to 2015 which had 55 deals involving 14 accelerators and incubators.

The report also looks at 2016 M&A transactions and health IT M&A activity dropped to 205 in 2016 compared to 219 in 2015.

Health information management (HIM) companies were involved in 89 M&A transactions in 2016, followed by mobile health companies (26), data analytics companies (19), telehealth and personal health companies with 18 each, and scheduling, rating and comparison shopping companies with 12.

According to the report, the top five disclosed M&A transactions in 2016— Pamplona Capital Management’s $2.75 billion acquisition of MedAssets, followed by the $2.6 billion acquisition of Truven Health Analytics by IBM. The third largest M&A transaction was the $2.35 billion acquisition of Press Ganey Associates by EQT Equity fund EQT VII, followed by the $950 million acquisition of Netsmart Technologies by Allscripts & GI Partners. Finally, bringing up the top 5 was the $820 million acquisition of Verisk Analytics' healthcare services business from Verisk Health (Verscend) by Veritas Capital.

Further, Mercom Capital reports that debt and public market financing for healthcare IT companies fell to $533 million in 18 deals last year, compared to $3.4 billion in 29 deals in 2015.

Last year, four IPOs raised a combined $234 million, while seven IPOs in 2015 raised a total of $2.2 billion. NantHealth raised $91 million, Tabula Rasa HealthCare raised $51.6 million, Oneview Healthcare raised $46.5 million and Senseonics raised $45 million.

 

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