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Report: Health IT VC Funding Hit $1.4B in Q1 2016

April 14, 2016
by Rajiv Leventhal
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Venture capital (VC) funding in the health IT sector increased 27 percent quarter-over-quarter, coming in at $1.4 billion in 146 deals, compared to $1.1 billion in 145 deals in Q4 2015, according to a new report from Austin, Texas-based Mercom Capital Group.

Healthcare practice-centric companies received 42 percent of the funding in Q1 2016, raising $569 million in 49 deals compared to $360 million in 44 deals in Q4 2015. Consumer-centric companies received 58 percent of the funding this quarter, bringing in $796 million in 97 deals compared to $711 million in 101 deals in Q4 2015, according to Mercom.

Top funded areas in Q1 were wearables/sensors with $260 million, data analytics companies with $197 million, telemedicine with $171 million, Mobile health (mHealth) apps with $120 million, and consumer health information/education with $100 million.

There were 53 early-stage deals at or below $2 million, including 14 accelerator and incubator deals. The top VC deals this quarter included the $175 million raised by Flatiron Health, $165 million raised by Jawbone, $95 million raised by Healthline, $70 million raised by Health Catalyst, $46 million raised by inviCRO, and $40 million raised by higi, according the report.

What’s more, there were 58 M&A transactions (nine disclosed) in the health it sector this quarter compared to 53 transactions (13 disclosed) in Q4 2015. This quarter had the highest recorded number of M&A transactions in a single quarter, Mercom reported. mHealth app companies were involved in the most M&A transactions with nine, followed by practice management companies and personal health companies with seven each, data analytics companies with five, electronic health record (EHR) companies with four, and telemedicine companies with three.

The top five disclosed M&A transactions were the $2.75 billion acquisition of MedAssets by Pamplona Capital Management, the $2.6 billion acquisition of Truven Health Analytics by IBM, the $950 million acquisition of Netsmart Technologies by Allscripts, the $140 million acquisition of CenTrak by Halma, and the $119 million acquisition of MedicalDirector by Affinity Equity Partners.

“The health IT sector is off to an impressive start this year with significant funding activity in the first quarter led by wearables, data analytics and telemedicine. Data analytics and telemedicine companies reached a significant milestone, each crossing $1 billion in funding raised to date. Health IT public companies, meanwhile, continued to underperform,” Raj Prabhu, CEO and co-founder of Mercom Capital Group, said in a statement.

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