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VC Funding Climbing in Healthcare IT

July 23, 2012
by Gabriel Perna
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According to a report from the Austin, Texas-based Mercom Capital Group, llc, a global communications and consulting firm, venture capital funding in the health IT sector continued to climb reaching $293 million in the second quarter of 2012 in 28 deals. The total amount and the number of deals were at their highest levels since 2010. The report looked at funding, merger and acquisition (M&A) activity for the Healthcare IT (HIT) sector for the Q2 in 2012.

 “The strong uptrend that started in Q2 2011 has continued for four quarters in a row,” Raj Prabhu, managing partner at Mercom Capital Group, said in a statement. “Also significant is the continued strong M&A activity in the sector, providing investors and companies with viable exit strategies.”

According to Mercom, 61 different investors participated in these funding rounds with Founders Fund and Venrock participating in multiple deals.  Receiving the most funding as a technology group were health information management companies, totaling $247 million in 19 deals. Telemedicine companies followed with $19 million in three deals and Personal Health Record (PHR) companies with $16 million in four deals.

The top deal this quarter was the $100 million raised by Castlight Health, a provider of healthcare web and mobile-based transparency solutions that aims to enable comparisons of doctors, hospitals, medical procedures based on price and quality, followed by $34 million raised by Practice Fusion, a provider of free web-based EMR, and $30 million each raised by Valence Health, a provider of clinical integration, data collection and analysis software and Liaison Technologies, a provider of cloud-based integration and data management solutions.

Other top deals were $14 million each raised by Carena, a provider of healthcare services 24 hours a day via phone, secure video, and the traditional house calls and Aware Point Corporation, a provider of real-time location system (RTLS) solutions for healthcare. The average VC deal size in Q2 was $10.5 million.

In terms of M&A, there were 29transactions in Q2 2012 amounting to $2.9 billion. Top M&A transactions included Thomson Reuters’ HIT business acquired by Veritas Capital for $1.25 billion, Decision Resource Group, a health information company acquired by Piramal Healthcare Limited for $635 million and Extend Health, a private medicare insurance exchange acquired by Towers Watson for $435 million.

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