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VC Funding for Health IT Jumps 32 Percent in Q3 2015

October 23, 2015
by Heather Landi
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After a slow start this year, venture capital funding for healthcare information technology and digital health bounced back with 32 percent growth quarter over quarter, according to a report from Mercom Capital Group.

The report on funding and mergers and acquisitions activity for digital health and health IT stated that VC funding, including private equity and corporate venture capital, increased by double digits from the second quarter, coming in at $1.6 billion in 148 deals compared to $1.2 billion in 139 deals in Q2 2015.

VC funding in this past third quarter also was up 66 percent compared to the same quarter last year, the Mercom Capital Group report states.

Year-to-date, VC funding has reached nearly $3.57 billion for this sector, compared to the $3.53 billion raised during the same period last year.

 The top VC funded category in the third quarter was Rating, Booking and Comparison Shopping, and those companies had the best fundraising quarter since Mercom Capital Group started tracking the category, bringing in $728 million in 15 deals, according to Raj Prabhu, CEO of Mercom Capital Group.

Mobile health companies were the second highest category with $319 million raised in 59 deals, followed by personal health and wellness companies accounting for $114 million in 17 deals. Practice management companies raised $72 million in five deals, telehealth companies raised $65 million in 14 deals and data analytics companies raised $61 million in 14 deals.

Companies aimed at providers raised $357 million in 42 deals and consumer-centric companies raised $1.2 billion in 106 deals this past quarter.

“Consumer-focused health IT companies have continued to grab a larger portion of VC funding but have consistently lagged practice-focused companies in M&A activity. This quarter, however, M&A activity increased with 18 consumer-focused transactions, the highest number for these companies in a single quarter. It is a very positive trend if it continues, because IPOs have not proven to be a sure path to success for the sector,” Prabhu said.

The largest M&A this quarter was IBM’s $1 billion acquisition of Merge Healthcare, followed by Emdeon’s $910 million acquisition of Altegra Health. Premier acquired CECity, a developer of a cloud-based data analytics platform that provides performance management and pay-for-value reporting, for $400 million. Cardinal Health acquired 71 percent of naviHealth for $290 million and Adidas acquired Runtastic, a developer of a fitness app, for $240 million.

Guahao, an online health information portal for patients in China to book appointments with physicians, was the top VC deal this quarter as it raised $394 million. Among the top VC deals were the $130 million raised by online doctor appointment booking platform ZocDoc and the $90 million raised by Practo, a developer of a physician search engine to book appointments and rate providers.

Debt and public market financing in the sector came up to $495 million in nine deals, including two IPOs. Total corporate funding raised in the sector including VC, debt and public market financing raised by publicly traded companies and IPOs for the third quarter came to $2.1 billion.

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