There’s still three months left in 2018, but digital health investing has already surpassed last year’s record-breaking haul, according to a new report from Rock Health.
So far, startups within digital health have raised an eye-popping $6.8 billion in 2018, compared to $5.7 billion in 2017.
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One interesting insight is that what’s mainly driving the increase is not the number of deals being made, but rather the size of the capital raises themselves.
Case in point, average deal size in 2018 has been $23.6 million, outstripping last year’s number by more than $7 million.
Median deal size has also increased through both early stage and later stage investments, with the 2018 median Series A round size of $8 million equivalent to a Series B in 2011.
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In 2018 alone, ten companies have inked mega-deals of more than $100 million including chronic disease management company Livongo, workforce healthcare management company Collective Health, Chicago-based data company Tempus and mobile ultrasound company Butterfly Network.
Far and away the largest deal was the $550 million capital infusion into exercise equipment and workout class company Peloton, which was led by TCV.
Part of the escalation in funding can also be attributed to the increasing prominence of corporate venture capital arms in digital health, especially in later stage rounds.
Some prominent examples include biopharma giant GlaxoSmithKline’s $300 million investment into 23andMe, Abbott’s participation in Bigfoot Biomedical’s $55 million Series B and Cigna Ventures’ continuing support of Omada Health.
One digital health market segment especially attractive to investors is the shift to on-demand and at-home care services, which received $1.27 billion in investment, including telehealth company American Well’s blockbuster $291 million investment from Philips.
In that vein digital therapeutics were also in investors’ sights with startups like Pear Therapeutics, Click Therapeutics, Akili Interactive Labs, Virta Health, and Hinge Health all raising more than $25 million.
“While there is still consumer demand for in-person provider relationships, there is an increasing focus on companies that connect patients (and patient data) with providers and care in more continuous, accessible, convenient ways,” the report said.
One note of caution is that exits remain sluggish in the market with only 82 acquisitions this year and no IPOs since 2016. Companies focused on enhancing electronic health records and clinical workflow have the highest chance to be acquired.
Still, the most likely acquirer for a digital health company is another digital health company. One example is Denver-based Welltok, which purchased WellPass earlier this year, adding to its line of digital health acquisitions including Mindbloom, Predilytics and Tea Leaves Health.
The consistent uptick of investment, along with the dearth of big exits have led some observers to predict a bubble within the digital health space.
Rock Health, for its part, predicts a consolidation within the digital health space accelerating in the near future and driven by mix of private equity and growth stage investors looking to package products together into larger service offerings.
Photo: StockFinland, Getty Images
