StartUp Health Reports Over $6 Billion in Digital Health Funding in First Half of 2017, Highlighting Surge in Patient Education and Digital Health Innovation

StartUp Health is one of the most influential digital health startup accelerators worldwide. In recent years, the company has continued to expand its scale, and its regularly published rankings have consistently garnered widespread attention from various sectors within the industry.

As soon as the second quarter of 2017 concluded, Startup Health released its review report on financing and investment for the first half of 2017, with data current as of June 30, 2017. VCBeat (WeChat: vcbeat) brings you the full translation of the report without delay; see below for details.

One of the most exciting trends in recent years is that a group of entrepreneurs, leaders, and investors are focusing on various bold “Health Moonshots.” StartUp Health is organizing and supporting its portfolio companies to achieve 10 “Health Moonshots,” committed to improving the health of people worldwide in all aspects over 25 years. Each “Health Moonshot” has the potential to benefit at least one billion people.

These 10 “Health Moonshot Initiatives” are:

1. Universal Care Access Program. Providing high-quality care to everyone, regardless of location or income;

2. Healthcare Cost Reduction Plan. Fundamentally reduce healthcare costs;

3. Disease Cure Plan. Achieve disease cures through big data, new technologies, and personalized medicine;

4. Cancer Plan. The fight against cancer will continue;

5. Women's Health Initiative. Focusing on women's health, including preventive care and new research;

6. Child Health Program. Ensure that every child has access to high-quality care, particularly in underdeveloped areas;

7. Nutrition and Fitness Plan. Provide a healthy environment to support an active lifestyle;

8. Brain Health Program. Explore the mysteries of the brain and improve brain health;

9. Mental Health Plan. Acknowledge the importance of mental health and reconnect mind, body, and spirit;

10. Longevity Plan. Extend every individual’s lifespan by 50 years.

As of mid-2017, the total amount of investment and financing, as well as the number of emerging investors focusing on the digital health sector, had already surpassed the figures from previous years.

Major deals in the first half of the year included Grail’s $914 million financing round and Health Outcomes’ $600 million financing round. In terms of deal volume, the San Francisco Bay Area far led other regions in the United States with 47 transactions; meanwhile, support for digital health innovation is growing steadily in several other U.S. and overseas digital health hubs outside the Bay Area.

1. Q2 2017 Became the Quarter with the Largest Investment and Financing Amount in History

The digital health industry reached a significant milestone in the second quarter of 2017: total financing and investment amounted to $3.8 billion, surpassing the combined totals for 2010 and 2011. Although the number of transactions did not increase, funding activities exceeding $100 million have become increasingly frequent.

2. 2017 Is Poised to Become the Year with the Highest Investment and Financing Volume

With mid-year investment and financing amounts surpassing $6 billion, 2017 has already broken many records, including the highest funding volume in the first half of a year. As various large-scale transactions are expected to become more frequent in the second half of the year, we anticipate that this year will be the biggest year for investment and financing in history.

3. Continuous Expansion of Transaction Scale

In the first half of 2017, there were more than 10 deals exceeding $100 million, making it the year with the highest number of “$100 million-plus” transactions on record. These deals spanned diverse sectors, ranging from big data and patient education to general health.

4. Patient Education Sector Begins to Heat Up

Health Outcomes Secures $600 Million in Financing, Signaling that Investors and the “Cancer Moonshot” Are Focusing on Patient Education

5. Digital Healthcare Welcomes a Wave of Emerging Investors

The number of active investors in the first half of 2017 has already reached the total for the entire year of 2014, indicating that investors view medical innovation as an exciting opportunity and are confident in deploying capital in this sector.

The implementation of the “Health Moonshot” initiative has drawn many companies into the digital health industry. Listed below are global companies under the StartUp Health incubator that achieved significant progress and secured funding in the first half of 2017.

1.CareDox

Field: Child Health

Series A Funding: $6.4 million

Public schools have long been at the forefront of promoting children’s health. Established in 2014, CareDox is committed to providing healthcare services to 50 million children in public schools annually.

2. Wellthie

Domain: Reducing Healthcare Costs

Series A Funding: $5 million

Wellthie is dedicated to helping consumers find, understand, and use their health insurance.

3. Conversa Health 

Domain: Disease Cure

Series A Financing: $8 Million

Conversa Health believes that better exchange and communication can enhance the effectiveness of healthcare services, and is committed to improving engagement through intelligent dialogue technology, thereby enhancing the quality of medical care.

4. AlemHealth 

Field: Public Access to Nursing Care

Seed Round Financing: $1 Million

AlemHealth is committed to providing people in developing countries with high-quality healthcare from around the world.

Diagnostic Services.

5. Babyscripts 

Domain: Women's Health

Series A Financing: $5.7 Million

To provide safe and healthy pregnancy experiences for over 200 million expectant mothers worldwide.

6. Pathfinder

Field: Child Health

Seed Round Financing: $1 Million

Pathfinder is dedicated to helping children with autism spectrum disorder better integrate into society.

7. VhedaHealth

Field: Reducing Healthcare Costs

Seed Round: $1.5 Million

VhedaHealth focuses on hospitalization costs for patients with chronic diseases, committed to reducing inpatient expenses for high-risk chronic disease patients.

8. RC21X

Field: Brain Health

Seed Round: $200,000

RC21X is an advanced brain health and performance measurement system dedicated to tracking and monitoring brain function through cloud-based tools, thereby improving treatment outcomes for brain injuries.

9. Varela Health

Domain: Mental Health

Series A Financing: $1 million

To provide better behavioral health services to the more than 100 million Americans suffering from mental health challenges.

10. HelloMD

Field: Longevity

Seed Round: $1 million

Provide medical cannabis to millions of patients to alleviate their suffering.

11. OpenDoctor

Field: Mass Nursing Access

Seed Round Financing: $1 Million

A simple and user-friendly platform enables patients to schedule outpatient appointments more easily, lowering the barrier for the general public to access medical services.

12. Oxitone

Field: Longevity

Seed Round: $1.5 million

Oxitone is a wrist-worn heart rate monitor from Israel that continuously tracks patients' heart rate and blood oxygen levels, triggering timely medical alerts before the onset of symptoms.

13. MondoPoint

Domain: Reducing Healthcare Costs

Seed Round: $200,000

Help healthcare institutions measure the value of purchased products.

14. Zentist

Field: Mass Nursing Access

Seed Round Financing: $1 Million

Provide dental services to the more than 120 million people in the United States who lack dental insurance coverage.

In the first half of this year, more than $6 billion flowed into the digital health industry, with 306 transactions completed. 2017 is poised to become the most active year for investment and financing in the history of digital health.

The continuous influx of substantial capital is driving the digital health market toward greater maturity, with transaction volumes growing in tandem. As industry giants enter the fray, we expect this trend to persist, accompanied by an increasing number of deals valued at over $100 million.

The two significant surges in March and May indicate that the large volume of financing events in the first half of 2017 continued to drive growth, fueling a more positive overall trend.

The financing figures in May 2017 were particularly high: during that month, 54 companies raised a total of $1.7 billion.

All of the top 10 deals in the first half of 2017 were large-scale transactions exceeding $100 million. As the digital health market continues to mature, we anticipate that such “hundred-million-dollar” mega-deals will continue to emerge.

Focus: Companies with tens of millions of dollars in financing

The group of companies shown in the figure below each secured $10 million in investment during the first half of this year.

Generally, companies that can raise $10 million have already proven the viability of their business models to the market and are about to enter a period of rapid expansion. There is clear market demand for their specific products, and the next step is to build business processes that allow for product replication at a larger scale. More attention should be paid to this type of company in the future.

Grail’s $914 million mega-deal made the “Big Data/Analytics” sector ($1.2 billion, 30 deals) stand out in this ranking, while Outcome Health’s $600 million deal single-handedly propelled the “Education/Training” sector ($622 million, 4 deals) to second place.

Ranks 3–10 were patient/consumer experience ($579 million, 56 deals), personalized medicine/self-health quantification ($571 million, 13 deals), medical devices ($507 million, 45 deals), wellness ($507 million, 28 deals), workflow ($471 million, 46 deals), research ($465 million, 18 deals), population health ($457 million, 30 deals), and electronic health records ($374 million, 6 deals). 

Based on the financing landscape in the first half of 2017, companies secured funding across every stage, including 50 deals at the seed round to date. Early-stage transactions (seed and Series A) accounted for more than 60% of the total number of deals.

As shown in the figure, the average financing size in the digital health sector has been on a continuous upward trend in recent years. When broken down by funding round, the average number of Series C rounds has gradually declined since 2015, while Series B rounds have seen steady growth.

In the first half of 2017, the digital health market continued to mature, with Series A financing deals outnumbering seed-stage transactions. As shown in the figure, sectors such as workflow solutions, big data/analytics, general health, medical devices, and personalized medicine/self-quantified health have all demonstrated extremely active Series A investment activity.

In recent years, “mega-deals” in the digital health sector have gradually become mainstream. This trend was particularly pronounced in the first half of 2017, when 11 transactions ranked among the top financings since 2010, including Grail in first place ($914 million) and Outcome Health in second place ($600 million).

The San Francisco Bay Area remains a key region for financing in the northeastern United States, with numerous mega-deals completed in the first half of the year.

Notably, the rankings in the middle and lower tiers of the list have changed significantly compared to the Q1 report. New entrants such as Minneapolis/St. Paul and Austin are emerging as new hubs for digital health innovation, ranking 6th and 9th, respectively. Together with Seattle (ranked 8th) and Denver (ranked 10th), these four cities saw 24 companies (accounting for 13% of the total number of transactions) raise $489 million in funding.

In the first half of 2017, several key deals emerged in the UK, Europe, Asia, and Australia, including Haodf Online in China (Series D, $200 million), Babylon in the UK (Series B, $60 million), Practo in India (Series D, $55 million), Cnoga Medical in Israel (venture capital, $50 million), and Saluda Medical in Australia (venture capital, $40 million), demonstrating the comprehensive global development of digital health investment and financing.

Although many new players entered the digital health sector in the first half of this year, existing investors maintained their leading positions on the rankings by sustaining or even increasing their investments. The following eight companies ranked in the top three among investors for the first half of the year, with 7, 6, and 5 transactions respectively.

As shown in the figure, the number of investors has generally demonstrated a steady upward trend in recent years. In just the first half of this year, 583 investors deployed capital in the digital health sector, approaching the full-year total of 609 in 2015 and on track to surpass last year’s figure of 865.