Mercom Capital Group Reports $4.7 Billion in Global Digital Health Venture Funding for 2014

Mercom Capital Group, LLC is a global communications consulting firm. It recently released its annual report on financing and mergers and acquisitions in the healthcare information technology sector for 2014, covering transactions of various sizes worldwide. The report shows that global venture capital investment in healthcare IT reached a record high of $4.7 billion in 2014, more than doubling the 2013 figure. VCBeat has compiled and translated this report:

Compared with 571 deals totaling $2.2 billion in 2013, the number of transactions in the healthcare information technology sector rose to 670 in 2014, while venture capital funding more than doubled to reach $4.7 billion. The sector also attracted $2.1 billion in debt and public market financing, including six initial public offerings (IPOs), bringing total corporate fundraising in the field to nearly $7 billion. Furthermore, venture capital investment increased in the fourth quarter of 2014, with 134 deals totaling $1.2 billion, compared with 212 deals worth $956 million in the third quarter.

“2014 was another year with astonishing capital raising in the field of healthcare information technology. We have been tracking data for five years, and during this period, the sector raised a total of $8.8 billion in venture capital funding, $3.6 billion in public markets and debt financing, amounting to $12.4 billion—largely driven by high-tech advancements and the Affordable Care Act. However, when you look at the market performance of companies going public via IPOs in 2014, it becomes apparent that the enthusiasm shown by the venture capital community does not quite align with the public market’s response,” commented Raj Prabhu, CEO and co-founder of Mercom Capital Group.

In 2014, practice-centric companies completed 234 transactions and raised $2.4 billion, including $517 million for clinical decision support companies, $367 million for data analytics companies, and $247 million for population health management companies.

Consumer-centric companies raised $2.3 billion across 436 deals. Mobile health (mHealth) companies were the largest recipients of venture capital, attracting $1.2 billion. Within the mHealth sector, the majority of funding went to wearables and mobile medical applications, which received $526 million and $507 million, respectively. Telemedicine and price-comparison shopping platforms also secured significant funding, raising $369 million and $288 million, respectively.

Significant Year-on-Year Growth in Key Technology Sectors:

· Internet healthcare apps: 341%
· Telemedicine: 297%
· Comparative Shopping: 216%
· Data Analysis: 146%
· Wearables: 136%

NantHealth closed two deals in its first two rounds of venture capital financing before 2014, raising $320 million and $135 million, respectively. Flatiron Health raised $130 million, followed by Alignment Healthcare, which secured $125 million. Proteus Digital Health raised $120 million (it also raised $52 million in another transaction, bringing its total funding in 2014 to $172 million). Additionally, China’s Guahao.com raised $100 million, the Dedalus Group raised $89 million, and American Well secured $81 million in funding.

A total of 732 investors participated in the financing rounds of healthcare information technology companies over a 14-year period. The top investors included Khosla Ventures and The Social+Capital Partnership, each with nine completed deals, as well as Kleiner Perkins and Sequoia Capital, each with seven completed deals.

Over the past five years, top investor Khosla Ventures completed 21 deals, The Social+Capital Partnership completed 18, Kleiner Perkins had 17, Sequoia Capital 12, and Andreessen Horowitz 10.

There were 120 accelerator and incubator deals in 2014, compared with 139 in 2013. The top accelerator/incubator seed investors include Blueprint Health, Rock Health, Y Combinator, DreamIt Ventures, Sprint Accelerator, The Iron Yard, and XLerateHealth.

Meanwhile, 29 countries participated in healthcare information technology investment activities this year. In the United States, California far led other regions with 174 deals, followed by New York with 50, Massachusetts with 33, Florida with 22, and Texas with 21.

“Most M&A activity has centered on larger, more mature companies with focused practices. Although mobile health-related apps and wearable devices have attracted substantial investment, we have yet to see a game-changing Instagram- or WhatsApp-type deal in this space,” Prabhu continued.

Revenue cycle management companies recorded 28 M&A transactions, followed by practice management with 24 and internet healthcare with 21.

Over the past five years, 121 companies have engaged in multiple mergers and acquisitions. Among them, IMS Health completed eight transactions; CompuGroup Medical, Emdeon, iMedx, and Quality Systems each completed seven; McKesson and PracticeMax each completed six; and Cerner, GE Healthcare, Nuance Communications, and The Advisory Board Company each completed five.

In public M&A transactions, the top five deals were: Starr Investment Holdings and Partners Group acquiring MultiPlan for $4.4 billion; Cognizant acquiring TriZetto for $2.7 billion; Cerner acquiring Siemens Health Services’ medical IT division for $1.3 billion; Vista Equity Partners acquiring Advanced Computer Software for $1.14 billion; and Summit Partners acquiring ABILITY Network for $550 million.

In 2014, six initial public offerings (IPOs) in the healthcare information technology sector raised a total of $1.8 billion. Among them, IMS Health raised $1.3 billion, Castlight Health raised $204 million, Everyday Health raised $100 million, Orion Health raised $98 million, and Imprivata and Connecture raised $86 million and $53 million, respectively.

(To stay updated at the earliest opportunityInternet HealthcareFor startup information, please follow the VCBeat WeChat official account: vcbeat. You are also welcome to engage with us on topics of interest, contact us via WeChat, and share your startup projects or related research insights.