Health IT VC funding sees 'torrid' Q1

$493 million in deals as consumer-facing technology gets closer look

With nearly half a billion dollars raised in venture capital funding for health information technology, the first three months of 2013 represented a "record quarter," according to Mercom Capital Group.

Some $493 million was raised industry-wide, according to Mercom's 2013 Healthcare IT Funding and M&A Report, in twice as many deals as the previous quarter (104, up from 51). There were nearly four times as many early stage deals – 42, up from 14 – compared to the fourth quarter of 2012.

The top deal for Q1 was a $41 million round of funding raised by Salt Lake City-based Health Catalyst, which develops data warehousing technology. That was followed by $40 million raised by Geisinger Health System spinoff xG Health Solutions, whose data analytics platform is aimed at patient and population-focused care management.

Los Angeles-based NantHealth, which is working on advanced secure fiber networks, cloud computing and wireless technology for care delivery, raised $31 million. Fitbit, a fitness and health tracker company, and One Medical Group, a provider of online primary care services, both based in San Francisco, raised $30 million each.

"The trend we began to see last year of VCs investing in consumer-focused companies like mobile health, telehealth, personal health [and] social health ... has become much more pronounced," said Raj Prabhu, CEO of Mercom Capital Group, in a press statement. "The enormous market opportunity in consumer-focused health has appeared to pique the interest of investors and is likely to continue to grow as witnessed by the surge in VC activity."

More than 100 investors participated in deals in the first quarter of 2013, with ten investors involved in multiple funding rounds. Those with multiple rounds include Blueprint Health, Google Ventures, Maverick Capital, Merck Global Health Innovation Fund, Nike+ Accelerator, Norwest Venture Partners, Oak Investment Partners, Psilos Group, The Social+Capital Partnership and Y Combinator.

On the merger and acquisition front, there were 46 transactions this quarter, according to Mercom. Health information management companies were acquired most, with 22 transactions, followed closely by service providers with 11 acquisitions.

The largest disclosed transaction was athenahealth’s acquisition of Epocrates, which develops mobile medical apps for the point of care, for $293 million. Allscripts’ acquisition of health information exchange and interoperability firm dbMotion, for $235 million, was a close second, followed by JLL Partners’ $123 million acquisition of BioClinica, which develops technology for clinical trial management.

[See also: VC funding for health IT breaks record in Q1]