Venture funding takes big dip in Q1
Venture capital funding in the health information technology and digital health dropped by about 35 percent in Q1 2015, according to a new report from global communications and research firm Mercom Capital Group. The $784 million raised in 142 deals compared to $1.2 billion in 134 deals in Q4 2014.
[See also: 2014 health IT venture funds fly high.]
The top deals for Q1 2015 were:
- $70 million raised by Health Catalyst, a provider of healthcare data warehousing and analytics
- $55 million raised by Ayasdi, a big data analytics company
- $40 million secured by Advance Health, a provider of a mobile patient data capture application for managed care providers
- $40 million raised by ClassPass, a mobile membership app offering fitness and wellness classes across multiple gyms and studios
- $38 million raised by Collective Health, a cloud-based employer self-insurance platform
- $30 million raised by Practo, developer of a physician search engine to book appointments and rate providers.
[See also: Eyeing IPO, Health Catalyst lands $70M.]
Announced debt and public market financings in the health IT sector amounted to $975 million in seven deals in Q1 2015 including one IPO, bringing the total corporate funding raised in the sector for Q1 2015, to almost $1.8 billion.
“Funding fell across the board with the exception of mobile health, which was the bright spot this quarter," said Raj Prabhu, CEO and co-founder of Mercom Capital Group. "There was also significant M&A activity in the first quarter for mHealth companies. We have already seen 10 M&A transactions in Q1 compared to 21 in all of last year, which bodes well for exits in mobile health.”
The largest disclosed M&A transaction was the $475 million acquisition of MyFitnessPal, a nutrition and fitness platform that allows users to track their health goals and provides nutritional information, by Under Armour. This was followed by the $325 million acquisition of Studer Group, a provider of healthcare consulting services and software, purchased by Huron Consulting.
[See also: Huron Consulting to acquire Studer.]
Healthcare practice-centric companies raised $347 million in 44 deals in Q1 2015 compared to $568 million in 43 deals in Q4 2014. Areas that received the most funding under this category were data analytics companies with $92 million; data warehousing companies with $70 million; health insurance exchange companies with $38 million; EHR/EMR companies with $36 million and practice management solutions companies with $34 million.
Consumer-centric companies raised $437 million in 98 deals this quarter compared to $643 million in 91 deals in Q4 2014. Mobile health companies continued to attract the most VC funding bringing in $282 million in 56 deals, most of which went to mHealth Apps with $220 million. Telehealth companies secured $65 million while rating and comparison shopping companies brought in $47 million.
There were 65 early-stage deals under $2 million, including 16 accelerator/incubator deals in Q1. Seed stage accelerator/incubator deals have slowed with only six deals last quarter and 16 this quarter compared to 35 in Q1 2014.
A total of 288 investors and four accelerators/incubators participated in Healthcare IT deals this quarter. There were 11 investors that participated in multiple rounds. Investors with the most funding deals this quarter included GE Ventures with four, followed by Rock Health and Kaiser Permanente Ventures with three each.
There were 56 M&A transactions (14 disclosed) in the Health IT sector in Q1 2015 compared to 52 transactions (nine disclosed) in Q4 2014. Practice-focused companies lead M&A activity.
In terms of disclosed transactions, mobile health came out on top with $578 million, led by two acquisitions from Under Armour.
Performant Financial Corporation acquired Premier Healthcare Exchange, a provider of advanced cost management solutions for commercial health plans and third party administrators, for $130 million. HealthStream acquired HealthLine Systems, a provider of credentialing and contact center quality management software to the healthcare industry, for $88 million. Under Armour also acquired Endomondo, a developer of a mobile app and website that provides users a fitness community and allows them to track their workouts, for $85 million.
Announced debt and public market financing in Health IT rose to $975 million in seven deals this quarter compared to the $299 million in eight deals in Q4 2014. There was one Digital Health IPO in Q1 2015: Inovalon, a data analytics solutions company, which raised $600 million.
Mercom notes that health IT/digital health companies have raised almost $10 billion in VC funding since 2010.
Read the full report here.