Venture capital continues to flock to startups targeting digital health
Now might be a good time to head to the garage and launch that pie-in-the-sky digital healthcare startup.
Through the first six months of the year, 188 digital health deals tallied an eye-popping $3.5 billion in investments. If financing continues at this clip, 2017 will see $2.7 billion more in investments than 2016, when $4.3 billion was invested, according to an analysis released last week by Rock Health, which tracks healthcare venture capital funding.
Investing reaccelerated in the second quarter when huge deals brought the funding up to an unprecedented level.
Outcome Health, which delivers health information to practices, raised a record $500 million in its first funding round, with investors including Goldman Sachs Investment Partners and CapitalG. Peloton Interactive, which makes spin bikes and is not a traditional healthcare organization, had the second-largest funding, with a $325 million series E round.
By comparison, funding at this point during each of the past three years hovered around $2.5 billion.
Firms focused on consumer health information have led the way this year, with eight deals totaling $757 million. That reflects the push to get consumers involved in their own care, given the shift to value-based models and the resulting demand for innovative, cost-cutting healthcare delivery solutions.
“As provider reimbursement is increasingly based on outcomes, providers are more likely to invest in solutions that promote healthy patient behaviors in and outside the hospital,” said Megan Zweig, Rock Health’s director of research and one of the report’s authors.
Demand for patient-centric solutions has persisted despite the uncertainty caused by the debate over healthcare in Washington. With the prospect of consumers paying more of their own healthcare costs because of high-deductible plans or loss of coverage, providers must find ways to make healthcare more affordable, according to Rock Health.
“Regardless of the outcome of the healthcare policy kerfuffle, we look forward to seeing how startups will continue to meet the urgent needs of patients and transform healthcare for the better,” Zweig and Halle Tecco, Rock Health’s founder emeritus, wrote in a blog post.
Some of those startups, such as Healthify—which announced $6.5 million in series A funding last week—are addressing patients’ needs by looking to issues not typically included in healthcare. Healthify’s software helps connect patients with community organizations that address social determinants of health, including healthy food and affordable housing. The company will use the funding to broaden its customer base and expand its network of social-service partners.
“Our latest round of funding is another indicator of the leading role digital health companies can play in system transformation,” said Eric Conner, co-founder and chief revenue officer of Healthify. “Good digital health companies take the risk out of the decisionmaking process.”