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Health IT doubles 2012 VC funding, hauls in $2.2 billion

- Digital health accelerators, a growing interest in mHealth, and an ongoing thirst for better EHR software and clinical analytics has driven an explosion in venture capital (VC) investment in health IT.  In 2013, the industry nearly doubled its previous year’s investments, pulling in $2.2 billion, according to a new report released by Mercom Capital Group this week.  Since 2010, the industry has raised more than $4 billion in investment capital intended to find new technological solutions for problems such as patient engagement, clinical documentation, and health information exchange.

There were 571 deals completed in 2013, including 139 accelerator and incubator transactions.  Small start-ups have been turning to mentoring programs like DreamIT Ventures in Philadelphia and GE healthymaginaton, which provide expert know-how and seed money in exchange for future stakes in any profits.  In the first quarter of 2013, mHealth investments alone totaled nearly $500 million as wearable tracking tech like FitBit burst onto the scene.  The exercise and vital sign wristband manufacturer scooped up $73 million over the past year, the third-most successful fundraiser in the industry.

“We have to believe we can make a difference in their trajectory,” said Hubert Zajicek, MD, founder of Health Wildcatters, the first digital health accelerator in Texas. “This is a mentor-driven program. We fill in their knowledge gaps and make them presentable. We want mentors who are proven healthcare executives with entrepreneurial experience. As a mentor, you give back through your time and wisdom. This effort is bigger than its parts. We can do more together than we could individually. [Startups] will be working with people who know the system.”

Evolent Health, which provides population health management and analytics services, celebrated $100 million in investments last year, followed closely by cloud-based EHR vendor Practice Fusion, with $85 million.  MedSynergies and Proteus Digital Health rounded out the top five with $65 million and $45 million respectively.

While the number of merger and acquisition (M&A) deals didn’t grow much from 2012, there were several notable buyouts.  Vitera bought Greenway Medical Technologies for $644 million and athenahealth snapped up clinical content app developer Epocrates for $293 million.  Allscripts bought dbMotion for $235 million, and Medtronic spent $200 million on clinical telehealth service provider Cardiocom.

California and New York were the top hotspots of investment activity, followed by Massachusetts, Texas, and Tennessee.  In 2013, nine new VC funds were established that were primarily focused on healthcare IT or included the industry in their scope.  More than $5 billion will be up for grabs from these new organizations, which may indicate an even bigger year in new technology for 2014.

 

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