- The past year saw a $4.7 billion investment in healthcare IT companies, according to a report from Mercom Capital Group, as venture capital firms seek to promote lucrative technologies in the practice-facing and consumer-facing markets. Data analytics, population health management, and clinical decision support products were among the most likely to grab investor attention in 2014, while mHealth, telehealth, and wearable technologies saw $2.3 billion in major deals.
“The Healthcare IT sector had another phenomenal fundraising year. In the five years since we started tracking funding data, the sector has raised $8.8B in VC funding and another $3.6B in public market and debt financings bringing the total to $12.4B – largely driven by the HITECH and Affordable Care Act,” said Raj Prabhu, CEO and Co-Founder of Mercom Capital Group. “However, the enthusiasm in the sector shown by the VC community was not quite matched by the public markets when you look at market performance of companies that went the IPO route in 2014.”
Technology intended for use in healthcare organizations accounted for $2.4 billion of the investments. Clinical decision support companies scooped up $517 million, while the data analytics segment trailed with $367 million and population health management brought up the rear with $247 million in funding. mHealth scored the most money from investors, with $1.2 billion in capital, representing a staggering 341% year over year growth rate. Telehealth brought in $369 million, while healthcare rating and comparison tools raised $288 million.
All of the market areas have experienced rapid growth over the past several years as providers invest more heavily in workflow-friendly IT that focuses on improving care quality and outcomes. The data analytics segment has experienced 146% year over year growth, while telehealth has expanded at a rate of 297 percent. Wearable technology has seen a 136% increase as consumers edge into the personal health tracking sphere, but they seem more interested in rating their healthcare and comparison shopping, driving a 216% year over year increase.
Some of the biggest merger and acquisition (M&A) transactions included the $1.3 billion purchase of Siemens Health Services by Cerner Corporation, the $4.4 billion acquisition of MultiPlan, Cognizant’s acquisition of TriZetto for $2.7 billion, and Vista Equity Partner’s takeover of Advanced Computer Software, which cost $1.14 billion.
The six major initial public offerings (IPOs) of 2014 were somewhat less flush with cash, however. IMS Health ($1.3 billion), Castlight Health ($204 million), Everyday Health ($100 million), Orion Health ($98 million), Imprivata ($86 million) and Connecture ($53 million) raised a total of just $1.8 billion.
The Mercom Report is somewhat more conservative than the estimate provided by StartUp Health Insight, which put the total of 2014 VC investment at a much higher $6.5 billion. Both reports agree, however, that big data analytics, population health management, and consumer-focused engagement technologies are being heavily sought after by venture capitalists, which are willing to invest large sums in the success of novel ideas.