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Mid-year in 2014, $2.3B in mHealth funding tops 2013 total

By Jennifer Bresnick

Digital health companies are scooping up investments at a record-breaking rate, according to the latest report by Rock Health, with the $2.3 billion raised so far in the first half of 2014 topping the entire previous year.  The 168% year-over-year growth rate is a clear indication that the mHealth market is just starting to take off as medical device companies seek to expand their reach by acquiring digital health innovators, close to 150 of which have raised more than $2 million year from venture capitalists.

“At the end of the first quarter, we were optimistic that 2014 would be another record year for digital health funding,” writes Teresa Wang of Rock Health. “What we didn’t expect was that in just six months, 143 companies would have successfully raised $2.3 billion. Not only are there more companies receiving funding, but the average deal sizes are also up to $15.6 million compared to last year’s $10 million.”

Almost half of the funding raised this year has gone towards six major categories: payer administration, digital medical devices, analytics and big data, patient engagement, population health management, and personalized medicine.  Digital medical devices saw $206 million in investments, while big data analytics and patient engagement tools were close behind at $196 million and $193 million respectively.

With the Affordable Care Act now in full swing, encouraging providers to take more financial risk and accept accountability for the long-term health of populations, it’s no surprise that healthcare organizations are eagerly seeking digital tools to help them achieve their strategic and clinical goals. “Healthcare reform is a strong tailwind into the space, underpinning at least four of the top six categories here as the entire industry needs to rethink its business models,” said Wang.

The biggest eight deals of the year so far make up more than one-third of the money raised.  Clinical operations platform provider NantHealth topped the list with $135 million, securing involvement from BlackBerry in April, while Flatiron Health, a cancer analytics company, scored $130 million, most of which came from Google Ventures.  Other top fundraisers include digital health and portal developer Proteus at $120 million, payer administration provider Zenefits at $67 million, and physician social networking tool Doximity with $54 million.

While crowd-sourced funding was the hot new trend of 2013, with Indiegogo seeing a 2779% increase in health-specific campaigns that year, the general public’s enthusiasm for investing in the next big idea seems to be cooling off as campaigns fail to deliver on promises.  Success rates are down almost 50% this year, the report says, hovering around 20 percent.  Just one campaign, from Healbe GoBe, a weable sensor that purports to measure calories consumed through contact with the skin, raised 41% of the year’s crowdfunding dollars.

The full Midyear Review 2014 slide deck from Rock Health is available here.

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