Report: Digital health firm investments skyrocketing

Investments in "digital health" companies--including firms in the health IT and wireless spaces--more than tripled in the first six months of 2012, according to a new report from Burrill & Co., a San Francisco financial services company. Venture-capital investments in the sector soared to $499 million in 46 transactions from $156 million in 19 transactions during the first half of 2011.

Among the biggest equity investments so far this year, Burrill said, are:

  • $100 million in Castlight Health, a consumer information service that focuses on healthcare pricing
  • $39.9 million in Kinnser Software, a provider of web-based software for home care agencies
  • $34 million in Practice Fusion, a vendor of electronic health records
  • $37 million in telehealth vendor American Well.

Burrill attributed the rapid growth in digital health investments to the awareness of investors that this emerging area can help reduce healthcare costs while improving access and care delivery.

Last week, healthcare accelerator Rock Health reported that digital health investments were up 73 percent this year among firms that received at least $2 million each. Rock Health said that $675 million had been invested so far this year, compared to $390 million in the prior-year period. More than 68 firms had raised this amount of money in the first half of 2012, Rock Health said.

The variance between the two sets of numbers is clearly not related to the minimum amount of investment in the earlier report, since Rock Health's figure is so much higher than Burrill & Co.'s. It is possible that Rock Health used a wider definition for "digital health," resulting in the inclusion of more companies that received investments.

In April, Mercom Capital Group, an Austin, Tex.-based consulting firm, said venture capitalists had invested $184 million in health IT firms in the first quarter of 2012. Mercom broke that down into $103 million for health information management companies, $32 million for personal health records firms, and the rest in other kinds of health IT firms. But this definition seems to fall short of the expansive "digital health" moniker.

To learn more:
- read the Burrill & Co. announcement