Digital health funding shows no signs of tapering off with $3.4B invested in first half of 2018

Role of hundred dollar bills on other bills
Digital health funding hasn't slowed, with $3.4 billion flowing into the industry over the last six months. (gawriloff/iStock/Getty Images Plus)

For the second straight year, more than $3 billion flowed into digital health companies during the first half of the year.

Investors sunk $3.4 billion into digital health companies during the first six months of 2018, nearly matching the record-setting $3.5 billion during the first half of 2017, according to data released by Rock Health. The average deal size of $17.9 million was the highest it's been since the group began tracking funding data in 2011.

Last year, the industry saw record-breaking funding totals reach $5.8 billion.

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Rock Health limits its analysis to U.S.-based companies covering deals that exceed $2 million. It excludes healthcare services and diagnostics companies.

Rock Health analysts noted that there have been more repeat digital health investors than new ones since 2016, a sign that the field is attracting experienced firms with long-term goals rather than “tourists” attracted to the hype of the digital health industry.

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Behavioral health solutions are also carving out a significant subsector, with $273 million flowing to 15 companies focused on mental or behavioral health.

However, the industry has seen few exits since the first half of 2015, when deals peaked. The largest deals during the first six months of 2018 included Flatiron Health, which sold to Roche for $1.9 billion, and PillPack, which Amazon bought for $1 billion.

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But analysts noted that trend aligns with the startup industry at large.

“Digital health startups are most likely to be acquired by other digital health companies, which make up half the acquirers in 2018 M&A transactions,” Rock Health analysts wrote. “Flush with capital—and a desire to grow fast through product extensions and new hires—it’s not surprising to see a great deal of M&A activity amongst this group.”