Investment in healthcare artificial intelligence startups and companies focused on mental health and wellness soared in the second quarter as both sectors hit funding highs, according to a new report.
Healthcare AI companies raised $864 million in the second quarter, compared to the $764 million AI startups raised in the second quarter of 2018, according to technology market intelligence company CB Insights' global healthcare report released on Tuesday morning.
The $864 million in AI healthcare investment was led by a $200 million round to Tempus in May. Tempus develops an AI-enabled precision medicine software based on its collection and analysis of clinical and molecular data.
Patent applications for AI healthcare technology also continue to grow with GE, Philips, and Siemens among the top patent applicants, CB Insights said.
Mental health and wellness companies raised $321 million across 26 deals, in the second quarter of 2019, with large rounds going to Quartet and Talkspace. That compares to $227 million invested in mental health startups during the same quarter in 2018.
Top investors Centene, Google Ventures, Oak HC/FT, Norwest Venture Partners, and Y Combinator are flocking towards mental and behavioral health, the report said.
It’s been a record first half of the year with the amount invested in healthcare companies globally rising to $26.9 billion across 2,258 deals so far in 2019 compared to $26.5 billion in the first half of 2018.
In-demand sectors including mental health and healthcare AI could drive a record annual deal high projected by the end of this year. CB Insights projects 4,516 deals by year's end compared to 4,395 deals in all of 2018. The company is projecting global venture capital-backed healthcare deals and financing to reach $53.9 billion in 2019, a slight dip from the $59.5 billion raised in 2018.
Digital health funding is on the rise for the second straight quarter, reaching $3.5 billion, up 23% versus the first quarter of 2019. There were 371 digital health deals compared to 354 in the first quarter, according to the report.
CB Insights also identified 38 so-called unicorns, global VC-backed digital health startup companies valued at $1 billion or more. These highly-valued startups are worth a combined $90.7 billion, according to the report.
Among U.S. companies the list includes Oscar Health, ZocDoc, Proteus, Clover Health, One Medical, Calm, Tempus, 23andMe, and Hims.
"The cohort’s total valuation in 2019 continues to grow as a result of continued mega-rounds to existing unicorns, such as Tempus and Doctolib, among others," the report said.
Other healthcare segments also saw strong investment growth including women's health startups.
Women's health venture capital funding totaled $284 million in the second quarter of 2019, compared to $129 million in the same quarter last year. Companies like Kindbody and Modern Fertility are disrupting traditional fertility services with technology-enabled platforms. Startups Elvie and JioVio are targeting maternal care with pregnancy trackers and wearable breast pumps connected to mobile apps, the report said.
Genomics startups saw a slight dip in venture capital investment in the second quarter of 2019 but still raised $638 million.
Cannabis startups raised $1 billion in 107 deals in the second quarter of 2019. Of those deals, startups with a hemp and/or CBD business took a record 25% of cannabis funding. Investment in this sector was led by a $420 million round to Pax, a company that provides internet-connected vaporizers that allow users to track the potency of consumed cannabis.