Venture deals, funding for digital health companies reached $9.5B last year

U.S.-based digital health companies raised more than $7 billion in venture capital funding in 2018. (Rostislav_Sedlacek)

Venture capital funding for digital health companies—and the size of the deals—jumped significantly last year, according to a new report.

Venture funding for digital health companies reached $9.5 billion in 2018, up more than 30% over the previous year, the report (PDF) from Austin, Texas-based Mercom Capital Group, a communications and research firm, reported (PDF). Of that funding, $7 billion went to U.S.-based companies.

There were 698 deals for digital health companies in 2018. That's up from $7.2 billion in venture funding for 778 deals in 2017. In all, total corporate funding for digital health companies, including debt and public market financing, reached $13 billion in 2018, up 58% compared to $8.2 billion in 2017. 

(Mercom Capital Group)

"Venture capitalists’ love of digital health companies is evident, but Wall Street is not yet convinced as more than 60 percent of publicly-traded digital health stocks traded below the S&P 500 in 2018,” said Raj Prabhu, CEO and co-founder of Mercom Capital Group, in a statement. “Funding deals every year have significantly outpaced M&A and IPO activity and exits continue to be a big challenge for digital health companies."

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A third of the venture capital funding was raised by just 18 companies, each bringing in over $100 million in 2018. For example, 23andMe raised $300 million, American Well raised $291 million and Butterfly Network raised $250 million.

What kinds of companies are attracting the funding?

  • Consumer-centric companies raised $5.2 billion in 447 deals in 2018. That's up 24% from $4.2 billion raised in 514 deals in 2017.
  • Practice-centric companies raised close to $4.3 billion in 251 deals in 2018, a 43% increase compared to the $3 billion raised in 264 deals in 2017.
  • Data analytics tools earned the most at $2.1 billion, followed by mHealth apps at $1.2 billion and telemedicine at $1.1 billion, mobile wireless technology companies with $847 million, clinical decision support with $714 million, and wearable sensors technology companies with $703 million.

There were 223 merger and acquisition transactions in 2018, compared to 203 transactions in 2017. There were 271 companies that made multiple acquisitions from 2010 to 2018, including Mediware Information Systems and WebMD.