This year was a big one for digital health, with 2016 marking the beginning of the health sector’s “Moonshot Movement,” according to the year-end report from StartUp Health.
“From Vice President Joe Biden’s Cancer Moonshot to speed up the progress in ending cancer as we know it, to the Chan Zuckerberg Initiative to cure all disease within 100 years, billions of dollars are being committed to health innovation-- a mindset that exponential progress is possible,” the report authors wrote.
The report called 2016 a “record-breaking year” with $8 billion invested in over 500 digital health companies alone, and the year also saw four of the six deals above $400 million in the last three years. The total number of investors also jumped by 42 percent, which StartUp called “a huge signal of a booming industry.”
“Not only are more investors entering the scene, but they are also participating in more rounds than ever,” the report authors wrote. “2016 brought investment form almost 900 unique firms, angles of investment arms – almost 300 more than last year.”
The top organizations funding digital health in 2016 were GE Ventures, with 18 deals, Khosla Ventures with 15, and StartUp Health with 10.
Almost 25 percent of all funding went to five deals, and three of the top five deals in record were signed in 2016, which StartUp called a demonstration of “international commitment to supporting paradigm shifting ideas in digital health.” Those doing so are examples of “bold visions,” setting out to achieve moonshots. The largest deal StartUp tracked in the year was OnDuo’s $500 million funding round, which wasn't really a funding round in a traditional sense, since OnDuo was a joint venture spin-off of Verily and Sanofi.
To put these major deals in perspective, StartUp also looked a selection of mid-level ($10 million) deals and early-stage investments of $1 million, both cross sections that included pretty much every sector in digital health and spanned the globe.
The top most active market was patient or consumer experience, which raised $2.8 billion across 163 deals in 2016. This sector received about two to three times as much as any other sector: wellness came in at $1 billion, personalized health or quantified self, at $765 million, medical devices at $713 million, and another $593 million going to digital health products to improve workflow.
Looking at how quickly rounds of funding are coming in, StartUp found companies across the digital health industry took an average of 14.5 months to raise their Series A round, breaking a trend in funding speed and becoming more variable than recent years. Patient- or consumer experience-focused companies had the shortest time between seed rounds and Series A, with an average of 13.3 months between investments, followed by medical devices, big data/analytics, clinical decision support and personalized health/quantified self, respectively.
The average size of early funding rounds are also moving up, the report found. Series A rounds in 2016 were 84 percent larger than those in 2015, or $1 million above the previous year’s total average deals. However, Series C deals dropped by 50 percent.
The San Francisco Bay area is the top US metropolitan area for digital health deals, nabbing $1.5 billion across 116 deals. Boston metro came in second, with $966 million invested across 33 deals, followed by New York, San Diego and Los Angeles.
“Domestically, risk bearing organizations find a lot of value in the ability to reach out, connect and educate those outside the walls of a hospital or office,” the report authors wrote. “Because of a lower barrier to entry, in comparison to a personalized health/quantified self company, there are more companies emerging and competing within the market. There is still plenty of opportunity in this area and there will be a need for focused solutions to help people with any ailment.”
