Oscar Health helps New York top Silicon Valley for the first time for digital health funding. The two regions are tied in activity.

With products ranging from ingestible sensors to track medication intake to practice management solutions, startups continue to innovate within the digital health space. And as the ecosystem grows, funding is keeping up. Global funding to the industry reached over $3.5B in the first half of 2016, on track for a record high this year.

As the digital health sector has expanded, geographic funding trends have begun to shift. While Silicon Valley has led the group in funding every year since 2012, NYC has recently overtaken the tech hub with over $800M invested so far in 2016. In this brief we look at funding trends to digital health startups in the greater metro areas of Silicon Valley, NYC, and Boston.

Our analysis focuses on the following areas:

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Annual financing activity

While Silicon Valley has led digital health investment for the past 4 years, the NYC metro area is pulling ahead so far in 2016, with $866M invested into the industry. Despite a strong showing in 2012, funding to digital health startups in Boston, known for its biotech industry, has not seen the impressive YoY growth of both Silicon Valley and NYC. Since 2012, funding in Boston is up 58%, compared to NYC’s growth of over 1000% and Silicon Valley’s over 150% increase.

The largest deal since 2012 was the $400M Series C to NYC-based health insurance startup Oscar Health in early 2016, which helped pushed NYC’s digital health funding total above Silicon Valley’s. The largest deals in Silicon Valley and Boston were the $120M Series G to Redwood City, CA-based ingestible sensor company Proteus Digital Health and the $81M Series C to Boston-based telehealth provider American Well, respectively.

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Annual deal activity

Silicon Valley led the group in deal activity to digital health startups since 2012. As of 11/29/16, however, NYC and Silicon Valley are on par with 58 deals each in 2016. Following yearly growth in deal activity to NYC-based startups, the city does not appear to be on pace to surpass 2015′s high of 72 deals.

Silicon Valley is also on track for a slow down after two years of energetic deal activity. Boston, behind both Silicon Valley and NYC, has maintained a steady average of 33 digital health deals/year. 2016 is on pace to fall slightly below that trend, in keeping with the overall drop off in VC activity in 2016.

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NYC deal share by stage

The NYC metro area appears to be pulling back from very early-stage digital health deals and transitioning towards less speculative investments. While seed/angel deals continue to make up the majority of deals to NYC-based digital health startups, deal share has fallen nearly every year since 2012, when it accounted for nearly three-quarters of deals.

On the flip side, Series A deal share has grown every year but is currently at 17% of all NYC digital health deals in 2016 YTD, down from 21% last year. 2016 has also seen growth in mid-stage (Series B and C) digital health deals, now at 23% of all deals.

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Boston deal share by stage

As in NYC, Boston has also been financing more Series A, B, and mid-stage deals, while seed and angel stage deals have lost share. The city has recently observed large YoY decreases in deals to seed and angel-stage digital health startups, currently at only 14% of total deals, down from 58% in 2012.

Series A stage deals, however, have been steadily growing every year since 2013 and have been the largest deal segment for the past two years. Mid-stage deals currently represent 28%, up from 14% in 2015.

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Silicon Valley deal share by stage

Silicon Valley has also seen funding move toward later-stage digital health deals. Early-stage seed/angel and Series A deals to digital health startups in Silicon Valley tumbled for the past two years. Seed/angel and Series A deals currently represent 47% of all deals, down from 68% in 2014.

Mid-stage deal share has grown significantly since 2014, currently at 27% of all digital health deals. One of the most recent mid-stage deals was the $12M Series B to San Mateo-based Moov, developer of a wearable heart monitor that provides real-time feedback during a workout.

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