Healthcare Remains The Hottest AI Category For Deals

From fintech and cybersecurity to ed tech and advertising, artificial intelligence is being applied across a host of industries. Notably, healthcare is one of the more popular areas of application, with startups leveraging machine learning algorithms to reduce drug discovery times, provide virtual assistance to patients, and improve the accuracy of medical imaging and diagnostic procedures, among other things.

Despite the challenges and privacy concerns in accessing patient data to train algorithms, corporates have been notably active in the space. IBM acquired private companies Explorys, Phytel and Merge Healthcare, giving it access to millions of patient records and data points for its Watson cloud. The IBM Watson group, which has been expanding its reach through partnerships with hospitals across the world, has also funded private companies including Pathway Genomics. Google acquired startup DeepMind in 2014, and started the DeepMind Health initiative in 2016, and also partnered with UK’s National Health Service.

Using CB Insights data we looked at private market trends among healthcare companies leveraging AI.

In the private market, AI in healthcare currently dominates all other industrial applications of AI in terms of equity deals, raising $1.8B across 270 deals since 2012. Last year the space saw a 5-year-high for deals and funding as well as the emergence of two unicorns: Flatiron Health, which uses machine learning to extract information from patients’ electronic health records, and iCarbonX, which provides AI-based personalized healthcare. In 2017 (as of 3/22/17) healthcare AI startups have raised over $132M across 22 deals, including a $65M Series A round raised by cancer diagnosis startup Freenome.

Around 27% of the total deals since 2012 have gone to countries outside the US. Non-US deal share reached a 5-year-high of 35.5% in 2016. The following visual, from our annual State of Artificial Intelligence report, highlights the funding trends and distribution of healthcare AI deals outside the United States.

Since 2012, Data Collective emerged as the most active VC investor in unique healthcare AI companies. Khosla Ventures ranked second. Predilytics, backed by GV and Flare Capital Partners, was acquired by Colorado-based private healthcare company WellTok in 2015. Explorys, also backed by Flare Capital Partners in 2015, was acquired by IBM the same year.

We used the CB Insights Mosaic algorithm, which tracks the health and wellness of private companies based on financial and non-financial signals, to identify a few promising early-stage companies in the space. Notable companies include Freenome, KenSci, HealthReveal, BayLabs, and KoKo.

Want more data on AI startups? Log in to CB Insights or sign up for free below.