Early-stage deals dominate with 58% of global deal share in 2016.|Early-stage deals dominate with 58% of global deal share in 2016.
In 2016 investors continued to ramp up their deals to companies aiming to use digital solutions to remedy pain points in the healthcare system. Global equity funding to private digital health startups grew for the 7th straight year in 2016, hitting a high of $6.1B. While the large majority of rounds went to early-stage, seed and Series A companies, a few more mature companies also raised notable mega-rounds.
This past year saw mega-rounds of $100M or more to insurance provider Oscar Health Insurance and oncology software platform Flatiron Health, among many others. Meanwhile, valuations at exit also remained strong. In February 2016 Truven Health Analytics was acquired by IBM at a valuation of $2.6B and NantHealth IPO’d in June at a valuation of $1.6B.
Below, we take a look at funding and deals to digital health startups from 2009 through 2016.
Yearly funding trends
In 2016, equity funding to digital health companies saw a 3.2% increase from $5.9B in 2015 to nearly $6.1B in 2016. Deals, however, dropped 9.6% from a high of 1016 in 2015 to 918 in 2016.
The largest deals of 2016 include Ping An Good Doctor‘s $500M Series A in May which valued the company at $3B and Oscar Health Insurance‘s $400M Series C in February from investors including Google Ventures, Ping An Ventures, Thrive Capital, and Founders Fund. Ping An Ventures is partially backed by Ping An Insurance, which also backs Ping An Good Doctor.
Quarterly funding trends
On a quarterly basis, funding saw a 7.7% increase from $944M in Q3’16 to $1.02B in Q4’16. Deal flow, which fell from Q1-Q3’16, picked back up at the end of the year, hitting 250.
A few of the larger deals in Q4’16 were Crossover Health‘s $92M equity round from Gurnet Point Capital, WellTok‘s $33.7 Series E from investors including Qualcomm Ventures, NEA, and InterWest Partners, and PatientPing‘s $31.6M Series B from Andreessen Horowitz and Leerink Partners.
Crossover Health uses health data analytics to optimize its health service offerings, WellTok develops an artificially intelligent platform to motivate employees to get healthy, and PatientPing is an online care coordination network.
Deal share by stage
Digital health is becoming an increasingly competitive sector, with a greater percentage of deals going to early-stage, seed and Series A rounds. Prior to 2011, early-stage funding occupied just under 50% of total deal share. But following the approval of the Affordable Care Act in 2010, funding to early-stage digital health companies in every following year has not dipped below 56% of total deal share.
Meanwhile, mid-stage deals (Series B and C) have been trending downwards from a high of 22% in 2009 to 12% in 2016. Since hitting a high of 11% in 2010, late-stage rounds (Series D and E+) have also trended down, settling at 4% in 2016.
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