Smart Money VCs Are Picking Up The Pace In Digital Health Investment

Dollar funding to digital health startups is up 36% in the most recent four quarters. With major investments and deals transforming the digital health industry, it is worth digging into how top investors are channeling their funds to the space.

Financings involving the top 20 smart money VCs pushed $505M into digital health startups in the first half of 2015, across 21 deals.

Smart money deal count in digital health is down somewhat, however, dipping to only 7 deals in Q1’15, before recovering to 14 in Q2’15. This relatively low deal activity contrasts with the quarterly deal number average in 2014, which was 16.

Looking at the past 5 years, Q2’14 was the peak year for dollar amount invested across deals involving smart money VCs. The largest deal in that quarter was a $130M Series B investment in Flatiron Health involving Google Ventures and First Round Capital, among others. Four of the last 5 quarters have seen more than $200M in funding involving smart money VCs.

(For more on how we selected our top 20 VCs, see the note at the end of this post.)

The CB Insights Business Social Graph details the relationship between investors and companies, and helps illuminate how the smart money is investing in digital health. The most active smart money investor in digital health is Khosla Ventures, with 29 investments across 21 companies since 2010. Khosla’s portfolio includes Jawbone, Misfit Wearables, and CrowdMed. Jawbone and CrowdMed each count 4 separate smart money VC investors among their backers.

We’ve identified five categories within digital health that top investors are moving into.

• Healthcare cost transparency — These are companies that aim to provide more transparency on prices and costs, as well as billing convenience, both to consumers of healthcare services, and to providers. Firms include Stride Health (NEA, Kleiner Perkins), Pokitdok (CRV), GetInsured (Bessemer Venture Partners), and Oscar Health Insurance (Founders Fund).
• Big data healthcare analytics — Companies offering predictive data as well as analytics solutions for the healthcare sector. Firms include Comprehend Systems (Sequoia Capital), Zephyr Health (Kleiner Perkins), Health Catalyst (Sequoia Capital), and SolveBio (Andreessen Horowitz).
• Quantified self — Companies using sensor and data technologies to track health and wellness metrics including calories burned, steps taken, or sleep rate and digitally transmitting the information to the user. These companies include both software and wearable tech startups such as MyFitnessPal (Kleiner Perkins, Accel), Jawbone (Sequoia, Khosla, Kleiner Perkins, Andreessen Horowitz), Misfit Wearables (Founders Fund, Khosla), and Pebble (CRV).
• Real-time healthcare — Companies offering platforms and technologies that allow on-demand access to healthcare and licensed health practitioners, consultations, and health-related educational resources. Such firms include Doctor on Demand (Andreessen Horowitz, Google Ventures), Healthtap (Khosla Ventures), First Opinion (Felicis Ventures, Greylock Partners), and TalkSpace (Spark Capital).
• Personal medicine and information: These companies use individual data and genetics to help consumers glean information about themselves, from tracing heritage to personalized medicine. Examples include 23andme (Google Ventures), DNAnexus (First Round Capital, Google Ventures), and AssurexHealth (Sequoia Capital).

Note: Smart money VCs can often see around corners and recognize great companies early on. To analyze smart money trends in digital health, we looked at the activity of the top 20 VC firms, selected according to portfolio evaluations and CB Insights’ Investor Mosaic investor ranking model. Here’s our full list of 20 smart money investors:

1. Accel Partners
2. Andreessen Horowitz
3. Battery Ventures
4. Benchmark Capital
5. Bessemer Venture Partners
6. CRV (Charles River Ventures)
7. Greylock Partners
8. Kleiner Perkins Caufield & Byers
9. New Enterprise Associates
10. Redpoint Ventures
11. Sequoia Capital
12. Union Square Ventures
13. Spark Capital
14. Index Ventures
15. Khosla Ventures
16. Founders Fund
17. Google Ventures
18. Felicis Ventures
19. Floodgate Fund
20. First Round Capital

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