Q3 digital health funding soars to $3.3B across 93 deals
- Investment in digital health startups surged in the third quarter of 2018, totaling $3.3 billion across 93 deals, according to Rock Health's latest report. Funding for the year hit $6.8 billion, soaring past 2017's yearlong haul of $5.7 billion.
- Deal size continues to grow across all stages, with an average this year of $23.6 million. Take out 2018's six $200 million-plus deals, and average deal size still outpaces 2017 by more than $1 million ($17.6 million versus $16.4 milion).
- Q3 saw six megadeals over $100 million, bringing the year's total to 10. Among them were precision medicine startup Tempus ($110 million), mobile dialysis clinic Onset Medical ($132 million) and AI- and cloud-enabled ultrasound system Butterfly Network ($250 million).
With three months left to go in 2018, a number of digital health funding records are already in the books.
Rounding out the quarter's megadeals were telemedicine vendor American Well ($291 million), genetic testing company 23andMe ($300 million) and home fitness program Peloton Interactive ($550 million).
Not only are companies scoring larger deals, they're also spacing their funding rounds closer together, the report notes. For example, a company that raised its seed in 2016 waited on average just 15.5 months to launch a Series A round — up from 21 months in 2013.
Q3's top-funded value proposition was on-demand services with $1.27 billion across 41 deals, led by American Well's $291 million megadeal. Fitness and wellness was close behind, thanks to Peloton, with $1.18 billion across 42 deals.
The other top-funded categories were diagnosis of disease with $110 billion on 27 deals, consumer health information ($900 million/34 deals), monitoring of disease ($781 million/38 deals) and treatment of disease ($630 million/21 deals). Among the winners in the remote were Akili Interactive Health ($68 million), Pear Therapeutics ($46 million) and Virta Health ($45 million).
Rock Health's latest analysis also shows growing corporate venture capital investment in digital health. While comprising just 15% of investor transactions this year, CVCs have completed 102 deals. Tech and biopharma CVCs each accounted for nearly a fifth of those deals.
Notable CVC investments include GSK's $300 million infusion in 23andMe and Abbott's $55 million injection in diabetes care startup Bigfoot Biomedical.
While some startups are reeling in funds, major tech companies aren't slowing their push into digital health, the report shows. Recent activity includes Apple's addition of an FDA-cleared electrocardiogram monitor in its latest Apple Watch and Google's exploration of how last summer's secretive Nest acquisition could be parlayed into digital health tools for the elderly.
Digital health continues to be a prime acquisition target, with 82 deals this year — just 33 shy of 2017's total. The most sought-after companies were ones focused on improving EHR performance and clinical workflow. IPOs continue to defy the space, with the last occurring in 2016.