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The big health news of the summer, maybe even the year, will undoubtedly be last week’s Supreme Court decision to uphold the Affordable Care Act. But the industry has also been making headlines for the double-digit (and even triple-digit-sized) investments going into health tech startups.
According to a recent study from digital health startup accelerator Rock Health, the sector has already seen a 73 percent increase in investments compared to the same time last year. Last year, the total venture investment that went into companies receiving $2 million or more was $968 million. This year, the figure is already $675 million, the accelerator said.
Earlier this week, financial services firm Burrill & Company released another report showing booming investment in digital health. According to the firm, digital health financing climbed 317 percent in the first half of 2012. The company may track a narrower set of companies than Rock Health, but it said it’s seen $499 million in transactions this year, compared to $156 million in the same period last year.
“More and more, people are starting to realize the tremendous need in healthcare,” said Amy Puliafito, research and marketing manager for Rock Health. “The Affordable Care Act and the attention to it in the past year, [as well as] the burden of chronic care and issues like that… have helped people realize that we need to start thinking about ways we can more efficiently care for our population. Digital health is what people are seeing as the most effective way to achieve [that].”
While investment is increasing across the board, she said the areas showing the biggest growth (which reflect the greatest need) are big data and analytics, sensors, home health and physicians tools. Big data and enterprise solutions are getting particular attention, she said. With $189 million in investment, the Bay Area is the dominant geographic area for health tech, according to Rock Health, but other hubs include Boston, Austin and Chicago.
While some think the Supreme Court’s decision last week to uphold the Affordable Care Act will have little impact on how investors view the health tech sector, Brad Weinberg, MD, co-founder of NY health tech incubator Blueprint Health, said he thinks it could subtly increase interest.
“If it was repealed, it would have [added] a whole other level of concern and that could have affected investor behavior,” he said. “We’ve seen a huge trend of angels and professional investors getting into [health tech investing] and that will continue.”
Hospitals, insurance companies and other organizations were already implementing changes to adapt to the legislation, Weinberg said, but going forward he expects to see even more innovation in how insurance companies manage relationships with patients, how individuals purchase insurance and how hospitals structure payment models.
Further highlighting heightened investor interest in digital health, the industry has seen some big investments even since Rock Health published its mid-year report last week. According to the accelerator, below are the year’s top investments in digital health, so far.
- Castlight Health: The IPO-bound comparison health care shopping site announced that it raised $100 million in March.
- GoHealth: Last month, the Chicago-based company, which provides free insurance quotes online, said it raised $50 million.
- Kinnser Software: The home health software company announced that it raised $40 million in Series A financing in March.
- AirStrip: Sequoia Capital-backed Airstrip, which creates mobile medical applications, said it raised $39 million in funding from Qualcomm Life in February.
- PracticeFusion: The San Fransisco copmany, which provides an electronic medical records platform, said last week that it raised $34 million in new funding.
- Valence Health: The healthcare data analytics company last month announced that it raised $30 million in funding.
- Liaison: The Atlanta-based data management firm said in April that it had raised an additional $30 million.
- Proteus: In May, the Redwood, Calif. company, which makes digestible tracking sensors, said it took $17.5 million in new funding.
- Physicians Interactive (Skyscape): In January, the mobile and online health information company said it raised $17 million.
- InstaMed: In May, the healthcare payments company announced that it raised $14 million.