2015 was the year digital health funding hit its stride and 2016 is stepping it up a notch with a record-setting first quarter. Signs continue to point to a market transitioning from something reminiscent of the Wild West to the early stages of maturity.
- 2016 Starts Strong: With a record $1.8B in funding, Q1 2016 started with big numbers. 2016 already saw 4 deals over $100M,as compared to 7 in all of 2015.
- Big Data / Analytics No Longer a Buzzword: We’ve seen buzzwords come and go, but big data has become a household name. As a robust ecosystem of startups begins to mature, we’re seeing data wranglers establish real ROI, both on the clinical and financial realms, and receive the financing they need to grow. We expect to see the days of point solutions disappear as more versatile data analytics companies begin to proliferate and gain significant market share.
- Nuanced Investors: The most active investors in 2016 include institutional VCs, as well as a hospital system and a payor, continuing the trend of previous years of a diverse investor base. Large organizations ramp up their investments and begin placing bets as they increasingly look externally for innovation. With such a disruptive digital health landscape, looking outside the walls of an institution is becoming an important strategy.
- Drop in Deal Volume, Increase in Funding: We tracked approximately $600M and 600 deals in 2013 - ever since, funding has swelled and deal volume has dropped. While there is still an extremely active Seed ecosystem, all signs point to venture learning - learning what a successfully positioned digital health startup looks like, learning about competition dynamics, about what solutions have business models that work and who can prove ROI. With that learning comes backing for more mid-stage and late-stage deals.
- New York Takes the Lead: New York overtook the San Francisco Bay Area in funding amount this quarter, in large part due to Oscar’s $400M funding. Los Angeles, Salt Lake City and Chicago are also great examples of new bustling health tech hubs that 5 years ago were not on the map.