VC investment in digital health reached $9.5bn in 2018 – These are the areas attracting investment

Luke Christou 18 January 2019 (Last Updated December 23rd, 2019 10:19)

Venture capital funding in the digital health market – which is focused on developing technologies that improve health and healthcare – fell just short of the $10bn mark in 2018, up 32% on the previous year.

VC investment in digital health reached $9.5bn in 2018 – These are the areas attracting investment
Investment in digital health has increased greatly since 2013. Credit: Shutterstock

Venture capital funding in the digital health market – which is focused on developing technologies that improve health and healthcare – fell just short of the $10bn mark in 2018, up 32% on the previous year.

Likewise, total corporate funding in the market totalled $13bn, more than double the $8.2m that was raised in 2017, according to research firm Mercom Capital Group.

Investment in digital health has increased greatly since 2013, when VC investment doubled from $2.2bn to $4.7bn. Total VC investment stood at $5bn in 2016 and has grown by more than $2bn each year since.

Research shows that the total number of deals in the area has fallen to 698, down from 778 in 2017. However, the average investment has increased from approximately $10m to $13.6m.

The majority of capital raised was by startups based in the United States, who received around $7bn, or 74% of investment throughout the year.

“Venture capital funding in digital health hit another high with almost $10bn raised. Venture capitalists’ love of digital health companies is evident, but Wall Street is not yet convinced as more than 60% of publicly-traded digital health stocks traded below the S&P 500 in 2018,” said Raj Prabhu, CEO of Mercom Capital Group.

“Funding deals every year have significantly outpaced M&A [mergers and acquisition] and IPO [initial public offering] activity and exits continue to be a big challenge for digital health companies.”

Digital health: What are investors interested in?

The market that attracted the most attention last year was mobile health apps. Some 32 mergers and acquisitions were completed in that market throughout the year. It comes as little surprise that mobile health apps have also received the most funding since 2010 at $4.8bn. Some $1.3bn of that total was raised last year alone.

This is followed by data analytics, which accounted for 27 M&As. However, this category received a higher amount of investment in 2018, totalling $2.1bn.

Telemedicine received $1.14bn in investment, followed by mobile wireless technologies ($850m), clinical decision support ($710m) and wearable sensors ($700m).