I recently had a chance to look at data from CB Insights on digital health funding, and it turned out to be worth seeing. While anyone in healthcare IT knows that digital health technologies are a Big Deal, I hadn’t pieced together just how much money is pouring into the space.
According to CB Insights, digital health funding hit a robust $3.5B last year, and the space saw several IPOs as well. A full 30 digital health ventures cashed out in 2014, compared with just eight exits by US-based digital health players in 2011.
One interesting feature of this activity is that three of the four companies that went to IPO last year (Care.com, Everyday Health and Castlight Health) support consumers. Honestly, I would have assumed that companies that serve providers would have had a bigger footprint.
Also, while there’s too few too data points to draw broad conclusions, I note that the two biggest deals done in 2014 — the Fitbit IPO and Under Armour’s $475M buyout of MyFitness Pal — were done by companies with a consumer focus as well. And Fitbit stock has gone great guns, with its value soaring from $4.1B at IPO to a market cap of about $8B.
On the other hand, it’s worth noting that the biggest exit listed by CB Insights was that of Veeva Systems, which provides cloud-based services to the life sciences industry. Clearly, there’s still a meaningful place for digital health companies that serve B2B needs.
On top of all of this investment, it’s worth noting that some of the hottest action in digital health isn’t going to make the CB Insights funding list. After all, well-funded giants like Apple, Qualcomm, Microsoft, Google and Samsung are just hitting their stride when it comes to digital health solutions. These behemoths bring their own huge piles of cash to the party, and pump up the opportunities in this space just by being there.
While healthcare probably isn’t mission-critical to any of the companies above, there’s still signs that they intend to invest heavily in digital health — and may yet prove to dominate key verticals. (For example, Apple HealthKit has tremendous potential, and its approach could become the default for integrating consumer health data with EMRs.)
Bottom line, the digital health market is very much in flux, and very hard to call. If I were sitting on a pile of cash, I’d probably invest in personal digital health data integration with providers, but that’s just me. The record so far suggests that investors haven’t given the provider enablement side of digital health, but rather, consumer empowerment.
I do think that the market will eventually swing around to hard-core business services that integrate all of these consumer digital health investments with day-to-day care. But it could take a few years of investors chasing rainbows until they get practical. In the mean time, hospitals would be smart to make their own digital health plays and even do their own startups. While digital health companies are everywhere, providers need to have a say in how this niche plays out.