Rock Health’s latest funding report reveals that the first three quarters of 2018 have already surpassed the total amount of funding that was spent on digital health startups in 2017. So far this year, digital health startups have raised $6.8 billion, with $3.3 billon of that coming from the third quarter alone, compared to a total of $5.7 billion in 2017.
The quarterly report suggests that while the average deal has increased incrementally since 2011, within the last year the average spiked by $10.2 million, from $16.4 million in 2017 to $23.6 million in 2018.
“Larger deals — rather than number of deals — account for this bump, with the average deal size on the year soaring to $23.6M,” the authors of the report wrote. “Even excluding the six deals in 2018 over $200M, average deal size is still greater than last year ($17.6M compared to $16.4M).”
So far this year ten companies have raised over $100 million. Those companies include Livongo, Collective Health, Tempus and Outset Medical. Helix, HeartFlow, American Well and Butterfly Network have all raised more than $200 million. But the top two amounts go to 23andMe, with $300 million, and Peloton Interactive, with $550 million.
Why it matters
Rock Health's numbers paint the picture of an industry growing at rapid speed.
“The pace of fundraising by individual startups suggests it’s an entrepreneurs’ market in which founders are raising larger and more frequent rounds, while the crop of maturing companies in digital health continues to grow,” the authors of the report wrote.
According to the report investors are now looking to create strategic partnerships with the digital health companies as well. For example, it noted that GSK had invested $300 million in 23andMe. This deal was part of a larger collaboration, which gave GSK exclusive rights for 23andMe’s consumer data for their R&D.
In addition to the money, more companies are starting to get the FDA nod. In the first three quarters of 2018, there were 31 FDA approvals and clearances, according to RockHealth.
Rock Health has been keeping tabs on the industry since 2011. Last year Rock Health reported a total of 357 deals. So far 2018 is lagging behind with 290 deals. When Rock Health first started keeping tabs on digital health funding in 2011, it reported 93 deals worth $1.2 billion. Both numbers have continuely increased until 2017.
On the record
“At the close of its third quarter, 2018 is already the most-funded year ever for digital health startups. There has never been a better time to raise money, with founders securing larger and more frequent rounds,” the report said. “Yet numbers alone don’t tell the full story of the progress made in digital health thus far in 2018.”