The healthcare IT sector had another phenomenal fundraising year. Venture capital (VC) funding in the healthcare IT sector more than doubled in 2014. However, the enthusiasm in the sector shown by the VC community was not quite matched by the public markets when the market performance of the companies that went the IPO route in 2014, is taken into account.

The VC funding in healthcare IT sector raised Rs.28,200 crore in 670 deals, in 2014 compared to Rs.13,200 crore in 571 deals in 2013, according to Mercom Capital Group. The sector also brought in Rs.12,600 crore in debts and public market financing including six IPOs. This brought the total corporate funding in the sector to almost Rs.42,000 crore for 2014.

The six healthcare IT IPOs in 2014 raised a total of Rs.10,800 crore. IMS Health raised Rs.7800 crore, followed by Castlight Health with Rs.1224 crore, Everyday Health with Rs.600 crore, Orion Health with Rs.588 crore, Imprivata with Rs.516 crore, and Connecture with Rs.318 crore. VC funding increased in Q4 of 2014 with Rs.7200 crore in 134 deals compared to Rs. 5736 crore in 212 deals in Q3 of 2014.

Practice-centric companies raised Rs.14,400 crore in 234 deals in 2014, including clinical decision support companies with Rs.3102 crore, followed by data analytics companies with Rs.2202 crore and population health management companies with Rs.1482 crore.

Consumer-centric companies raised Rs.13,800 crore in 436 deals. Mobile health (mHealth) companies were the largest recipient of VC funding bringing in Rs.7200 crore. Within mHealth most funding went to wearables with Rs.3156 crore and mHealth apps with Rs.3042 crore. Telehealth companies received Rs.2214 crore, rating and comparison shopping companies brought in Rs.1728 crore.

The top two VC funding rounds in 2014 were raised by NantHealth which brought in Rs.1920 crore and Rs.810 crore in two separate deals. Flatiron Health raised Rs.780 crore, this was followed by Alignment Healthcare which raised Rs.750 crore. Proteus Digital Health came in next with its Rs.720 crore raise; they also raised Rs.312 crore in another deal bringing its total to Rs.1032 crore for 2014. China's Guahao.com raised Rs.600 crore. Italy's Dedalus Group raised Rs.534 crore and American Well brought in Rs.486 crore.

A total of 732 investors were involved in funding rounds for healthcare IT companies in 2014. The top VC investors were Khosla Ventures and The Social Capital Partnership with nine deals each, followed by Kleiner Perkins Caufield & Byers and Sequoia Capital with seven deals each.

There were 120 accelerator and incubator deals in 2014. The top accelerator and incubator seed investors were Blueprint Health, Rock Health, Y Combinator, DreamIt Ventures, Sprint Accelerator, The Iron Yard, and XLerate Health.

A record 29 countries participated in healthcare IT VC funding activity in 2014. There were 219 merger and acquisition (M&A) transactions in the healthcare IT sector in 2014 compared to 165 transactions in 2013, with 21 companies making multiple transactions during the year.

Revenue cycle management companies led M&A activity with 28 transactions followed by practice management and mobile health with 24 and 21 transactions, respectively.

The top five disclosed M&A transactions included the Rs.26,400 crore acquisition of MultiPlan by Starr Investment Holdings and Partners Group, the acquisition of TriZetto by Cognizant for Rs.16,200 crore, and the Rs.7800 crore acquisition of Siemens' health information technology business unit, Siemens Health Services, by Cerner. This was followed by Vista Equity Partners' acquisition of Advanced Computer Software for Rs.6840 crore, and the Rs.3300 crore acquisition of ABILITY Network by Summit Partners.

While the healthcare IT sector in the United States has more than doubled, in India the deals have barely crossed the half a billion dollar mark. The funding scenario is way behind the west as most of the investors are not ready to lead the investment rounds and push the innovation to the level of market launch. Companies are coming up with better technologies to tackle the healthcare delivery problem and also to make the healthcare IT system better. However, the VC industry in India which wants to bet on services and ideas which have traction have hampered the initial pre-seed stage startups and the innovation horizon.


 

randox

Digital version