StartUp Health Insights Annual Report: 2014: The Year Digital Health Broke Out

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1 Published: 12/22/14 Report data through 12/19/14 StartUp Health Insights Annual Report: 2014: The Year Digital Health Broke Out 2014 StartUp Health, LLC A StartUp Health Insights TM Report Report is inclusive of seed, venture, corporate venture and private equity funding Take the pledge at startuphealth.com/pledge for weekly funding insights

2 DEALS & FUNDING 2014 YEAR IN REVIEW 2014 was a record year for digital health with $6.5B invested, a 125% increase from the total amount invested in Our report provides a snapshot of the market s top deals, subsectors, investors and more. Here are five trends we re watching: Healthcare Reform Continues to Spur Innovation: As incentive structures change and new penalties come into effect in 2015, providers and payors look to entrepreneurs to create effective solutions. The unmet need is evidenced as Big Data / Analytics ($1.5B), Population Health ($1.1B) and Healthcare System Navigation ($975M) net the largest amounts of private funding in Acceleration of Chronic Disease & Aging Population Leads to Increased Consumerism: Rising costs continue to be the second largest catalyst for innovation in healthcare. Patients are not only encouraged, but enabled through mobile technology, to manage their health through preventive measures. Consumer health companies raised $880M in Clinical Decision Support & Personalized Medicine Gain Traction: With the advent of the $1,000 genome, truly personalized medicine is in our reach. Genomic companies raised $632M and diagnostics $962M this year. This data, coupled with $624M that went into clinical research companies will revolutionize the way that diseases are treated. Convergence of Technology in Clinical Settings: Mobile and wireless technology has permeated not only our daily lives, but those of professionals in clinical settings. Practice management tools allowing physicians to focus on treatment, rather than admin tasks, raised $783M, while those focusing on improving workflows raised $681M. Payor-related toolkits raised $699M. Innovation Globalization: More than 7,500 startups around the world are developing new solutions in digital health, based on data from the StartUp Health Network. Even within the US, areas outside of the Bay Area, New York and Boston are seeing an uptick in the number of companies obtaining funding. "The healthcare industry continues to be one of the biggest opportunities for entrepreneurs and investors. Overemployment and declining productivity has plagued our healthcare system industry for decades, but today market forces are driving new incentives and paving the way for disruption. The walls are clearly coming down and we see increased demand across the health care ecosystem to address inefficiencies and focus on creating value. - Bob Kocher, MD, Partner 2

3 DEALS & FUNDING DIGITAL HEALTH FUNDING SNAPSHOT Funding in 2014 more than doubled from last year with $6.5B invested compared to $2.9B in 2013, with each quarter in 2014 attracting more capital than all of Signs of a maturing market continue, as investors place larger bets on fewer companies $7B Deals $1.2B 251 $1.7B 452 $2.2B $2.9B 459 $6.5B $5B $4B $2B Funding ($B) YTD 2014 Deal Count Total Funding Note: StartUp Health Insights TM is inclusive of seed, venture, corporate venture and private equity funding. 3

4 DEALS & FUNDING THE TOP 10 PRIVATE DEALS OVER $100M OF 2014 The top five companies received close to 20% of all funding invested this year. The top 10 deals represent one-third of all funding in Company $ Invested Subsector Notable Investor 1 $400M Practice Management Cardinal Partners 2 * $320M Diagnostics Kuwait Investment Authority 3 $172M Sensors & Diagnostics Essex Woodlands 4 * $135M Diagnostics Kuwait Investment Authority 5 $130M Big Data / Analytics Google Ventures 6 $125M Population Health General Atlantic 7 $120M Genomics OrbiMed Advisors 8 $108M Patient Engagment Undisclosed 9 $105M Diagnostics Capricorn Investment Group 10 $100M Imaging Aeris Capital 10 $100M Big Data / Analytics General Atlantic 10 $100M Practice Management Tencent *NantHealth received funding in May 2014 and October Note: Report is inclusive of private equity, venture and angel funding. 4

5 DEALS & FUNDING THE TOP 10 PRIVATE DEALS UNDER $100M OF 2014 Company $ Invested Subsector Notable Investor 1 $89M Big Data / Analytics Hutton Collins 2 $80M Insurance Founders Fund 2 $80M Telemedicine Undisclosed 4 $78M Big Data / Analytics Bain Capital 5 $71M Navigating the Healthcare System Sandbox Industries 5 $71M Population Health Undisclosed 7 $70M Aging with Vitality K.T. Lim 8 $67M Navigating the Healthcare System Andreessen Horowitz 9 $61M Patient Engagement Undisclosed 9 $60M Personalized Medicine HealthCare Royalty Partners Note: StartUp Health Insights TM is inclusive of seed, venture, corporate venture and private equity funding. 5

6 DEALS & FUNDING THE TOP 10 PRIVATE DEALS UNDER $10M OF 2014 Company $ Invested Subsector Notable Investor 1 $9.9M Navigating the Healthcare System SoftTech VC 2 $9.8M Wellness Mayfield Fund 3 $9.6M Population Health KPCB 4 $9.0M Navigating the Healthcare System Merck Global Health Innovation Fund 4 $9.0M Big Data / Analytics Romulum Capital 6 $9.0M Consumer Health Matrix Partners 7 $8.8M Communication Health Enterprise Partners 8 $8.8M Big Data / Analytics Undisclosed 9 $8.5M Big Data / Analytics GE Ventures 9 $8.5M Big Data / Analytics Bootstrap Venture Fund 9 $8.5M Patient Engagement Formation 8 Note: StartUp Health Insights TM is inclusive of seed, venture, corporate venture and private equity funding. 6

7 DEALS & FUNDING THE TOP 10 MOST ACTIVE SUBSECTORS OF 2014 Big data is clearly a big winner; companies that may not have been traditionally labeled as big data are now leveraging analytic and predictive methods to drive value in niche subsector areas. Subsector $ Invested # of Deals Largest Deals 1 Big Data / Analytics $1.46B 90 2 Population Health $1.14B 33 3 Navigating the Care System $974M 52 4 Diagnostics $962M 60 5 Consumer Health $880M 69 6 Practice Management $783M 40 7 Payor / Insurance $699M 33 8 Workflows $681M 38 9 Genomics $632M Clinical Research $624M 17 NantHealth Flatiron Health PriviaHealth Alignment Health Oscar Preventice FlatironHealth HeartFlow One Medical Group Misfit Wearables PriviaHealth Guahao Oscar Zenefits MedHOK Health Catalyst Flatiron Health Invitae NantHealth medfusion Note: Investments in the above subsectors are not mutually exclusive as deals are tagged with multiple subsectors. 7

8 DEALS & FUNDING SUBSECTOR SPOTLIGHT: BIG DATA / ANALYTICS While the majority of the 90 deals were in seed or Series A, the capital is concentrated in mid-stage deals, demonstrating that follow-on funding has been prevalent for big data companies this year. Deals $0.2B 36 $290M $0.3B 79 $0.4B 123 $452M $0.7B $1.5B $2B $1B $1B $487M $0B Funding ($B) $578M 2014 ACTIVITY $1.6B 90 Deal Count Total Funding NOTABLE DEALS IN 2014 $320M Series C $70M Series A NOTABLE Early Stage Mid Stage Late Stage $130 Series B $8.5M Series A Deal Count Total Funding 8

9 DEALS & FUNDING SUBSECTOR SPOTLIGHT: POPULATION HEALTH Of the top three sectors, Population Health is the least mature with only one late-stage deal, but has seen a jump in follow-on funding, mostly as a result of large deals including Alignment Healthcare and Evolent Health ACTIVITY 40 $1,200M $900M $1.6B Deal Count Total Funding Early Stage Mid Stage Late Stage Deals $97M $290M $117M 14 $81M 17 $452M $259M $1,146M $1.2B $487M $600M $300M Funding ($M) NOTABLE DEALS IN 2014 $125M Venture Round $25M Series D $101M Series B $12M Series A NOTABLE Deal Count Total Funding 9

10 DEALS & FUNDING SUBSECTOR SPOTLIGHT: NAVIGATING THE HEALTHCARE SYSTEM While the total deal count is half of what it was last year, it did not stop the dollars from coming in as funding nearly doubled from 2013 to ACTIVITY $1,000M $750M $1.6B Deal Count Total Funding Early Stage Mid Stage Late Stage Deals $154M 45 $290M $455M 62 $291M $452M $566M 52 $974M $487M $500M $250M Funding ($M) $578M NOTABLE DEALS IN 2014 $80M Series A $50M Series F $66.5M Series B $26.4M Series B NOTABLE Deal Count Total Funding 10

11 DEALS & FUNDING THE TOP 10 MOST ACTIVE US METRO AREAS OF 2014 The Bay Area continues to attract the most capital, while interest in New York startups increases. Los Angeles rounds out the top three, mostly due to NantHealth, while Boston is the third most active area by deal count. Metro Area $ Invested # of Deals 1 SF Bay Area $1.04B 81 2 New York City $722M 44 3 Los Angeles $693M 12 $722M $383M 4 DC / MD $577M 17 5 Boston $383M 36 6 San Diego $186M 16 7 Dallas / Fort Worth $168M 6 8 Chicago $150M 12 9 Minneapolis $134M 5 10 Seattle $80M 7 $1.04B $693M $577M 11

12 DEALS & FUNDING 2014 DEAL SIZE RANGES & MEDIANS BY STAGE Because of how relatively young the digital health market is, there is a lot of variance in deal sizes across the different stages and we expect that to continue in $17.0M $0 $120M $12.3M $3.0M $7.3M $15.0M $41.7M $0 $400M $3.0M $8.0M $20.7M $50.0M $4.6M $0 $80M $0 $10M $20M $40M $80M $400M Early Stage (Seed + Series A) Mid Stage (Series B + Series C) Late Stage (Series D+) 12

13 DEALS & FUNDING 2014 DEAL ACTIVITY BY STAGE Even though deal sizes vary greatly, digital health continues to show signs of growth as mid-stage deal count grows to 28.6% in 2014, up from 21% in % 25% 50% 75% 100% Seed Series A Series B Series C Series D Series E Series F + G We believe the future of healthcare will be defined by personalized insights derived from large and original data sources. We are excited by the range of companies that are now using this strategy to convert the practice of medicine into the science of medicine. - Euan Thomson, Operating Partner 13

14 DEALS & FUNDING THE TOP VENTURE OF 2014 Only one firm decreased the amount of investments they made in 2014 vs 2013, with other venture groups either keeping par with or increasing their commitment to digital health innovation. Investor 2014 YTD Deals 2013 Deals Stage Early Mid Late Investments in digital health are having a positive impact and the momentum is likely to continue and cause changes throughout the entire healthcare ecosystem. In particular, the pharmaceutical industry is poised to take advantage of digital and mobile innovation allowing them to go beyond the pill. - Jack Young, Head, Qualcomm Life Fund 14

15 DEALS & FUNDING THE TOP CORPORATE VENTURE OF 2014 For entrepreneurs who are looking for less traditional sources of capital, corporate venture arms are proving to be an excellent go-to source, with most becoming more comfortable with early-stage investment. Investor 2014 YTD Deals 2013 Deals Stage Early Mid Late In 2015, we will see continued investment and progress around the two major themes of the rise of the healthcare consumer and the shift to value-based payment models. - Anna Haghgooie, Managing Director 15

16 DEALS & FUNDING 2014 M&A ACTIVITY IN DIGITAL HEALTH The digital health industry is starting to see consolidation as startups merge to provide stronger offerings, and corporations are looking to entrepreneurs to be a source of innovation. ACQUIRING ORGANIZATION MEDIAN AMOUNT RAISED PRIOR TO ACQUISITION Fund Payor 1 1 $4.2M NOTABLE ACQUIRERS Corporation 18 Startup 20 16

17 DEALS & FUNDING 2014 M&A ACTIVITY IN DIGITAL HEALTH 2014 saw 40 mergers and acquisitions take place, mostly in areas aligned with the top subsectors that received the highest overall funding. Subsector # of Deals Notable Deals (Notable Investor*) 1 Population Health 5 2 Big Data 4 2 Consumer Health 4 2 Navigating Health System 4 2 Wellness 4 6 Medication Adherence 3 6 Practice Management 3 6 Telemedicine 3 6 Vital Signs Monitoring 3 6 Workflows 3 WebOutcomes CareInSync (Samsung Ventures) Tomorrow Networks Altos Solutions BASIS (Norwest Venture Partners) MedHelp bswift (Great Hill Partners) DoctorDirectory.com ProtoGeo (Tekes) Wello (Mohr Davidow Ventures) Inspiro Medical RxAnte (Aberdare Ventures) Origin Healthcare (KPCB) HealthPost Medeo Corporation Breakthrough Behavioral Corventis (KPCB) Zephyr Technology (3M New Ventures) OnFocus Healthcare (TriStar Technology Ventures) Siemens Healthcare *Notable Investor listed when publicly available. 17

18 DEALS & FUNDING 2014 IPOS IN DIGITAL HEALTH This year s IPOs in digital health have produced mixed results. We look forward to 2015 as more companies prepare to go public. Big Data Navigating Care System Consumer Health Workflows Not Available Pre-IPO VC Funding $168M Pre-IPO VC Funding $181M Pre-IPO VC Funding $24M Pre-IPO VC Funding $8.46B (Market Cap 12/18/14) $454.3M (Market Cap 12/18/14) $1.04B (Market Cap 12/18/14) $308.2M (Market Cap 12/18/14) 123% (76%) 247% (21%) $6.9B on opening (4/4/14) $1.9B on opening (3/14/14) $421M on opening (3/27/14) $388M on opening (6/24/14) 18

19 METHODOLOGIES Sectors: We have a broad view of digital health and believe that the current trend is a cross-pollination of technology and data with all aspects of health and healthcare. StartUp Health Insights TM tracks companies that enable health, wellness and the delivery of care through data / analytics, sensors, mobile, internet-of-things, and genomics / personalized medicine. Investments in sub-sectors are not mutually exclusive as deals are tagged with multiple sub-sectors. Stage of funding: StartUp Health Insights TM records only publicly available data on cash for equity investments as the cash is actually received by the company. StartUp Health Insights TM is inclusive of seed, venture, corporate venture and private equity funding. Early stage: The company has raised a Seed or Series A round Mid stage: The company has raised a Series B or Series C round Late stage: The company has raised a Series D or other growth equity round StartUp Health also tracks incubator rounds and other financings into privately-held entities (e.g. unnamed venture rounds, strategic investments, growth equity and private equity). In tabulating deal activity by stage we excluded rounds not clearly associated with a specific stage. Sources: Funding data is from StartUp Health Insights TM, the most comprehensive funding database for digital health, and managed by the StartUp Health team. Information, data and figures represent only publicly available data. Data for acquisitions slide was provided by a range of sources including StartUp Health Insights TM, CrunchBase, AngelList and news reports. StartUp Health has taken responsible steps to ensure that the information contained in the StartUp Health Insights TM Report has been obtained from reliable sources. However, StartUp Health cannot warrant the ultimate validity of the data obtained in this manner. All data is subject to verification with the venture capital firms and/or the investee companies. Results are updated periodically. Therefore, all data is subject to change at any time. This report is provided for informational purposes and was prepared in good faith on the basis of public information available at the time of publication without independent verification. StartUp Health does not guarantee or warrant the reliability or completeness of the data nor its usefulness in achieving any particular purposes. StartUp Health shall not be liable for any loss, damage, cost or expense incurred by reason of any persons use or reliance on this report. This report is a proprietary aggregation of publicly available data and shall not be forwarded or reproduced without the written consent of StartUp Health. 19

20 ABOUT STARTUP HEALTH StartUp Health is a global growth platform for entrepreneurs transforming healthcare. The StartUp Health Academy, a long-term coaching program and trusted peer network, includes 165 entrepreneurs from 84 companies in 7 countries and 45 cities. StartUp Health's full-time team of entrepreneur coaches helps increase the equity value of its companies by providing structured programming and access to investors, customers and advisors, from the StartUp Health Network, for every stage of a company s lifecycle. StartUp Health companies have cumulatively raised over $180M and to date, three have been acquired - Basis Science by Intel, Avado by WebMD and Arpeggi by Gene by Gene. StartUp Health was founded by health tech entrepreneurs, Steven Krein and Unity Stoakes, and is chaired by former Time Warner Chairman and CEO, Jerry Levin. Investors include Mark Cuban, Steve Case, Esther Dyson, Roger Ehrenberg, Brad Feld, Richard Forman, Jason Finger, Linda Holliday, Jon Kaplan, Howard Krein, MD, PhD, Jon Miller, Jeff Stewart and Wayne Kimmel. Learn more at startuphealth.com and For press inquiries, press@startuphealth.com TM StartUp Health Insights Report Contributors: Troy Bannister, Brian Edwards, Polina Hanin, Jennifer Hankin & Tanner Yager. 20

21 STARTUP HEALTH COMPANIES 21

22 Published: 12/22/14 Report data through 12/19/14 StartUp Health Insights Annual Report: 2014: The Year Digital Health Broke Out 2014 StartUp Health, LLC A StartUp Health Insights TM Report Report is inclusive of seed, venture, corporate venture and private equity funding Take the pledge at startuphealth.com/pledge for weekly funding insights