StartUp Health’s 2018 Insights Funding Report: A Record Year for Digital Health
$14.6B of venture funding pumped through digital health in 2018, making it the most-funded year since we started tracking the market. But while growth has become the norm, trends suggest that this is just the first inning of a very long game.
It’s official. 2018 was another record year for global digital health innovation funding.
For the eighth year in a row, StartUp Health crunched the numbers on venture funding, deal sizes, investor trends, and the companies blowing up the global digital health innovation space. And for the eighth year in a row, the market grew.
This year, funding totaled $14.6B — that’s 14 times more than what it was in 2010, when it barely tipped $1B. Investments topped hundreds of millions of US dollars for the first time with no sign of slowing down. Just days into Q1 2019 Alphabet’s Life Science Tech Unit Verily announced the first $1 billion raise. Globally, investors nearly doubled their 2017 investments, and the average deal size grew by $3M from 2017 to 2018. Additionally, median deal sizes climbed at every stage, demonstrating long-term commitments, as well as overall growth potential in the market.
That said, 2018 was more than deja vu all over again. Growth may be the norm in digital health these days, but this blockbuster year bears the markings of a reinvention of an entire sector, rather than a bubble stretching thinner as it expands. The market is sturdy and ready for continued transformation with big multinational corporations, local industry players, and startups capturing maximum share and establishing their unique market positions. In the last quarter of 2018, funds continued to funnel to a broader range of cities like Bengaluru and Nashville, as startups secured larger deals across all stages, with the average A round today (~$10M) matching the size of a Series C in 2014. In this epoch of digital health innovation, A is the new C.
Beneath the surface of this year’s analysis we find a growing crop of mature companies supported by spikes in Series C funding rounds, a tell-tale sign that investors are paying more attention to this sector. And the rise of megafunds shows diverse dollars continuing to be poured into a market that is hell-bent on remaining patient-first, with companies and investors alike committed to the world’s biggest health needs.
According to Unity Stoakes, StartUp Health’s Co-founder and President, while health innovation today is growing more rapidly than ever, there is a paradox at play. “There is a confusing pattern in global digital health innovation,” Stoakes writes in his recent editorial in StartUp Health Magazine. “I call it the health innovation paradox. Whether in Beijing, Berlin, Berkeley or Buenos Aires, health innovation today is progressing slower than we think and faster than we ever dreamed possible — at the same time.”
On the one hand, the numbers from our 2018 Q4 Insights Report tell us that going into 2019, virtually every sector of healthcare is thinking about, or already leveraging digital. In 2018, newer niche sub-sectors gained increased attention from investors, including machine learning, blockchain, AI, and IoT. In other words, in 2019, digital health = health. On the other hand, old habits die hard. There is still a temptation to rely on incremental, band-aid innovation out of necessity because that’s what customers are buying and what investors are funding.
“We’re living in the most exciting time in history for transforming health — but there is still too little imagination being unleashed on our greatest health challenges,” Stoakes says. “Together we need to choose to go to the moon again. The time is now to stop inching forward and start racing past the health innovation paradox.”
We’ve crunched the numbers, read the tea leaves, and believe the ongoing evolution of digital health will require more than another blockbuster year. Heading into 2019, StartUp Health is poised to support Health Transformers across the globe in leapfrog innovation to achieve health moonshots with new technologies, new platforms and new entrants into the market committed to changing entire paradigms.
Check out the top takeaways from the 2018 Q4 Report below and download the full (and free) report now at startuphealth.com.
Funding surpassed 2017 numbers by almost $3B, making 2018 the fourth consecutive increase in capital investment and largest since we began tracking digital health funding in 2010. Deal volume decreased from Q3 to Q4, but deal sizes spiked with $3B invested in Q4 alone. Average deal size in 2018 was $21M, a $6M increase from 2017.
The closing of a handful of mega deals each quarter continued to be the norm, not the exception. Peloton held its spot as the largest deal of 2018. This quarter, Smile Direct Club joined the list as the second largest deal of 2018. Deals made in 2018 represented more than half of ten digital health functions, with biometric data acquisition appearing most frequently.
Total share of seed rounds continued to decrease in 2018, while the percentage of mid-stage deals grew by ~15% compared to 2017. Series D and E deals account fo six percent total deals, which is the highest percentage we’ve seen in the last five years.
Visit startuphealth.com to download the full report, and join in on the conversation on Twitter at @StartUpHealth.
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