Venture Investment In Healthcare Declines Through Q2 After Record 2014

After a record-breaking year of growth in 2014, venture capital investors in healthcare seem to have settled into a groove. They invested roughly $2.8 billion in healthcare technologies through the second quarter of 2015, down from $3.3 billion over the same period last year, according to a study from Startup Health.

Nearly $6.8 billion went into healthcare technologies that year, up from $3 billion the year before.

Given the twin engines of government legislation and technology innovation around wearable devices and data, it’s little wonder that venture capital investments in healthcare went up like a rocket in 2014.

Now, the industry seems to be catching its breath a bit. Investments in healthcare technology actually held steady in the second quarter at $1.8 billion after a $500 million decline year-on-year in the first quarter.

The trajectory points to just how revolutionary the combination of new mandates for health insurance, the proliferation of sensor technologies to track and monitor health data, and the availability of low-cost software tools to actually collect, manage and interpret that data has been.

An examination of some of the companies that have raised the most money and successfully exited supports this. Zenefits and Oscar Health , which are tackling the regulatory changes brought on by the Affordable Care Act (thanks Supreme Court!), raised more than respectable $500 million and $145 million rounds, respectively. While Nant Health, a company using big data analytics for genomic sequencing, and HealthCatalyst, which uses data to track health across populations, both scored big with their own big rounds of $200 million and $70 million.

“The market has really matured. The [stock markets]… opened up for Digital Health ([with] Fitbit and Evolent as the best examples) and you are seeing the deal size increase significantly pointing to a maturing market. Unity Stoakes, co-founder Startup Health

On the wearables side, the FitBit public offering proved that even public markets were interested in the wearable health opportunity.

“The market has really matured,” wrote Unity Stoakes, Startup Health’s co-founder in an email. “The [stock markets]… opened up for Digital Health ([with] Fitbit and Evolent as the best examples) and you are seeing the deal size increase significantly pointing to a maturing market.”

These later stage deals are a look back, but they’re also a taste of things to come. Companies have yet to fully mine the opportunities in diagnostics that can mitigate the risk of becoming ill in the first place, or companies that use data to improve treatment in line with the Affordable Care Act.

Beyond the size of the market,and the continued opportunities it contains, it’s worth noting that the breadth of firms that are investing and the geographies in which they’re putting capital to work is also impressive.

Corporate investors like GE Ventures and Qualcomm Ventures stood side-by-side with big ticket venture capital firms like Khosla Ventures and Venrock as the top investors in the sector.

Unsurprisingly, the top three cities for investment were San Francisco, New York, and Boston, according to the survey, but Minneapolis also found its way into the top five, which speaks to the broad reach of healthcare technologies in the country.

“There are lots of other interesting trends including where the money is flowing from. While SF and New York are still at the top there really is the “rise of the rest” with opportunities emerging in cities like Chicago, Denver, Salt Lake City, Miami, and everywhere in between,” Stoakes wrote in an email.

Startup Health is hoping that it too can be a beneficiary of this largesse. The New York-based startup academy and accelerator just closed on $5 million of a planned $30 million round, which is being led by AthenaHealth, which has its own healthcare accelerator.