Strong Start For Healthcare IT Sector With $858M In VC Funding in Q1, Reports Mercom Capital Group

Another record quarter for dollars raised

Mercom Capital Group, llc, a global communications and consulting firm, today released its report on funding and mergers and acquisitions (M&A) activity in the Healthcare Information Technology (IT) sector for the first quarter of 2014. Mercom’s comprehensive report looks at deals of all sizes in Healthcare IT across the globe.

Venture capital (VC) funding in the sector continued at a record pace with $858M raised in 163 deals, a 154 percent increase compared to the $337M raised in Q4 2013. This was the highest dollar amount raised by the sector in a single quarter to date.

Click here for “Healthcare IT VC Funding Q1 2014” (http://www.mercomcapital.com/assets/images/Charts%202014/HITQ12014/HealthcareITVCFundingQ12014.png).

“Funding into the Healthcare IT sector continues at an astonishing pace. Venture capital funding in Healthcare IT has reached almost $5B in about 1,000 deals since 2010,” commented Raj Prabhu, CEO and Co-Founder of Mercom Capital Group.

Healthcare practice-focused technology companies received half of all VC investments in the first quarter of 2014, with $460M in 60 deals. Areas that received the most funding under this category were Practice Management with $124M in eight deals, Health Information Exchange with $78M in two deals, and Data Analytics with $43M in seven deals.

Consumer-focused companies received $398M in 103 deals, with the majority of the funding going into the Mobile Health category ($198M in 61 deals). Telehealth companies received $79M in 14 deals and Scheduling, Rating & Shopping companies received $66M in six deals

There were 65 early-stage deals under $2M. including 29 accelerator/incubator deals in Q1. Investments going into early-stage deals (<$2M) were more consumer-focused compared to deals of over $2M, which were going towards practice-focused technology companies.

The top VC funding deal in Q1 2014 was the $89M raise by Dedalus Group, a Healthcare IT systems company providing software solutions for clinical, general practices, and hospitals, from Hutton Collins and other investors. Other top deals included the $77.5M raise by MedHOK, a provider of a single platform for care, quality and compliance for health plans, pharmacy benefits managers and other risk-bearing entities by facilitating real-time information sharing, from Bain Capital Ventures and Spectrum Equity; MINDBODY, a provider of scheduling and business management software for health and wellness companies, which raised $50M from investors including Bessemer Venture Partners, Institutional Venture Partners, Catalyst Investors, W Capital Partners, and Montreux Equity Partners; the $41.4M raise by Clarity Software Solutions, a provider of on-demand document management and communications delivery solutions for the health insurance industry, from North Bridge Growth Equity; and Health Catalyst, a provider of healthcare data warehousing, which raised $41M from Sequoia Capital, Norwest Venture Partners, Kaiser Permanente Ventures, Sorenson Capital, CHV Capital, and Partners HealthCare System.

Click here for “Healthcare IT Top 5 VC Deals in Q1 2014” (http://www.mercomcapital.com/assets/images/Charts%202014/HITQ12014/HealthcareITTop5VCDealsinQ12014.png).

There were 188 VC investors and eight accelerators/incubators that participated in Q1 2014. There were 19 investors that participated in multiple rounds; Khosla Ventures was the most active with three deals.

U.S.-based Healthcare IT companies accounted for 87 percent of all deals. However, we are seeing more Healthcare IT activity globally, with 15 other countries recording at least one funding deal.

Within the United States, California continued to be the most active state accounting for 42 deals, followed by New York with 13, Maryland with 10, Massachusetts with nine, and Florida with six. Among cities, San Francisco led with 13 deals followed closely by New York with 11. In terms of dollars, Tampa led with $78M, followed by San Luis Obispo with $50M and New York with $44M.

Mergers and acquisitions (M&A) activity in the Healthcare IT sector was at its highest level, totaling 53 transactions, only six of which were disclosed for a combined total of $4.7B, compared to 44 transactions in Q4 2013. Health Information Management companies saw the most M&A activity this quarter with 18 transactions, followed by Service Providers with 13, and Mobile Health companies with eight.

The largest disclosed transaction was the $4.4B acquisition of MultiPlan, a company that manages claims processing and provides healthcare cost management solutions through its network and analytics-based technology platform, by Starr Investment Holdings, an investment firm focused on long-term investments, and Partners Group, a private markets investment management firm. This was followed by the $130M divestiture of HealthTronics, a provider of EHR for urology practices, from specialty healthcare company Endo Health Solutions to Altaris Capital Partners, an investment firm focused on the healthcare industry. Semiconductor chip maker Intel Corporation acquired Basis Science, a provider of wearable device technologies for health and wellness applications, for nearly $100M. Other disclosed transactions were the $16.15M acquisition of Health Care Compliance Strategies, a company providing online compliance training for healthcare organizations, by HealthStream, a provider of workforce development and research/patient experience solutions for the healthcare industry, followed by the $6.5M acquisition of Unibased Systems Architecture, a provider of patient access solutions including enterprise scheduling and surgery management software, by Streamline Health Solutions, a provider of enterprise content management and business analytics solutions for healthcare organizations. Vocera Communications, a provider of point-of-care communication solutions, acquired mVisum, a provider of alarm management technology solutions for health systems, for $3.5M.

Announced debt and public market financing in Healthcare IT amounted to $343M in six deals in Q1 2014, compared to $36M in seven deals in Q4 2013.

Two Healthcare IT IPOs in Q1 2014 raised a combined $304M. Castlight Health, a provider of healthcare transparency solutions, brought in $204M through its IPO in March and Everyday Health, a provider of digital health and wellness solutions launched an IPO that raised $100M.

Total corporate funding in the Healthcare IT sector, including VC, accelerator/incubator, debt, and public market financing, in Q1 2014 came in at $1.2 B.

There were a total of 464 companies and investors mentioned in this report.

To learn more about the report, visit: http://store.mercom.mercomcapital.com/products-page/healthcare-it-reports/hit-q12014-funding-report/

About Mercom Capital Group
Mercom Capital Group, llc, is a global communications and consulting firm focused on Healthcare IT, cleantech and financial communications. Mercom’s consulting division advises companies on new market entry, overall strategic decision-making, and provides custom market research. Mercom delivers highly respected industry market intelligence reports covering Healthcare IT, Solar Energy, Wind Energy and Smart Grid. Our reports provide timely industry happenings and ahead-of-the-curve analysis specifically for C-level decision making. Mercom’s communications division helps companies and financial institutions build powerful relationships with media, analysts, local communities and strategic partners. For more information, visit http://www.mercomcapital.com. and http://mercomcapital.com/market_intelligence.php.