Healthcare IT VC Funding Totals $737M In Q3 2013, Reports Mercom Capital Group - Strong Funding Activity Continues

Mercom Capital Group, llc, a global communications and consulting firm, recently released its report on funding and mergers and acquisitions (M&A) activity in the Healthcare Information Technology (IT) sector for the third quarter of 2013.

Venture capital (VC) funding in the sector continued to rise in yet another record quarter with $737M raised in 151 deals. The dollar amount of disclosed deals surpassed the second quarter total of $623M. Year to date, the Healthcare IT sector has raised a disclosed $1.85B.

Chart - Healthcare IT VC Funding Q3 2013: http://mercomcapital.com/assets/images/Charts/HIT-Q3-2013/Chart_1.png

While the 2009 HITECH Act helped launch the sector through its $17B allocation towards the adoption of meaningful use of healthcare IT, private investments into the sector have continued to rise with increasing EHR adoption. Release of healthcare data by the U.S. Department of Health and Human Services has also contributed to the growth of healthcare products and applications focused on consumers.

“Funding into Healthcare IT is on pace to double over last year,” said Raj Prabhu, CEO of Mercom Capital Group. “With major parts of the Affordable Care Act on the horizon, the focus is on health insurance exchanges, preventative care, wellness, population health, and a general shift from quantity to quality of care, which is reflected in this quarter’s funding transactions.”

Healthcare practice-focused technology companies received $489M in 59 deals with population health, EHR/EMR, practice management, and data analytics companies all receiving attention this quarter.

Consumer-focused companies received $248M in 92 deals, with most funding ($161M) going to the mobile health category, with mobile health apps and sensors receiving the most funding this quarter.

The top VC funding deal in Q3 2013 went to Evolent Health, a population health management organization that integrates technology, tools and services to support value-based care and payment models, which raised $100M from The Advisory Board Company, UPMC Health Plan and TPG Growth. Other top deals in the quarter included Practice Fusion, a free web-based EMR provider, which raised $70M from Kleiner Perkins Caufield & Byers, OrbiMed Advisors, Deerfield Management Company, Industry Ventures, Artis Ventures, Morgenthaler Ventures, Felicis Ventures, Glynn Capital Management, Band of Angels Acorn Fund, H Barton Co-Invest Fund, and Goldcrest Investments; MedSynergies, a provider of revenue and performance management solutions for healthcare providers, raised $65M from undisclosed investors; Fitbit, a fitness and health tracker company, raised $43M in private equity financing from Qualcomm Ventures, SAP Ventures, SoftBank Capital, Foundry Group and True Ventures; and Oscar, a technology-based health insurance and telemedicine provider, raised $40M from Thrive, Founders Fund, General Catalyst, and Khosla Ventures.

Chart - Healthcare IT Top 5 VC deals Q3 2013: http://mercomcapital.com/assets/images/Charts/HIT-Q3-2013/Chart_2.png

There were a total of 168 investors in Q3 2013, including VCs, accelerators, incubators and crowdfunding platforms, compared to 161 investors in Q2 2013. Six investors participated in multiple funding rounds compared to 11 in Q2 2013. Kleiner Perkins Caufield & Byers and The Social+Capital Partnership were the most active investors and participated in four deals each. The remaining top investors participated in three deals apiece. They included FirstMark Capital, Founders Fund, HLM Venture Partners and Khosla Ventures.

Mergers and acquisitions (M&A) in Healthcare IT totaled $1.1B in 45 transactions. Last quarter saw $108M in 30 transactions. Health Information Management companies attracted the most acquirers in Q3 2013 with 22 transactions followed by Revenue Cycle Management with nine acquisitions and Telehealth with four.

Chart - Healthcare IT disclsoed M&A transactions Q3 2013: http://mercomcapital.com/assets/images/Charts/HIT-Q3-2013/Chart_3.png

There were only six disclosed M&A transactions in the third quarter, including the $644M merger of Greenway Medical Technologies, a provider of an EHR, practice management and interoperability solution platform, and Vitera Healthcare Solutions, an EHR and practice management software provider; the $200M acquisition of Medical Management Professionals, a medical billing and practice management company (subsidiary CBIZ), by Zotec Partners; and the $200M acquisition of Cardiocom, a developer and provider of integrated telehealth and remote patient-monitoring services, by Medtronic. The Advisory Board Company acquired Medical Referral Source, a web-based software program that streamlines patient referrals from primary-care doctors to specialists, for $11.5M; and IMS Health acquired Diversinet, a provider of secure, patented mobile technologies and connected health solutions for healthcare organizations and partners, for $3.5M. Also in Q3, Mastech Holdings’ Healthcare Unit was acquired by Accountable Healthcare Staffing for $1.15M. There were a total of 412 companies and investors mentioned in this report.

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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.