Rock Health published the Rock Report: State of Digital Health on Tuesday, August 2, 2011, which provided data demonstrating that investment in digital health is increasing dramatically.
In its report, Rock combined studies from Capital IQ, CrunchBase, NVCA, Dow Jones VentureSource, and its own survey of 110-early stage digital health entrepreneurs, which show the direct correlation between which developers are receiving venture capital (VC) and who their target consumer is.
The studies conducted by the outside groups showed that VC funding of healthcare technology has increased significantly in the last few years, including a considerable spike from the 2005 total of 52 healthcare technology deals to the 2010 total of 138.
Furthermore, according to the 2011 Venture View Predictions Survey published by NVCA and Dow Jones VentureSource, 77% of VCs think that healthcare IT investment dollars will increase in 2011.
This prediction is supported by Capital IQ and CrunchBase’s findings that 35 digital health companies have already received two million dollars or more in 2011. This includes significant investments such as $61 million in EGHC for healthcare and insurance delivery software, $32.5 million in Lumosity for cognitive enhancement software, $27 million in Ability for connecting Medicare and providers, and $23 million in Practice Fusion for web-based EMR.
Additionally, within the first three days of August, MobiHealthNews has reported that $50 million has already been given to ZocDoc, an app for appointment set-up, in addition to the $3 million provided for AliveCor, the iPhoneECG developer, showing that VC investment in digital health is still strong.
However, despite the visible trend of increasing VC investment, this phenomenon is mostly visible within business to business (B2B) ventures. This poses a problem to many of the digital health entrepreneurs that Rock surveyed, who are mostly building business to consumer (B2C) companies.
Many of these B2C entrepreneurial companies are still struggling monetarily, listing funding as the number one challenge to their business’s success with 60 percent stating that they have received less than $50 thousand in funding.
Therefore, although funding in the digital health space has increased significantly in the last few years, this does not mean that all of the barriers to mHealth innovation have been removed. Instead, investment is still being placed in companies that target their products to the business market rather than the individual consumer.