startup health insights report 2015

© 2015 StartUp Health, LLC

A StartUp Health InsightsTM Report Report inclusive of seed, venture, corporate venture and private equity funding Sign up to receive weekly funding insights at startuphealth.com

Published: April 1, 2015

StartUp Health Insights Digital Health Funding Rankings

2015: The Year Digital Health Hit Its Stride

TM

Year End Early Preview Report data through 12.15.15

Source: StartUp Health Insights | startuphealth.com/insights Note: Report based on public data on seed, venture, corporate venture and private equity funding only. © 2015 StartUp Health LLC

While 2014 was the year that digital health broke out, 2015 was the year it hit its stride. A slow start in Q1 didn’t hamper a rebound in the market, with Q2 and Q3 ending on par with 2014. And although 2015 didn’t surpass the $7B mark of 2014, the total dollar funding is still double that of 2013.

2015 Year End Summary

1Digital Health Funding Gets Smart: Although there are fewer mid-stage deals this year than last, companies that are raising are able to do so faster than in 2014. Follow-on capital is readily available for those companies able to consistently demonstrate a validated solution as investors are focused more on compelling business models and credible outcomes.

2A Maturing Market: Deal distribution continues to shift to mid- and late-stage deals as average overall deal size is on par with Series B rounds, as compared to it being in line with Series A rounds in 2013. Median deal size stayed consistent in early-stage deals since 2014, while mid-stage and late-stage deals have increased 27% and 50%, respectively. Funding is coming in bigger sizes and moving to later stages.

3Investors Continue to Support Early Stage Innovation: As investors back later-stage companies, the most active investors in digital health continue to support early-stage innovation. In fact, new entrants to the digital health space come in record numbers, with nearly 600 organizations supporting innovation financially and with expert advice.

4

Shift in Focus to B2C / B2B2C Versus Strict B2B Models: After a strong 2014 with heavy investments in clinical B2B solutions, 2015 displayed a complementary investment landscape with funding focused more on the consumer ecosystem. Enterprise solutions in workflow, population health and clinical decision support dropped in funding whereas patient/consumer experience, wellness and e-commerce rose in the ranks. While the 10 top markets have consistently remained at the top, they have shuffled significantly as different solutions receive financial attention.

5

Betting on Winners Across Singular Sectors: Time-to-market, funding and challenging pilot hurdles play a role in the difficulties demonstrating an ROI and selling to budget-minded hospitals and clinics, effectively slowing the growth of many B2B solutions. As market leaders emerge in each sector, investors are focused on identifying singular winners and strategically funding them to dominate whole sectors. 2014 saw more of these ‘all- in’ investments, explaining $750M of the difference between this year and last.

DEALS & FUNDING INVESTORS MOMENTUM OUTLOOK

2


150

280

465

617561

477

Digital Health Funding Snapshot Year Over YearFu

ndin

g ($

B)

$2

$4

$6

$8

2010 2011 2012 2013 2014 2015 YTD

Q1 Q2 Q3 Q4

$1.1B

$1.9B$2.4B

$3.0B

$7.0B

2015 saw a significant shift towards validated innovation. Today’s capital is supporting companies with proven leadership, strategy, business models and demonstrated outcomes. Although total funding is down from last year, there is more market impact per invested dollar than ever.

Deal Count

$5.8B


$1.6B

$1.8B

$1.9B

$1.7B

$1.1B

$1.9B

$1.8B

$1.0B

3


$0

$250,000,000

$500,000,000

$750,000,000

$1,000,000,000

$1,250,000,000

2010 2011 2012 2013 2014 2015

R² = 0.5597

Digital Health Funding Snapshot Month over Month

Despite fluctuations and a slow first quarter of 2015, the market trend is still positive, with a regression analysis on a month-over-month basis demonstrating a continued upward momentum.

DEALS & FUNDING INVESTORS

$101M Series B

$320M Series B

$230M Series B

$394M Venture

$150M Series C

$37.5M Venture

$37.9M Venture

$33M Series B

$31M Series A

$400M Series C

$500M Series C

R2 = 0.5564

MOMENTUM OUTLOOK

4

$1.25M

$1.00M

$0.75M

$0.50M

$0.25M


Subsector 2014 Rank Total Raised YTD Deal Count Average Deal Size

1 Patient / ConsumerExperience

5 $1.30B 111 $12.9M

2 Wellness / Benefits 8 $1.22B 54 $28.4M

3 Workflow 1 $641M 79 $9.0M

4 Personalized Health / Quantified Self 7 $583M 32 $20.1M

5 Medical Device 2 $483M 64 $7.5M

6 E-Commerce 9 $464M 23 $25.8M

7 Big Data / Analytics 6 $409M 40 $10.5M

8 Population Health 3 $206M 18 $11.4M

9 Clinical Decision Support 4 $202M 19 $11.2M

10 Research 10 $97M 15 $6.9M

The Top 10 Most Active Markets of 2015


The patient / consumer experience sector continues to be a huge market force with increasing entrants and cash flow — driven by the market focus on prevention and savings, as well as the relative ease of market entry.

5

MOMENTUM OUTLOOK


Company $ Invested Subsector Notable Investor

1 $500M Benefits

2 $394M Navigating the Healthcare System

3 $145M Insurance


5 $114M Genomics

6 $108M Genomics

7 $100M Personalized Health Undisclosed


9 $81M Insurance

10 $79M Genomics

The top 10 deals of 2015 include the largest ever Series A (Oscar) and venture deal (Zenefits). These record-breaking deals in benefits, insurance, genomics and navigating the healthcare system represent answers to the biggest global healthcare challenges today — new insurance models, individualized medicine and price transparency.

The Top 10 Largest Deals of 2015


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Average Overall Deal vs. Average Round Comparison

The average deal size in digital health continues to increase. In 2013, the average deal size was $5.8M. This year, average deal size increased almost three-fold to $15.1M, on par with the Series B average of $17.1M.

DEALS & FUNDING INVESTORSFu

ndin

g ($

M)

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Average Deal Size Avg. Seed Avg. Series A Avg. Series B Avg. Series C

2013 2015

*Excludes $500M Zenefits deal (Q2 2015) and accelerator rounds

MOMENTUM OUTLOOK

7

$40M

$30M

$20M

$10M Fund

ing

($M

)


As deal size continues to vary, the median ranges of early-, mid- and late-stage deals also continued to spread. Median deal size stayed consistent in early-stage deals since 2014, while mid-stage and late-stage deals have increased 27% and 50%.

Deal Size Ranges & Medians by Stage for 2015


$0

$5M $193M

$3M $81M

$200K $35M

$200M

$17.5M

Late-stage (Series D+)Mid-stage (Series B + Series C)Early-stage (Seed + Series A)

$3.1M

$27.9M

Excludes outliers: $500M Zenefits deal, $145M Oscar deal and accelerator rounds.

MOMENTUM OUTLOOK

8


Freq

uenc

y of

Dea

l Siz

e

0

32

64

96

128

160

1M 5M 10M 25M 50M 100M 150M 200M 250M 300M 350M 400M 450M 500M

2014 2015

Round Size Frequency: A Shift of Focus

The funding amount in $100M+ deals accounts for a $750M difference between 2014 and 2015. While the frequency of deals over $50M has stayed even, companies raising $10-$25M saw a 21% boost in deal count.


$500M Series C

$394M Venture$400M Series C

$320M Series B

$230M Series B

2014 $100M+ Deals Total = $2.2B

2015 100M+ DealsTotal = $1.5B

$172M Series G

MOMENTUM OUTLOOK

9

Notable Deals Notable Deals

The market continues to mature. Mid-stage deal volume grows overall, accounting for 34% of deals in 2015, up from 28% in 2014.

Deal Activity by Stage for 2015

2010

2011

2012

2013

2014

2015

0% 25% 50% 75% 100%

Seed Series A Series B Series C Series D Series E Series F + G

30% 35% 11%18% 3%

Deal Count*

122

232

305

444

378

255

DEALS & FUNDING INVESTORS MOMENTUM

10

MARKET DIVE OUTLOOK

Source: StartUp Health Insights | startuphealth.com/insights Note: Report based on public data on seed, venture, corporate venture and private equity funding only. © 2015 StartUp Health LLCDeal count only includes Seed though Series G rounds


Funding Velocity: The Top 3 Most Active Markets


Across all digital health, companies traditionally take 15.2 months to raise a Series A after an initial Seed round. The top three sectors are each uniformly spread between 13 and 16 months.

SubsectorAvg. # of Months from

Seed to Series A

Patient / Consumer Experience 14.6 Months

Wellness / Benefits 13.3 Months

Workflow 16.6 Months

Average 15.2 Monthss

MOMENTUM OUTLOOK

11

# of Months from Seed to Series A

0

0

0.001

0.001

0.002

0 10 20 30 40 50


The Top 10 Most Active US Metro Areas of 2015


Metro Area

1 SF Bay Area

2 New York City

3 Los Angeles

4 Boston

5 Miami

6 Chicago

7 Denver

8 Salt Lake City

9 Washington, DC

10 Seattle

$126M

$612M

$378M

$134M$2.0B

SF Bay Area

Washington, DC

Salt Lake City

New York City

Boston

$150MChicago

$248M

Miami

$135M

Denver

(11 Deals)

(6 Deals)

(104 Deals)(3 Deals)

(11 Deals)

(6 Deals)

(42 Deals)

(36 Deals)

Seattle

$77M(5 Deals)

Los Angeles

$391M(22 Deals)

A new hotspot for health innovation emerged on the West Coast, with NantHealth, HomeHero and Soothe all choosing to call Los Angeles home, while the traditional investment hubs of the Bay Area, New York City and Boston continued to provide large amounts of funding.

MOMENTUM OUTLOOK

12


Notable International Deals of 2015


China

From portable genomics tests in the United Kingdom to government-sponsored physician networks in China and doctor searches in India, digital health is becoming a keystone component of international healthcare systems.

13

$20M

$20M

$394M

$120M

$38M

$20M

$20M

$28M Huakang Mobile$32M

$39M

Genomics

Navigating the Healthcare System

Population Health

Medical Device


Patient/Consumer Experience

Genomics


Payment Solutions

Patient/Consumer Experience

MOMENTUM OUTLOOK


The Top 10 Venture Investors of 2015


Firm 2015 Deals 2014 Deals Stage

Early Mid Late

1 10 7

2 9 5

2 9 10

2 9 4

5 8 12

5 8 6

5 8 3

5 8 7

9 7 4

9 7 7

FKA Fidelity Biosciences

In 2015, a more diverse group of investors were involved in digital health than ever before, from institutional venture, corporate venture and private equity to unexpected entrants like Disney. GE Ventures nearly doubled its deals from last year and took the most active investor spot away from Qualcomm Ventures.

MOMENTUM OUTLOOK

14


215

318 345

506

603 596

15

Number of Investors Year Over Year

2015 showed a rising number of deals being struck by large groups of investors. This has been a consistent theme the last few years as the total number of unique investors has grown significantly in the past two years. In 2015, the number of investors making more than six investments in digital health doubled.

# of Total Investors

$1.6B

$1.1B

0

10

20

30

40

50

60

70

80

90

100

2010 2011 2012 2013 2014 2015

2 3 4 5 6+

DEALS & FUNDING INVESTORS MOMENTUM OUTLOOKIn

vest

or C

ount

# of Deals by Investor


Digital Health IPOs of 2015


Population Health

$101.3M Pre-IPO VC Funding

$762.3M(Market Cap

12/15/15)

$195M on opening (6/8/15)

(28.22%)

Wearables

$66M Pre-IPO VC Funding

$6.15B (Market Cap

12/15/15)

$732M on opening (6/19/15)

(1.84%)


Wellness

$597.6M (Market Cap

12/15/15)

$101M on opening (6/22/15)

(6.04%)

$0

$15

$30

$45

$60 52-Week High & Low Share Price

Genomics


$520.8M (Market Cap

12/15/15)


(51.55%) (38.29%)

Telemedicine


$93M Pre-IPO VC Funding

$707M (Market Cap

12/15/15)

$102M on opening (2/13/15)


Genomics

(57.09%)

$239.8M (Market Cap

12/15/15)

Shar

e Pr

ice

($)

OUTLOOK

From wearables and wellness to genomics, a record-breaking six digital health companies took the IPO path this year. The diversity of their sectors are blazing the path for other consumer, clinical and wellness companies to exit in 2016 and beyond.

16



22%

33%

34%

11%

<2 Months2-6 Months6 - 10 Months>10 Months

How long was your most recent fundraising process?

N = 39

37%

37%

16%

10%

1 - 55 - 1010-2020+

How many firms did you pitch while raising your last round?

N = 39

To wrap up the year, we asked Healthcare Transformers from the StartUp Health Academy about their experience with fundraising in 2015 and what they expect for 2016.

OUTLOOK

17

StartUp Health Portfolio: Fundraising Survey and 2016 Predictions


DEALS & FUNDING INVESTORS OUTLOOK

18

MOMENTUM

37%

39%

22%

2%

Much EasierEasierSameHarder

In the next year, do you think it will be easier or harder to raise money?

N = 41

Our Academy CEOs believe that the fundraising landscape will remain steady in 2016 and expect to see more acquisitions as market leaders continue to consolidate solutions.

7%

24%

66%

2%

Significantly MoreMoreSame AmountLess

How do you believe the acquisition market will change in the next year?

N = 41

StartUp Health Portfolio: Fundraising Survey and 2016 Predictions



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MOMENTUM

StartUp Health Portfolio: Healthcare Transformer 2016 Predictions

OUTLOOK

“FDA supervision will become more stringent across the board. The Theranos scandal will have consequences on the credibility of startups with disruptive technology in the diagnostics space, making investors more skeptical and worrisome of regulatory risks.”

@AccelDX

“Finding a balance between data sharing and interoperability that protects consumer security will be critical to prevent health care rationing.”

@CeroraInc

“We will see the patient driving the market for consumer quality health services. The level of personalization found in the marketplace, for things like booking travel and online shopping, will start to be demanded for healthcare too.”

@CuratioMe

“New markets will develop by exchanging and securing consumer health data using decentralized networks and P2P networks such as Blockchain-based distributed databases that provide better interoperability and limit traditional security liability.”

@InboxHealth

“Synthetic biotechnology industry will boom - as did 3D printing. Desktop biotechnology is the next biggest market disruption, including desktop diagnostics - the only customizable solution for precision medicine adoption.”

@Skindroid_Inc

“We'll start to see the first wave of consolidation in telehealth / telemedicine, which will peak in 2018. We'll also see government proposing that medical insurance marketplaces be allowed to cross state lines as a way to prop up the ACA.“

@UnaliWear


Sectors: • We have a broad view of digital health and believe that the current trend is a cross-pollination of technology and data with all aspects of health and

healthcare. StartUp Health InsightsTM tracks companies that enable health, wellness and the delivery of care through data / analytics, sensors, mobile, internet-of-things, 3D printing and genomics and personalized medicine.

• StartUp Health tracks companies based on their sectors, subsectors and specialties. Investments in subsectors and specialties are not mutually exclusive, as deals are tagged with multiple subsectors and specialties based on the company’s focus.

• Q2 of 2015 brought with it an extensive database quality assessment. A new system was implemented allowing StartUp Health to track innovation with enhanced granularity. Additionally, gaps in funding data were researched and added into our database enabling us to identify fundings previously unaccounted for in previous reports.

Stage of Funding: • StartUp Health InsightsTM records only publicly available data on cash for equity investments as the cash is actually received by the company.

StartUp Health InsightsTM is inclusive of seed, venture, corporate venture and private equity funding. • Early stage: The company has raised a Seed or Series A round • Mid stage: The company has raised a Series B or Series C round • Late stage: The company has raised a Series D or other growth equity round • StartUp Health also tracks incubator rounds and other financings into privately-held entities (e.g. “unnamed” venture rounds, strategic investments,

growth equity and private equity). • In tabulating deal activity by stage we excluded rounds not clearly associated with a specific stage.

Sources: • Funding data is from StartUp Health InsightsTM, the most comprehensive funding database for digital health, and managed by the StartUp Health

team. Information, data and figures represent only publicly available data. • Data for acquisitions slide was provided by a range of sources including StartUp Health InsightsTM, CrunchBase, AngelList and news reports. • StartUp Health works to ensure that the information contained in the StartUp Health InsightsTM Report has been obtained from reliable sources.

However, StartUp Health cannot warrant the ultimate validity of the data obtained in this manner. All data is subject to verification with the venture capital firms and/or the investee companies. Results are updated periodically. Therefore, all data is subject to change at any time.

• If you find an error please let us know so we can correct it.

This report is provided for informational purposes and was prepared in good faith on the basis of public information available at the time of publication without independent verification. StartUp Health does not guarantee or warrant the reliability or completeness of the data nor its usefulness in achieving any particular purposes. StartUp Health shall not be liable for any loss, damage, cost or expense incurred by reason of any persons use or reliance on this report. This report is a proprietary aggregation of publicly available data and shall not be forwarded or reproduced without the written consent of StartUp Health.

Our Methodologies

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StartUp Health is a global health innovation company. The StartUp Health Platform, including its Academy, Network and Innovation Fund, is empowering a global network of entrepreneurs and innovators to transform healthcare. StartUp Health has the world’s largest portfolio of digital health companies, at more than 115, from 11 countries and 50 cities. StartUp Health was founded in 2011 by Steven Krein and Unity Stoakes and is chaired by former Time Warner CEO, Jerry Levin. StartUp Health’s notable strategic partners and investors include AARP, AON, Aurora Health Care, California Healthcare Foundation, Steve Case, Cleveland Clinic, Conifer Health Solutions, Mark Cuban, Esther Dyson, Roger Ehrenberg, Brad Feld, GE Ventures, Kaiser Permanente Ventures, Robert Wood Johnson Foundation, SeventySix Capital and Stericycle.

Learn more at startuphealth.com and follow @startuphealth. For press inquiries, email [email protected]

StartUp Health InsightsTM Report Contributors : Troy Bannister, Korey Fisher, Polina Hanin, Jennifer Hankin, Samar Ladhib, Monika Wysocki

About StartUp Health

21


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