Digital Health Funding 2015 Midyear Report by @Rock_Health

PRESENTATION © 2015 ROCK HEALTH
Jan
DIGITAL
HEALTH
FUNDING
Midyear Update
2015
July 7, 2015

Rock Health is powering the future of the digital health
ecosystem, bringing together the brightest minds across
disciplines to build better solutions. Rock Health funds
and supports startups building the next generation of
technologies transforming healthcare.
Our partners include AARP, Abbott, Blue Shield of
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Hospital, Deloitte, Genentech, and Qualcomm.
Learn more at rockhealth.com
MIDYEAR DIGITAL HEALTH FUNDING (2015)
July 7, 2015
oming off a record-smashing year for digital health funding, where dollars into the space totaled
more than 8% of all venture funding, it would not have been surprising if 2015 was a let down.
However, 2015 has more or less kept pace with 2014. Digital health funding continues to grow
faster than venture funding overall, suggesting a growing importance in every venture capitalist’s
portfolio.
Alongside the growth has come a downside—noise. With 136 companies raising more than $2M in just
the first half of 2015, including 80 companies raising their first significant capital, there has never been
this many digital health companies vying for the attention of both the industry and the consumer.
As we wrote in our last report on funding, it is time for name-brand digital health companies to start
exiting and returning capital to investors. 2015 has not disappointed, with five IPOs creating $11B in
market capitalization, including the unquestioned winner of the first half, Fitbit.
The last half of the year can turn many ways—there will definitely be more IPOs, and with venture markets
extraordinarily hot, there will be a few important rounds coming this summer. Stay tuned!
C
MALAY GANDHI
@mgxtro
TERESA WANG
@teresawang6
AUTHORED BY WITH HELP FROM
CHARU RAGHU
@raghucharu
CARLOS RODRIGUEZ
@rodcarl1

Table of contents
3
SECTION KEY FIGURES
3 Dollars and deals Venture funding of digital health companies (2014 and H1 2015)
Growth in venture funding (2014 vs. 2013 and TTM Q1 2014 vs. TTM Q1 2015)
Funding of top 6 categories (H1 2015)
Distribution of deals (2014 vs. H1 2015)
10 Investors Most active investors by deal count (H1 2015)
11 Geographies Deals by geography (H1 2015)
12 Exits and public markets Digital health acquirers by category (H1 2015)
2015 IPO price change relative to offering price
2015 IPO outlook survey
Performance of newly public digital health companies (H1 2015)
Public company IPO price appreciation versus years from IPO
15 Summary
16 Methodologies

Source: Rock Health Funding Database
Note: Only includes U.S. deals >$2M
Venture funding of digital health companies in 2015 is closely mirroring 2014’s record-
breaking year, with funding surpassing $2B through the first half.
4
Following significant growth in digital
health funding last year, the pace has
been slightly slower to start 2015, coming
in about $70M short of 2014’s first half
record.
Growth on a trailing twelve month (TTM)
basis continues, with funding up 25%
over that timeframe.
While the first quarter had few large
rounds (average deal size was $10M in
Q1), the second quarter brought a
number of large deals, pushing the 2015
average deal size above $15M, exceeding
2014’s $14.6M.
DIGITAL HEALTH VENTURE FUNDING
2014 and H1 2015
2014
$
4.3B
2014-2015
JAN
$0B
$1B
$2B
$3B
$4B
$5B
FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
2015
$2.1B

Source: PwC MoneyTree (latest data available is for Q1 2015); digital health data based on Rock Health analysis
Note: Digital health only includes U.S. deals >$2M
Digital health funding continues to grow faster than overall venture funding and
funding in the software, biotech, and medical device sectors.
5
The first quarter of 2015 continued the trend of
significant growth in overall venture funding. The first
quarter had $13.4B invested, representing 26% growth
versus Q1 2014 and 51% growth on a TTM basis.
Digital health represented approximately 5% of all
venture funding in the first quarter, with a 15% decline
versus Q1 2014, and 77% growth on a TTM basis. Growth
in the space continues to outpace all others, including
the overall market, software, biotech, and medical
device.
As more of the venture pie gets eaten by digital health,
medical device companies appear to be the most
harmed, with overall digital health funding now
approximately 30% higher than medical device funding.
GROWTH IN VENTURE FUNDING
2014 vs. 2013 and 2015 Q1 TTM vs. 2014 Q1 TTM
15%
40%
77%
56%
51%
22%
30%
114%
86%
65%
ALL VENTURE FUNDING SOFTWARE DIGITAL HEALTH BIOTECH MED DEVICE
2014 vs. 2013 2015 Q1 TTM vs. 2014 Q1 TTM
LEGEND

in the first half of 2015
136digital health companies each raised more than
$
2 million

Manufactures consumer technology and
wearable devices
Growth
Delivers real-time actionable clinical data to
empower physicians and support precision
medicine
Growth
Builds an enterprise wellness platform to
engage employees in sustainable behavior
change
Growth
Provides healthcare data warehousing and
aggregates and harnesses data utilized in
population health and ACO projects
$
125M
Series D
Offers on-demand and scheduled video call
visits with US-licensed healthcare providers
via any smartphone, tablet, or computer
$
125M
Series B
Leverages service and technology to simplify
the management of complex medication
regimes
$
81M
Series C
The six largest rounds of the year represent over one third of all funding in 2015.
7
LARGEST VENTURE ROUNDS
H1 2015
The three largest venture deals of the year, all growth
capital, could not present more diverse companies. On
the one end, Virgin Pulse is taking its first outside
capital, having been funded by the Virgin Group since its
inception 12 years ago.
On the other end, Jawbone and NantHealth combined
have taken on at least $1.3B in venture capital. These
latest rounds, financed by BlackRock (Jawbone) and
Allscripts (NantHealth) show the diverse base of
investors that later stage companies are pulling from in
advance of hopeful public offerings.
Doctor on Demand raised one of the largest Series B
rounds in the history of digital health, only exceeded by
NantHealth, Evolent Health, and Flatiron Health’s
rounds.
Source: Rock Health Funding Database, Company websites
$
92M$
300M
$
70M $
50M
$
50M
$
200M

PRESENTATION © 2015 ROCK HEALTHNote: Rock Health tracks funding across 24 separate categories
The top six categories accounted for more than 50% of all digital health funding in 2015,
three of which were not ranked within the top six in 2014.
8
EHR AND CLINICAL WORKFLOW
Electronic health records and surround
applications, including clinical workflow support/
augmentation
HEALTHCARE CONSUMER ENGAGEMENT
Consumer tools for the purchasing of healthcare
products and services or health insurance (B2B and
B2C)
ANALYTICS AND BIG DATA
Data aggregation and/or analysis to support a
wide range of healthcare use cases
WEARABLES AND BIOSENSING
Wearable or accessory devices that detect specific
biometrics and are designated for consumers
TELEMEDICINE
Delivery of healthcare services (synchronous or
asynchronous) through non-physical means (e.g.
telephone, digital imaging, video)
ENTERPRISE WELLNESS
Services designed to improve general well-being of
employees
Jawbone
($300M)
$
387M
Health Catalyst
($70M)
$
212M
PillPack
($50M)
$
176M
Doctor on Demand
($50M)
$
169M
Virgin Pulse
($92M)
$
128M
Augmedix
($16M)
$
74M

There was a slight increase in the number of Series B stage deals; however, Seed and
Series A stage deals continue to drive the vast majority of deal volume.
9
In the first half of 2015, Series B represented 22% of
overall deal volume versus only 18% in 2014, with
ten companies who raised Series A in 2014
progressing “on time” into their Series B raises.
Stride Health and PillPack were notable for
announcing round-to-round progress (Seed to A,
and Series B to Series C, respectively) in under 12
months.
Average deal size by round has remained consistent
at the early stage, while round sizes were down
20-35% in Series C and Series B (H1 2015 versus
2014), respectively.
DEAL DISTRIBUTION
2014 vs. H1 2015 (% of deal volume by stage)
100%75%50%25%
LEGEND
D+CB
SEED
& A
0%
2014
H1 2015
Stage progression Number of companies
Seed to A 5
A to B 10
B to C 3
C to D+ 3
Represents the number of companies that raised Seed, A, B, or C
round capital in 2014 and have progressed in the first half of 2015

1
2
Venture funds continue to be active in early stage deals while corporate venture funds
invested heavily in later stage deals.
10
Many of the most active venture
investors return in 2015, including NEA,
Venrock, First Round, and Social+Capital
Partnership. They were joined by new
names, including RRE Ventures and
Thrive Capital.
The top of the corporate investor ranks
has remained largely the same, with
Google Ventures falling off the most
active list as they move towards broader
life sciences initiatives.
We tracked 330 distinct investors to
date in 2015, with nearly a third of those
doing their first and only digital health
deal since 2011.
MOST ACTIVE FUNDS
Deals in H1 2015
3
2
1
3
1
2
3
2
3
2
1
3
1 5
4
4
VENTURE CORPORATE
# of deals
LEGEND
Seed or A H1 2015 total
4
4
H1 2015 totalSeed or A
3
3
3
3
3
3
3
3
5
Benchling (Seed)
Collective Health (B)
Doctor on Demand (B)
Evidation Health (A)
Honor (A)

Digital health companies headquartered in California continue to garner the majority of
funding, with Bay Area-based companies accounting for almost 40% themselves.
11
DEALS BY GEOGRAPHY
H1 2015
Digital health companies from 23 states
received funding (side note: in five years
of tracking, nine states have yet to record
a digital health deal) with California alone
responsible for more than half of all
venture funding in the first half (Jawbone
and NantHealth alone accounted for
nearly 25% of all dollars).
Boston and New York City continue to
tussle for the second largest digital
health hub in the U.S., with New York City
doing one additional deal but each
accounting for 10% of the total venture
dollars.
44
6
18
5
$0-10M
$10-50M
$50-100M
$100-500M
$500M+
>
# of deals in metro area
LEGEND
4
17

Digital health
Other healthcare
Tech
Other
Medical device
Private equity
Provider
Payer
1
2
1
4
12 50
1
3
11
9
8
5
Source: Rock Health tracking and analysis based on news reports and company filings
Only halfway through 2015, there have already been 92 M&A deals, which is almost as
many as all of 2014, but total disclosed dollars only reached $2.6B.
12
In 2014, we tracked a total of 95 digital health company acquisitions,
while only halfway through 2015 we have already tracked 92 digital
health deals. Other digital health companies continue to be the most
active acquirers, acquiring more than half of the companies tracked.
The most notable transactions in 2015 include the Under Armour
purchase of MyFitnessPal for $475M and Managed Health Care
Associates purchasing LTC pharmacy software company SoftWriters for
$450M.
2014 H1 2015
value of deals
LEGEND
Remainder of deals
Top 3 Deals
$20.4B
$2.6B
Aggregate
transaction
value
Per
disclosed
deal
$1.4B $113M
$477M $119M
$21M $21M
$501M $251M
n/a n/a
$200M $200M
n/a n/a
n/a n/a
$2.6B $704MTOTAL
# of M&A deals
LEGEND
With
disclosed
transaction
value
2015 total
5
DIGITAL HEALTH ACQUIRERS BY SECTOR
H1 2015

17%
102%
40%
16%
68%
15%
90%
-7%
-1%
50%
Four venture-backed digital health companies have gone public in the first half of the
year, and Teladoc debuted on day one of the second half of 2015.
13
Venture-backed digital health companies
with IPOs in the first half of 2015 were
able to raise more than $1B in overall
capital and reached more than $10B in
total market capitalization.
The Fitbit IPO was the largest technology
IPO of the year (all sectors) and had an
incredibly successful debut, while both
Evolent and Teladoc were able to move
above $1B market caps post-offering.
IPO LANDSCAPE
2015 IPO performance
2%
2%
2%
3%
3%
4%
4%
6%
8%
10%
15%
19%
20%
Source: 2015 performance from NASDAQ as of market close on June 30, 2015; investor survey was conducted on May 30, 2015 at the Fenwick Investor Summit (n = 39)
Note: Teladoc numbers are as of July 1, 2015, when TDOC began trading
0%
EVH FIT NVTA MB TDOC* 2015 total
IPO RAISE $196M $732M $102M $101M $157M $1.3B
MARKET CAP $1.1B $7.9B $0.5B $0.6B $1.0B $11.1B
IPO Baseline
LEGEND
Price change
relative to IPO
2015 high
June 30, 2015
*
WHO ELSE WILL IPO IN 2015?
Survey of investors

PRICEAPPRECIATIONSINCEIPO
-150%
0%
150%
300%
450%
600%
YEARS SINCE IPO
0 5 10 15 20
Source: The Digital Health Public Company Index by Rock Health (as of market close on June 30, 2015); Available
from: https://www.motifinvesting.com/motifs/the-digital-health-index-by-roc-O7xghiOF#/
While mirroring general market trends, publicly-traded digital health companies were
able to outperform the broader S&P 500 public market index in the first half of 2015.
14
PERFORMANCE OF PUBLIC DIGITAL HEALTH COMPANIES
H1 2015
5%
10%
-5%
S&P 500
1.2%
Digital health
companies
7.3%
1/1/2015-6/30/2015
The digital health public company index is comprised of 25 companies,
totaling $71B in aggregate value (Cerner, IMS, and Fitbit hold nearly
60% of the value). The digital health index was able to significantly
outperform the broader stock market through the first half in 2015, and
was assisted by the addition of Fitbit in June.
ATHN
CERN
OMCL
MDSO
Index includes 25 companies: ATHN, CERN, CNXR, CPSI, CRCM, CSLT, EVDY, EVH, FIT, HSTM,
IMPR, IMS, INOV, MB, MDAS, MDRX, MDSO, MRGE, NVTA, OMCL, QSII, STRM, VCRA, VEEV, WBMD
0%
FIT
30

Venture funding for digital health companies in the first half of 2015 reached $2.1B, closely mirroring total funding in 2014. This
represents 25% TTM (Q3 2014-Q2 2015) growth in funding compared to Q3 2013-Q2 2014. 139 deals, across 136 companies, closed
with an average deal size of $15.4M.
Summary of findings
15
FUNDING AND DEAL VOLUME
The top six themes of the year that received 54% of all funding included: wearables and biosensing, analytics and big data,
healthcare consumer engagement, telemedicine, enterprise wellness, and EHR and clinical workflow. Analytics and big data, in
addition to healthcare consumer engagement continue to be the categories which appear in the top six year after year.
MAJOR THEMES
In 2015, 330 distinct investors funded digital health companies, including 108 investors that funded a digital health company for the
first time since tracking began. The most active corporate digital health investors have remained stable—and diverse—over the past
four years.
MOST ACTIVE FUNDS
There was a lot of M&A activity in the first half of 2015. There were 92 M&A transactions tracked, closing in rapidly on the 95 deals
done in 2014. However, disclosed deal value was significantly lower than last year ($20.4B in 2014 vs $2.6B in H1 2015). Digital
health companies were still the most active acquirers of other digital health companies, in predominantly small transactions. Beyond
private exits, the public markets welcomed five venture-backed digital health companies (Teladoc debuted on July 1st) with a total
current market capitalization of $11B.
EXIT ACTIVITY

Rock Health defines digital health as the intersection of healthcare and
technology. This means that the venture funding tracked only includes
technology-enabled, health-related companies, whether they focus on the
administration of healthcare, the delivery of healthcare, or the process of
bringing breakthrough new healthcare products to market (both R&D and
commercialization).
Healthcare companies that aren’t digital. Health insurance companies, such as
Oscar, or healthcare providers, such as One Medical, are pure services
companies (that employ technology, certainly, as does every company). This is in
direct contrast to a technology-enabled services business such as telemedicine,
that simply could not exist without digital. Molecular diagnostic companies, such
as Guardant Health, that perform FDA-regulated testing and render a diagnosis or
report to physicians are also excluded. Similar to biopharma companies,
molecular diagnostic companies are significantly more capital intensive than
software-based companies and would skew funding.
Technology companies that aren’t healthcare. Tech companies that are industry-
agnostic or diversified across more than two verticals are not included
(companies operating in two verticals must designate healthcare as their primary
vertical to be included). Software companies focused across human resources
(and not solely health benefits), such as Zenefits, are also not included.
Methodologies
Rock Health funding data only includes disclosed US deals over $2M. Deals under $2M
would be impossible to track comprehensively since companies often do not file their
small seed rounds with the SEC or disclose to press. We also believe that deals under
$2M generate noise in key statistics, including deal count and average deal size.
Disclosed deals under $2M represent less than 5% of the total we report, giving us
confidence in our overall figures.
In prior years, we have attempted to include international companies that were funded
by U.S. investors, monitoring the portfolios of hundreds of VCs. In reviewing this data,
we have concluded that it is challenging to track all international deals and beginning
with the 2014 year end report, we are no longer tracking or reporting any international
deals. All numbers in this report are for U.S.-based companies only.
Funding tracked includes venture debt, venture rounds, and growth equity but
excludes lines of credit (working capital) and cash/equity associated with merger or
acquisition activities.
Deals data is gathered based on publicly available resources (press releases, news
outlets, SEC filings, etc.) and supplemented with CapIQ’s venture data.
16
WHAT IS DIGITAL HEALTH? HOW WE TRACK DIGITAL HEALTH FUNDING

GET OUR DATA AND SUPPORT OUR WORK
Our Funding Database is available as part of a research
subscription on our website. The subscription includes
a dataset encompassing individual deals back to 2011,
provides details on each of the funded companies, and
profiles investors based on deal volume. The annual
subscription includes quarterly data updates and
member-only webinars.
Please visit rockhealth.com/research to learn more.
research@rockhealth.org
@rock_health

Digital Health Funding 2015 Midyear Report by @Rock_Health

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Digital Health Funding 2015 Midyear Report by @Rock_Health