AI funding tops $1 billion mark as mobile investments wane

By Mike Miliard
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Total corporate funding for healthcare technology companies climbed to $8.2 billion (including debt and public market financing) in 2017 – a whopping 47 percent increase from the $5.6 billion raised in 2016, according to  from Mercom Capital Group.

It was a record-breaking year, with worldwide venture funding for digital health startups posting similarly impressive numbers: $7.2 billion raised across 778 deals, representing a 42 percent uptick from the previous banner year of $5.1 billion in 2016. 

In a sign of continuing maturity as providers make more use of their growing troves of health data, analytics technology was the top funded category, according to the report, with the biggest focus area being artificial intelligence.

“Artificial intelligence and data analytics companies had a breakout year with over a billion dollars raised," said Mercom CEO Raj Prabhu. 

Other tech categories that saw substantial year-over-year growth were patient engagement, clinical decision support and telehealth.

Analytics posted $1.1 billion in funding, followed by mobile health apps ($759 million), patient engagement ($708 million), telemedicine ($624 million), appointment booking ($516 million) and clinical decision support with ($514 million).

Within the analytics category specifically, AI saw strong growth, with $419 million in funding. Together, AI and predictive analytics represented almost $500 million, according to Mercom.

Interestingly, mobile health apps and wearable sensors saw steep declines in funding levels year-over-year, according to the report.

That said, consumer-facing companies still outpaced provider-focused tools, according to the report, bring in in $4.2 billion over 514 deals in 2017, compared to $3 billion in 264 deals in 2017 (which was nonetheless nearly double the $1.6 billion raised in 185 deals in 2016).

As for mergers and acquisitions, there were 203 deals struck in 2017, including 13 companies that participated in multiple transactions. Four of the mergers involved public companies; Again, data analytics companies were involved in the most M&A transactions (21 of them), followed by practice management companies (19), mobile app developers (17) and telemedicine vendors.

Among the biggest deals of the year: Optum’s $1.3 billion acquisition of the Advisory Board Company, McKesson’s purchase of CoverMyMeds for $1.1 billion, Konica Minolta’s acquisition of Ambry Genetics Corporation for $1 billion and Navicure’s acquisition of ZirMed for $750 million.

Still, M&A "has been declining slightly over the last few years," said Prabhu. "Investors do not want to miss out on the sheer size and potential of this growing market, but the exit path for many companies remains elusive."