Traditional players take 2018 funding lead but China, other international cities gaining steam in StartUp Health report

San Francisco, New York and Boston topped the funding charts this year but Beijing was on their heels.
By Laura Lovett
Share

Look out Silicon Valley and the Big Apple—new cities are starting to gain steam in the digital health funding game. A recently released end of year report from StartUp Health shows that while San Francisco, New York and Boston are still leading the pack in digital health funding amounts and deals, the industry is beginning to see more action emerging in cities like Beijing, Nashville and Bengaluru, India. 

“Globally, new cities made their debut on the digital health scene in 2018 as potential leaders of innovation and investment,” authors of the report wrote. “Companies headquartered in Nashville raised $380 million in 2018, while companies in Bengaluru and Toronto raised over $225 million. “

StartUp Health reports that 2018 was the biggest year for digital health funding to date, with startups raking in $14.6 billion in investments—up $6 billion from last year. It is important to note that this number is roughly $6 billion higher than the RockHealth report, which was released earlier this week, but each organization uses different measurements and metrics in the calculation. 

The international market is continuing to grow with China and the UK taking the lead. While Beijing and London were tied for the number of deals made in the city, both with 21, Beijing had a significantly higher total funding amount with $950 million, compared to London’s $198 million. Other Chinese cities including, Shanghai ($125 million), Hangzhou ($105 million) and Zhenjiang ($100 million), also brought in a significant amount of money last year.

“Deregulation and health reform continue to fuel digital health’s growth in China in 2018,” authors of the report wrote. “Beijing and London closed the same amount of deals in 2018, but larger deals in Beijing brought their year total close to nearly five times that of London’s.”

Bengaluru became an international player this year landing $229 million in funding. Toronto was also on the map with 13 deals and $262 million in funding. 

Domestically, Nashville has emerged as a new player this year with $380 million in funding from six deals. However, while new cities have started to make their way onto the map, the traditional leaders continued to top the charts; the San Francisco Bay Area raked in $3.8 billion in funding, New York City startups landed $2.4 billion in funding and Boston companies raised $1.7 billion in funding. 

The average size of the deals this year was $21 million (a number similar to RockHealth report's $21.9 million). The largest deal of the year came from fitness company Peloton, which raised $550 million. Smile Direct Club, Oscar, Grail, 23andMe and Devoted Health all landed $300 million or more. Internationally Beijing-based companies Link Doc and MedLinker took the lead with funding amounts just under $150 million. 

Another takeaway from the StartUp Health report was that the industry is seeing a smaller percentage of seed funding announcements than in pervious years and more funding in Series B and later stages. 

When it comes to where that money was being invested patient empowerment tools took the lead with a total of $3.3 billion raised in this area. Diagnostics and screening tools ($2.3 billion), machine learning  ($980 million), and mental health tools ($602 million) were among the highest areas of funding concentration. 

Why it matters

As digital health companies begin to evolve, the places where innovation is happening are also starting to grow. More investors and entrepreneurs have started looking beyond the traditional cities, including StartUp Health. 

“We expect in the future a lot more of our portfolio will be coming from places like China and India, throughout Africa, and really all over the world,” Unity Stoakes, president and cofounder of StartUp Health, said at last year’s Health 2.0

The trend

In 2017 StartUp Health reported that digital health companies landed $11.5 billion in funding. Last year Grail’s $914 million funding land topped the charts. Interestingly Peloton was another big name in last year’s report as well, landing $325 million.