By Nick Paul Taylor
The Fenwick & West analysis of life science venture capital investment in 2012 is a downbeat read. Equity investments dropped 19% and the number of first round financings fell to its lowest level since 1995. But within the gloom the surging growth of one area shines out--digital health.
Venture capital investments in digital health jumped 46% to $1.4 billion last year. The number of deals also shot up by 56%. And 134 digital health companies raised more than $2 million. Digital health--as defined by the group that gathered the data, startup incubator Rock Health--includes a wide range of companies. Although health consumer engagement was the biggest single area of investment--hovering at $237 million last year--Big Data analytics and clinical trial technologies were also represented.
A $58 million investment in personal genomics firm 23andMe by Google Ventures and others was the second biggest deal covered by Rock Health. Big data provider Cloudera--the first largest investment--serves multiple industries, not only life sciences. Most were considerably smaller but show the broad investor interest in digital health. The vast majority of investors only did one digital health deal. More active digital health investors included Qualcomm Ventures--which put money into eClinical outfit goBalto--and Merck Global Health Innovation Fund. Both contributed to a jump in the number of deals.
While the trend is a clear reflection of the new possibilities offered by next generation sequencing data analytics, bioinformatics and eClinical tools, it is also a result of financing conditions. These tools generally need less investment to bring them to commercialization than a drug, so it makes sense for life science investors seeking a quick turnaround to give them priority. In a risk-averse environment it is easier to justify investing cash in a digital health startup than a discovery stage biotech. Potential returns might be smaller in digital health, but so are timelines and risk.
Although investors are putting their cash into different health niches, most of it is being spent in the same geographies. The San Francisco Bay Area and Boston were the focus of most digital health investments last year, accounting for 27 and 20 deals, respectively. No other state or area received more than seven.
$65 million Big Data service provider Cloudera fueled IPO speculation when it secured $65 million in a fifth round of venture capital funding. Item
Oxford Nanopore Technologies $50.3 million
Oxford Nanopore Technologies raised $50.8 million to advance its DNA sequencing technology to commercialization. Piece
23andMe $50 million
Personal genomics firm 23andMe returned from a fundraising round with fresh investment, adding $50 million from a Russian billionaire and others. Report
goBalto $12 million
Cloud-based trial software developer goBalto doubled its total financing at the turn of the year by securing $12 million from Qualcomm Ventures and others. Article
Ayasdi $10.3 million
Stanford University spinout Ayasdi added $10.3 million to its coffers to build a machine learning method for asking questions of Big Data. News Systech International $7.5 million
Pharma serialization firm Systech International nailed down a $7.5 million venture loan to finance growth as the industry grapples with supply chain security. Piece Bina Technologies
$6.25 million Bina Technologies raised $6.25 million to advance its platform for genomic data analysis, which promises to analyze data in just four hours. More Remedy Informatics $6 million
Remedy Informatics gained $6 million in funding and a Big Pharma board member when Merck ($MRK) invested through its investment unit. Item Spiral Genetics $3 million
Just before the end of the fiscal year, Spiral Genetics snagged $3 million to fund its cloud-based bioinformatics system. Report GenomOncology $1.5 million
GenomOncology secured at least $1.5 million to get its genomics-as-a-service business off the ground. Article