Digital Health Megadeals Get Bigger in Q3 2018

Just over a year ago, we reported about the rise of the mega-round in digital health investments. At that time, we tallied nine investment rounds valued at more than $100 million in the first half of 2017. Deals in H1 2018 surpassed that with a total of 14 such megadeals, as we reported in earlier posts for Q1 and Q2. The surge has continued in Q3, with 11 rounds north of $100 million including five valued at more than $300 million and one hitting $550 million.

But while mega rounds were rare occurrences in 2017,[1] today they are becoming more common. So is it fair to say that $300 million is the new $100 million? Is there another superlative after “mega”?

Rock Health and Startup Health both reported record levels of investment in their recent third-quarter reports on digital health investments, and each cites the emergence of large, late-stage investment rounds as a factor driving the record-breaking totals.

Rock Health’s report on third-quarter digital health investment pegs digital health investment at $3.3 billion for Q3, beating out totals from the same period in 2017. Rock Health’s report also notes that it’s not just late-stage deals that are growing in size. Across the board the median deal size by round is increasing.

The super-mega rounds in Q3 2018 were all late-stage investments in established businesses. If public market dynamics were different, these unicorns may have gone public. But with plenty of private capital available, digital health companies seem to be in no rush to go public and face the increased scrutiny and regulatory burdens that a public filing brings.

Super-Mega Rounds for Q3 2018 ($300 Million or More)

Peloton: developer of integrated at-home fitness equipment.

Investment: Series F, $550 million

Investors: Technology Crossover (lead), Balyasny Asset Management, Felix Capital, Fidelity Investments, G Square, GGV Capital, Kleiner Perkins, NBC Universal, QuestMark Partners

Oscar: Provider of an online health insurance network.

Investment: Series G, $375 million

Investors: CapitalG

One Medical: Provider of technology-enabled primary care.

Investment: Series I, $350 million

Investors: The Carlyle Group

23andMe: Operator of a consumer genetics and research platform.

Investment: Corporate, $300 million

Investors: GlaxoSmithKline

Yitu: Provider and developer of artificial intelligence technology designed to improve the quality of healthcare.

Investment: Series C, $300 million

Investors: Gaocheng Capital, Gaorong Capital, ICBC International, Industrial Bank Company, SPDB International

Mega Rounds ($100 Million or More)

American Well: provider of software and services to enable healthcare payers or providers to offer complete telehealth services.

Investment: Series C, $291 million

Investors: Philips and Allianz X (lead), Martin Ventures, Hanaco Venture Capital, Cito Ventures

Butterfly Network: Maker of a personal, pocket-sized ultrasound device that plugs into an iPhone.

Investment: Series D, $250 million

Investors: Fidelity Management and Research (lead), The Gates Foundation, Fosun Pharma, Jamie Dinan

Outset Medical: A medical device company that has developed and is marketing an easy-to-use dialysis machine.

Investment: Series D, $132 million

Investors: Mubadala Investment Company (lead), Baxter Ventures, Fidelity Management and Research Company, Partner Fund Management LP, Perceptive Advisors, funds advised by T. Rowe Price Associates Inc., Warburg Pincus Operator of an online retail platform intended to sell medicines and other pharmaceutical products.

Investment: Series B, $130 million

Investors: Shenzhen GTJA Investment Group (lead), Crescent Point Group, HBM Healthcare Investments, Viceroy Ventures

curefit: Developer of a fitness-based online platform designed to prevent disease through a combination of engagement and coaching.

Investment: Series C, $120 million

Investors: Accel, Chiratae Ventures, IDG Ventures India, Kalaari Capital, Oaktree Capital Management

Tempus: Developer of a healthcare data analytics platform designed to improve patient outcomes, starting with cancer.

Investment: Series E, $110 million

Investors: Baillie Gifford, T. Rowe Price (leads), New Enterprise Associates, Revolution Growth

We’ll be taking a deeper dive into these and other trends at our 7th annual Digital Health Investor Summit next week.

[1] In 2017 we noted that Verily took in an investment of $800 million as part of a partnership with Singapore-based Temasek. That same year in May, Outcome Health received a conventional venture round for nearly $600 million.