Health IT venture cash may be waning

Health IT venture cash may be waning

Cash flow into the healthcare IT sector may just have reached its limit. Coming down from a torrid second quarter, Q3 venture capital funding for the sector dropped nearly 50 percent, according to the findings of a new report.

The study, published by consulting firm Mercom Capital Group, showed a higher number of VC deals in the third quarter, compared to Q2. But in terms of cash raised, Q3 paled in comparison.

Still, the numbers were hardly disappointing. Q3 marked the second-biggest quarter to date. The health IT sector raised $956 million across 212 deals globally, compared with the whopping $1.8 billion across 161 deals the quarter prior to that, analysts noted. Digital health companies have attracted $3.6 billion in VC cash since 2010.

Mercom officials noted another interesting characteristic of the third quarter: record funding for companies abroad.

“Companies from countries outside of the United States, accounted for a record 21 percent share of the funding,” said Raj Prabhu, chief executive officer and co-founder of Mercom Capital Group, in a press statement announcing the report. “While consumer-centric companies attracted the majority of the funding this quarter, M&A has been a different story with the majority of the deals involving practice-focused companies.”

Consumer-focused technologies, which includes mobile health and telehealth, walked away with the lion’s share of capital — 65 percent of all VC cash for the quarter, or $623 million across 140 deals. In Q2, that number stood at $678 million across 100 deals.

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