The money, it seems, keeps pouring into digital healthcare.

Last year investors funded $7.2 billion worth of digital healthcare deals, up 42% from $5.1 billion in 2016, says healthcare technology research firm Mercom Capital. The number of deals also increased year over year by 25% from 622 transactions to 778 transactions.

Since 2010, the digital healthcare market has raised about $26 billion in venture capital funding in 3,450 deals and almost $8.6 billion in debt and public market financing (including IPOs), bringing the total funding to date $34.3 billion, Mercom says.

“Venture capital funding into digital health spiked after plateauing the last couple of years,” says Mercom CEO Raj Prabhu. “Artificial intelligence and data analytics companies had a breakout year with over $1 billion raised.”

In 2017, start-up and established companies developing artificial intelligence applications and services for healthcare raised $1.1 billion in funding, compared with $759 million for mobile healthcare and apps, $708 million for patient engagement, $624 million for telehealth, $516 million for online appointment scheduling and clinical decision support at $514 million.

While overall investor funding was up substantially for digital healthcare one area that lagged was public offerings. “Digital health public companies had a much better 2016 compared to previous years with a majority of stocks outperforming the S&P 500,” Prabhu says, “However, a buoyant stock market did not translate into companies going public. For the first time in years we did not see any companies issue an IPO in all of 2017.”

There were four initial public offerings in 2016 that raised a combined $234 million and seven IPOs in 2015 bringing in $2.2 billion, Mercom says. Merger and acquisition deals for digital health companies totaled 203 in 2017 compared with 205 in 2016.

The biggest acquisitions included:

• Internet Brands buying content provider WebMD for $2.8 billion
• Optum’s $1.3 billion acquisition of research, technology, and consulting serviced company Advisory Board Co.
• McKesson’s acquisition of prior authorization software developer CoverMyMeds for $1.1 billion.
• Konica Minolta acquiring clinical diagnostics testing services company Ambry Genetics Corp. for $1 billion.
• Navicure’s acquisition of revenue cycle management application and services provider ZirMed for $750 million.

“Investors do not want to miss out on the sheer size and potential of this growing market,” Prabhu says.

Other investor milestones for digital healthcare include:

• Consumer digital health companies brought in $4.2 billion in 514 deals in 2017, up 21% percent from $3.5 billion raised in 437 deals in 2016.
• Provider-focused companies raised close to $3 billion in 264 deals in 2017, almost twice the $1.6 billion raised in 185 deals in 2016.
• Venture capital investor participation went up in 2017, with the total number of participating investors (including accelerators and incubators) increasing to 1,288 from 1,115 investors in 2016.
• The most active venture capital investors in 2017 were F-Prime Capital Partners and Sequoia Capital with nine deals each, followed by Matrix Capital Partners with eight deals, and GE Ventures, Khosla Ventures, and Flare Capital Partners with seven deals each. Accelerator and incubator funding activity slipped to 58 deals in 2017 from 83 deals logged in 2016. 
• Data analytics companies were involved in the most merger and acquisition transactions in 2017 with 21, followed by practice management companies at 19 transactions, mobile app companies 17, and telemedicine companies 16.

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