Pace of digital health funding slows in Q3

About $700 million in venture funding flowed into the digital health sector during the third quarter, a report from prominent digital health accelerator Rock Health found. That represents a decline in the pace of growth in funding.

The second quarter saw $1.6 billion raised. The third quarter haul roughly equaled the first quarter total, as approximately $700 million was raised then as well. In total, the sector has garnered $3 billion this year.

Rock Health does not provide a definition of which types of startups it includes in its definition of digital health. However, a look at the categories of firms it considers such as predictive analytics, payer administration and telemedicine suggests it views digital health in very broad terms to include any software designed to interact with the healthcare system.

Even the quarter's slower funding pace shows investor enthusiasm for the sector. The third-quarter total nearly matches the total funds raised during all of 2011, for example, and the total amount invested has grown each year since 2011.

The increased investments largely mirror growth in the venture-capital sector overall. In 2009 the sector invested $20 billion, according to data from the National Venture Capital Association. Through the first half of the year, VCs invested $22.6 billion.

Year-over-year growth in digital health funding exceeds 100%, Rock Health says.

The average deal size this year is $13.1 million, about 31% higher than 2013, the report details. The most popular area for investment is big data and analytics, with $381 million raised during 2014 to date. Digital medical devices ($280 million) and healthcare consumer engagement ($238 million) round out the top three areas for investment.

Follow Darius Tahir on Twitter: @dariustahir