In the first three quarters of 2017, four of the Midwest’s five largest deals involved healthcare tech companies. Together, these four deals brought in $870M in investment and amounted to a collective valuation of $7.1B.
Cincinnati-based PatientPoint, Minneapolis-based Bright Health and Chicago-based Outcome Healthand Tempus not only represented a disproportionate influx of dollars into the region, but also managed to bring in diverse sources of capital. Both Midwestern VC firms like Arch Venture Partners, Baird Venture Capital, and Sandbox Industries and Coastal firms like NEA, Greycroft, Bessemer Venture Partners, and Revolution Ventures contributed to their fundraises. Regionally and nationally, healthcare tech investing is markedly outpacing investing in other hot industries.
Why are VCs across the country banking on healthcare tech?
The answer is multi-faceted. The healthcare market faces broad-sweeping challenges that affect virtually all its stakeholders from patients and customers to providers, administrators, and institutions. Every challenge presents an opportunity for an innovative solution, which draws unique thinkers and leaders from other industry areas. For example, healthcare tech is increasingly powered by artificial intelligence and data science, leading to the advent of companies like Tempus. Finally, healthcare technology truly touches every life. There is real opportunity to uniquely change the world by building new technologies and creating new solutions that materially impact health, longevity, quality of life, and more.
With so much opportunity to produce better diagnoses, better treatments, and better management – and such huge returns to be reaped from positive advancements – founders and investors alike view the overarching healthcare space as a fruitful market for disruption and impact.
In the Midwest, healthcare companies are proliferating and succeeding across the device, drug, and technology categories. According to Hyde Park Angels’ own research drawn from Pitchbook, Mattermark, and internal data sources, 89% of Minnesota’s exits in 2017 were in the healthcare space, as well as 55% of its rounds. Minnesota also saw strong deal flow in the life sciences and healthcare tech. Similarly, 58% of Ohio’s deals were in healthcare, with Columbus growing its healthcare tech vertical by investing in eight Series A and Series B rounds this year so far.
Interestingly, Midwest healthcare tech companies are succeeding at both the earlier and later stages. Newer players like clinical communication platform DocHalo, mobile healthcare benefits platform HealthJoy, online vision test provider Opternative, and behavioral health telemedicine provider Regroup Therapy (which my VC firm Hyde Park Angels invested in) have increasingly attracted investors. Bigger players are raising unprecedented rounds for their regions, with Outcome Health raising $500M at a $5.5B valuation, Bright Health raising $160M at a $400M valuation, and PatientPoint raising $140M at a $500M valuation all this year.
The overwhelming investment activity in healthcare, and specifically healthcare tech, points to an overall trend in the Midwest. Illinois, Minnesota, and Ohio are becoming hubs for healthcare tech innovation and attracting capital from various sources, fostering a positive cycle of investment and returns that fuel further growth. And in this case, this growth means positive change for people everywhere.