Healthcare companies raise $6.8B in Q1, topping tech and every other industry

Every year, millions of people who get a flu shot still come down with the disease.
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Healthcare has been a winner so far in 2018, at least in terms of venture capital.

That’s the takeaway from the quarterly Dow Jones VentureSource report, which found that healthcare companies received 26.6 percent of all investment dollars in the first quarter of 2018, a total of $6.85 billion.

That’s a 21 percent increase from the quarter before and a more modest four percent rise from the same time period in 2017. It also means healthcare companies received more funding than those in any other industry, including technology.

Tim Tasker, the managing partner for EY in Seattle, told GeekWire that healthcare financing in the past five years has been about 22 percent of the total venture capital — and in Seattle, it’s an even bigger share.

“In Seattle, the numbers are very different,” Tasker said in an email. “Over the past five years, healthcare equity financings represented 65% of the total ($1.9B). Although Q1 2018 was lower than the five-year average at 6%, I believe this is just due to timing.”

Examples of healthcare rounds in the Pacific Northwest include health technology company Accolade’s giant $50 million round in March, as well as $20 million for DNA sequencing company Stratos Genomics and $5.7 million for hospital management software company NurseGrid in January. The region also saw a number of high-profile acquisitions in the first quarter, including Juno Therapeutics’ $9 billion acquisition by Celgene.

The rise in national funding was in spite of a decrease in the number of deals. It’s one thing that sets healthcare apart from other industries: The sheer amount of money needed to break into an industry like pharmaceuticals or health services is huge.

Healthcare companies took home just under 27 percent of venture funds in the first quarter of 2018, the highest of any industry. (Dow Jones VentureSource Image)

One force behind the surge in funding is likely the political stability around healthcare. Last year, as Congress attempted to repeal and/or replace the Affordable Care Act, many healthcare business experts cited political uncertainty as a huge obstacle to attracting investors.

Another trend is the recent surge in biopharmaceutical innovations, fueled by new technologies like gene editing and cell therapies. Biopharmaceutical companies received nearly half of all funding in the healthcare space.

Tasker said the Pacific Northwest’s healthcare investments are strong partially because of “the greater concentration of biopharmaceutical companies over other types of healthcare companies. This is not surprising given all the great research institutions we have in the region, which attract world-class talent and ideas,” he said.

Of course, the rise in funding in the healthcare space mirrors another huge number: Healthcare now takes up one-fifth of the U.S. GDP, something that many experts see as a huge problem.

The U.S. spends more per capita on healthcare than any other country in the world. In 2016, it spent $10,348 per person, according to the Peterson-Kaiser Health System Tracker. Comparable countries — as in other large, wealthy countries — spent an average of $5,169 per person.

Despite that high spending rate, health outcomes in the U.S. are not noticeably better than in other developed countries. In fact, according to a recent report from the Peter G. Peterson Foundation, the U.S. ranks among the lowest for important health markers, including unamanaged diabetes and the safety of childbirth.

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