EMRs Snag Just One VC Investment Last Quarter

Posted on November 27, 2012 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

If you’re looking for signs that the EMR market is consolidating, especially on the small vendor/startup side, consider the following data and see what it tells you. To me, it suggests very clearly that the days of unbridled EMR startup growth are tailing off quickly.

According to a report by Mercom Capital Group, VC funding in the health IT sector was strong in Q3 2012, with $194 million going into 37 deals during the period.  This is the 5th quarter in a row that the dollars invested in HIT ventures has gone up, Mercom reports.

Health information management companies got the most funding in the sector ($101 million across 20 deals), dwarfing the $39 million sunk in mobile health and $26 million in social health networking companies.  That being said, EMRs only logged a single $1 million investment during the last quarter. Meanwhile, there were two EMR M&A transactions this quarter.

Far more interesting is the list of deals that were closed in other subsectors. For example, he top HIT VC funding deal in Q3 was $25.5 million raised by Telcare, a mobile health company using cellular machine-to-machine to manage chronic illnesses. Other deals included $20 million for Connecture, an online health insurance process automation company focused on health insurance exchanges and $13 million for eClinical technology provider Clinipace.

While it’s not exactly a set-game-match point to make, I’d argue that this data is instructive. VC money is migrating away to infrastructure plays, mHealth and social health networking, next-round investments which are likely to make the make the right investors a bundle.

Another way of putting this is that while we’re not seeing any signs that EMR vendors are outta luck, EMR startups aren’t the hot, sexy thing on the block any more. Could it be that we’re finally seeing the market mature and beginnings of M&A and business failures in some EMR sectors?  In a word I’d say, “yes.”