Venture funding continues to pour into digital health start-ups, surpassing last year’s record to reach $2.3 billion by mid-year 2014, according to Rock Health. IPOs of companies that operate at the intersection of health care and technology have not fared as well, however.
Digital health bellwether Castlight Health, which brandished itself as “the enterprise healthcare cloud,” wasn’t able to sustain a run-up in the stock which valued the price transparency tools company at $3 billion on its first day of trading this past March. Its shares recently traded at nearly $12, a 35% drop from its IPO price.
A look at eight venture-backed initial public offerings of companies since 2009, the year the HITECH Act opened the flood gates for entrepreneurs in health care, shows that only two trade above their IPO price:
Medidata, which had its IPO in 2009—seven years after its first round, has since more than tripled its net earnings to $16.6 million last year on revenues of $228 million. The company, which counts
Others, including Vocera, Imprivata, Everyday Health, and
Despite sizable market opportunities within the health care sector thanks to government legislation, the public seems confused about what digital health is.
One thing is certain: If performance doesn’t improve, IPO exits will become less of an option.