Venture Capital (VC) funding in HIT continued to be strong with $194 million going into 37 deals in Q3 2012. The strong uptrend that started in Q3 2011 has continued for five quarters in a row, according to Mercom. Fifty-eight different investors participated in these funding rounds with First Round Capital, Great Point Partners and West Health Investment Fund participating in multiple deals.

In Q3 2012, Health Information Management (HIM) companies received the most funding as a technology group with $101 million in 20 deals, followed by Mobile Health companies with $39 million in seven deals and Social Health Network companies with $26 million in four deals.

HIT VC Funding (By Quarter)

“Funding and M&A activity continues to be strong in the HIT sector this quarter with a healthy number of early-stage deals. 2012 has the potential to be a billion dollar VC funding year for the sector,” explained Raj Prabhu, Managing Partner of Mercom Capital Group. “Mobile health and social health network companies had a strong showing this quarter.”

HIT Top 5 VC Deals

The top funding deal this quarter was the $25.5 million raise by Telcare, a mobile health company that uses cellular machine-to-machine technology for diabetes and other chronic illnesses. Other top deals included $20 million raised by Connecture, an online health insurance process automation company focused on health insurance exchanges, followed by $17 million raised by Doximity, a professional social network for physicians. Clinipace, an eClinical technology provider of real-time access to the healthcare information raised $13 million, and finally Streamline Health Solutions, a provider of enterprise content management and business analytics solutions for healthcare organizations and SoloHealth, a healthcare technology and data analytics company raised $12 million each.

There was continued strength in M&A activity in the sector as well, providing investors and companies with plenty of viable exit strategies. There were 37 M&A transactions in Q3 2012 amounting to $3.2 billion, of which only ten transactions disclosed details.

HIT M&A (By Quarter)

Among the top M&A transactions, Roper Industries acquired Sunquest Information Systems, a provider of diagnostic and laboratory software solutions to healthcare providers, for $1.4 billion. One Equity Partners acquired M*Modal, a provider of clinical documentation services and speech understanding solutions, for $1.1 billion, Science Applications International Corporation acquired maxIT Healthcare, a healthcare IT consulting firm, for $473 million. Thomas Bravo acquired Mediware Information Systems, a provider of clinical software solutions, for $195 million.

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