Venture capital in the blockchain in healthcare market

Robert Miller
Mar 29 · 4 min read

These numbers track traditional venture capital funds raised and exclude initial coin offerings (ICOs) and security token offerings (STOs). My research is built entirely off of public sources. There are likely startups that haven’t released their funding and as such I can’t account for here.

A quick breakdown of the numbers:

  • Since 2017 $49.8m of investment in 9 blockchain in healthcare startups has been publicly revealed
  • Including PokitDok in this count would over double these numbers to $104.8m, but the bulk of their funding was raised prior to introducing a blockchain product
  • Investment was scattered across use cases and industries, but data marketplaces/monetization was the primary business model for 4 of the 9 startups
  • 2019 is on pace to be the hottest year yet, with 2 prominent raises in Q1 for a sum of just under $20m

The numbers

You can see the data here. There were two raises in 2017 for $5.3m, five in 2018 for $24.8m, and two in Q1 2019 for $19.7m.

For some perspective Rock Health estimated that 359 digital health startups raised $5.7 billion in 2017 and 359 raised $8.1 billion in 2018 for a total of $13.8 billion over 2017–2018. In contrast, not including the two raises so far in 2019, only $30.1 million was raised by blockchain in healthcare startups over the same time period.

But, again, we are only measuring publicly revealed blockchain in healthcare VC funding. There are some reasons why you wouldn’t announce your raise, among them would be not raising enough money to announce (sub ~$500k). Anecdotal evidence of mine suggests this is true, and while this would boost the # of startups which have raised capital, it likely wouldn’t move the total funding in a meaningful way.

I’ll note that I’m not including PokitDok’s funding here. As far as I can tell, DokChain was only introduced in 2016, which is after they had already raised $38m ($4m series A, $34m series B) in 2015. They went on to raise $17m more, but it’s difficult to separate how much of that was driven by DokChain vs their other products.

The effect of ICOs

There is an 11 month gap in 2017 between companies announcing their raise. (or at least announcing it). This gap was during the height of crypto bull market, where it was not unusual for startups to raise millions of dollars with relatively little to show for it. Indeed, if you look at public sources like Vince’s list you can see the jaw dropping sums raised by healthcare ICOs during that time. It seems likely then that a number of entrepreneurs who would have been raising VC money turned to the ICO market instead, and that this had a crowding out effect on the amount of VC funding raised to date.

The newest kid on the block: STOs

Security token offerings (STOs) are another way to raise funding, this time by by offering tokens that are securities, including traditional equity but something other esoteric assets. While interesting, I don’t think they aren’t going to have a big impact on blockchain in healthcare startups raising capital in the short term.

In short the barriers to launching an STO are too high right now for it to make sense at the range most startups are raising. Hiring the lawyers and licensing the right technology stack is expensive. That’ll come down over time, but right now if you’re raising a seed round or series A traditional instruments are hard to beat.

One caveat: I think there is a value prop for biotech companies like Agenus Bio to have STOs to fund the development of their drugs, but since those funds are won’t be used to develop blockchain solutions for healthcare I’m not including them.

As existing solutions find product market fit and the industry matures in general you can expect a resurgence of venture capital funding. The majority of this will be in traditional forms as the ICO market is in full retreat and the barriers to launch STOs remain high. In the meantime, I’ll be eagerly watching the market develop and tracking funding (VC, ICO, and STO) as well as the other side of this equation, successful exits. If you’re interested in collaborating on this data please let me know.

Robert Miller

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I write about blockchains, data, and healthcare. Sign up for my newsletter here -> http://beyondblocks.bertcmiller.com