Tag: venture capital

PE Practice Purchases Tick Up

Posted on by Brian Casey

Private equity acquisitions of radiology practices ticked up in 2024 after two years of declines. A new paper in JACR sheds light on PE purchases in radiology, which have raised concerns about the corporatization of medical imaging in the U.S.

Private-sector radiology historically consisted of independent imaging practices run largely by radiologist-owners who contracted with hospitals to read imaging exams.

  • That model has begun to break down as radiology attracts investment from private equity investors eager to roll up what they see as a fragmented industry into larger companies that can leverage market power.

But what’s good for PE investors may not be good for radiologists – or for healthcare. 

  • Private equity investment in healthcare providers has raised concerns that investors may be putting profits before patients.

The new study documents the rate of private equity investment in radiology from 2013 to 2024, based on queries of the Pitchbook and CB Insights databases, finding …

  • There were 113 PE-led radiology acquisitions over the full study period (out of a total of 4.3k radiology practices in the U.S. in 2023). 
  • PE radiology acquisitions peaked at 18 in 2021, fell for the next two years, and ticked back up to 10 in 2024.
  • Most of the radiology practices being acquired employed 50-99 radiologists.
  • PE-led acquisitions were most common in the South.

So what’s to make of the numbers? A total of 113 acquisitions over 10 years isn’t that many (although the authors caution that acquisitions of multi-state or national practices and imaging chains would be counted as a single deal). 

  • And the researchers acknowledge that there’s little data on the impact of corporatization on healthcare quality, at least in radiology (although they do cite a study showing that PE ownership was associated with an 8.2% increase in radiology prices).  

The Takeaway

Private equity investment in radiology practices may still be in the early stages relative to other medical specialties, but radiologists will watch PE acquisitions closely for signs of how the trend may impact them. The new study serves as an important baseline for tracking future activity.   

Radiology’s VC Funding Boom?

Posted on by Brian Casey

Radiology venture capital funding appears to be gaining momentum in the first few weeks of 2025. This past week has seen the release of six funding rounds, led by a massive $260M Series B from preventive medicine firm Neko Health. 

Venture capital funding is a closely watched barometer for any industry built on innovation, and radiology is no exception, especially the imaging AI sector. 

  • Radiology venture capital funding got off to a particularly slow start in 2024, and by year end funding specifically for imaging AI was down 48% compared to 2023 ($335M vs. $646M according to Signify Research). This raised concerns about whether imaging startups might face a decline in VC investment – the equivalent of choking off their air supply before products in development could begin generating commercial sales. 

A CB Insights report earlier this month found that the nature of venture capital investment in digital health has indeed changed, with fewer but larger deals getting done.

  • This was widely seen as VC firms pivoting to quality, with investors demanding proof of progress in the clinical, regulatory, and commercial realms.

That brings us to the recent funding rounds …

  • Neko Health raised $260M that it will use to expand its Neko Body Scan from its current beachheads in Stockholm and London to other locations in Europe and the U.S.
  • Rad AI raised $60M in a round that follows on a $50M Series B less than a year ago as it moves to commercialize its AI-powered radiology reporting software. 
  • Quibim raised $50M in a Series A round to advance its work in imaging biomarkers through AI foundation models that analyze MRI, CT, and PET scans.
  • Annalise.ai parent Harrison.ai received $20M (USD) in funding from an Australian government investment fund to further develop its radiology and pathology AI.
  • Springbok Analytics raised $5M in a Series A round to fund its AI technology for analyzing muscle health from MRI scans.
  • Sycai Medical raised $3.1M for its AI for detecting abdominal cancers.

These six deals – combined with other recent funding rounds from Median Technologies, Core Sound, and BrainSightAI – show that January 2025 has already exceeded the five radiology venture capital deals recorded during the first four months of 2024.

The Takeaway

Do this week’s developments in radiology venture capital funding represent a boom, a boomlet, or just a string of coincidences? Whichever it is, startups would have to acknowledge that any interest from VC investors is better than the alternative.

VC Investors Pivot to Quality

Posted on by Brian Casey

Venture capital investors in digital health firms pivoted to quality in 2024, with fewer deals done but a higher median deal size compared to 2023. That’s according to a new report from market analysis firm CB Insights that also documented a record high for both the number and value of AI-focused deals.

Digital health investment has fluctuated in the years since the COVID-19 pandemic, with the number of deals hitting a peak in 2021 but then receding. 

  • The first half of 2024 was particularly slow in the radiology AI sector, but funding seemed to accelerate in the second half, with more and larger deals getting done.

So where did venture capital funding for digital health end up for all of 2024? The CB Insights report found that relative to 2023 there was …

  • A 23% drop in the number of digital health funding rounds, to 1.2k deals, the lowest number since 2014, versus 1.6k deals.
  • A 3% increase in the total dollar value of investments, to $15.6B versus $15.1B.
  • A median deal size of $5.3M, up 39% versus $3.8M.
  • AI-focused companies secured 42% of funding and 31% of deals, up from 37% and 26%. 
  • The biggest imaging-related deal was a $106M Series C round raised by cardiac AI developer Cleerly.

The numbers are a sign of VC investors looking for quality companies that meet heightened benchmarks.

  • Investors want demonstrated progress in terms of clinical validation, commercial traction, and regulatory readiness before they’ll sign checks. 

The Takeaway

The new report illustrates the opportunities and challenges of the current investment environment for digital health. AI developers will find the wind shifting in their favor, but they will need to do their homework and show real progress in the clinical, commercial, and regulatory spaces before securing venture capital investment.

Headwinds Slow AI Funding

Posted on by Brian Casey

Venture capital funding of medical imaging AI developers continues to slow. A new report from Signify Research shows that funding declined 19% in 2023, and is off to a slow start in 2024 as well. 

Signify tracks VC funding on an annual basis, and previous reports from the UK firm showed that AI investment peaked in 2021 and has been declining ever since. 

  • The report’s author, Signify analyst Ellie Baker, sees a variety of factors behind the decline, chief among them macroeconomic headwinds such as tighter access to capital due to higher interest rates. 

Total Funding Value Drops – Total funding for 2023 came in at $627M, down 19% from $771M in 2022. Funding hit a peak in 2021 at $1.1B.

Deal Volume Declines – The number of deals in 2023 fell to 35, down 30% from 50 the year before. Deal volume peaked in 2021 at 63. And 2024 isn’t off to a great start, with only five deals recorded in the first quarter. 

Deals Are Getting Bigger – Despite the declines, the average deal size grew last year, to $19M, up 23% versus $15M in 2022. 

HeartFlow Rules the Roost – HeartFlow raised the most in 2023, fueled by a massive $215M funding round in April 2023, while Cleerly held the crown in 2022.

US Funding Dominates – On a geographic basis, funding is shifting away from Europe (-46%) and Asia-Pacific (no 2023 deals) and back to the Americas, which generated over 70% of the funding raised last year. This may be due to the US providing faster technology uptake and more routes to reimbursement.

Early Bird Gets the Worm – Unlike past years in which later-stage funding dominated, 2024 has seen a shift to early-stage deals with seed funding and Series A rounds, such as AZmed’s $16M deal in February 2024. 

$100M Club Admits New Members – Signify’s exclusive “$100M Club” of AI developers has expanded to include Elucid and RapidAI. 

The Takeaway

Despite the funding drop, Signify still sees a healthy funding environment for AI developers ($627M is definitely a lot of money). That said, AI software developers are going to have to make a stronger case to investors regarding revenue potential and a path to ROI. 

What’s Fueling AI’s Growth

Posted on by Brian Casey

It’s no secret that the rapid growth of AI in radiology is being fueled by venture capital firms eager to see a payoff for early investments in startup AI developers. But are there signs that VCs’ appetite for radiology AI is starting to wane?

Maybe. And maybe not. While one new analysis shows that AI investments slowed in 2023 compared to the year before, another predicts that over the long term, VC investing will spur a boom in AI development that is likely to transform radiology. 

First up is an update by Signify Research to its ongoing analysis of VC funding. The new numbers show that through Q3 2023, the number of medical imaging AI deals has fallen compared to Q3 2022 (24 vs. 40). 

  • Total funding has also fallen for the second straight year, to $501M year-to-date in 2023. That compares to $771M through the third quarter of 2022, and $1.1B through the corresponding quarter of 2021. 

On the other hand, the average deal size has grown to an all-time high of $20.9M, compared to 2022 ($15.4M) and 2021 ($18M). 

  • And one company – Rapid AI – joined the exclusive club of just 14 AI vendors that have raised over $100M with a $75M Series C round in July 2023. 

In a look forward at AI’s future, a new analysis in JACR by researchers from the ACR Data Science Institute (DSI) directly ties VC funding to healthcare AI software development, predicting that every $1B in funding translates into 11 new product approvals, with a six-year lag between funding and approval. 

  • And the authors forecast long-term growth: In 2022 there were 69 FDA-approved products, but by 2035, funding is expected to reach $31B for the year, resulting in the release of a staggering 350 new AI products that year.

Further, the ACR DSI authors see a virtuous cycle developing, as increasing AI adoption spurs more investment that creates more products available to help radiologists with their workloads. 

The Takeaway

The numbers from Signify and ACR DSI don’t match up exactly, but together they paint a picture of a market segment that continues to enjoy massive VC investment. While the precise numbers may fluctuate year to year, investor interest in medical imaging AI will fuel innovation that promises to transform how radiology is practiced in years to come.

AI Investment Shift

Posted on by Brian Casey

VC investment in the AI medical imaging sector has shifted notably in the last couple years, says a new report from UK market intelligence firm Signify Research. The report offers a fascinating look at an industry where almost $5B has been raised since 2015. 

VC investment in the AI medical imaging sector has shifted in the last couple years, with money moving to later-stage companies.

Total Funding Value Drops – Both investors and AI independent software vendors (ISVs) have noticed reduced funding activity, and that’s reflected in the Signify numbers. VC funding of imaging AI firms fell 32% in 2022, to $750.4M, down from a peak of $1.1B in 2021.

Deal Volume Declines – The number of deals getting done has also fallen, to 42 deals in 2022, off 30% compared to 60 in 2021. In imaging AI’s peak year, 2020, 95 funding deals were completed. 

VC Appetite Remains Strong – Despite the declines, VCs still have a strong appetite for radiology AI, but funding has shifted from smaller early-stage deals to larger, late-stage investments. 

HeartFlow Deal Tips Scales – The average deal size has spiked this year to date, to $27.6M, compared to $17.9M in 2022, $18M in 2021, and $7.9M in 2020. Much of the higher 2023 number is driven by HeartFlow’s huge $215M funding round in April; Signify analyst Sanjay Parekh, PhD, told The Imaging Wire he expects the average deal value to fall to $18M by year’s end.

The Rich Get Richer – Much of the funding has concentrated in a dozen or so AI companies that have raised over $100M. Big winners include HeartFlow (over $650M), and Cleerly, Shukun Technology, and Viz.ai (over $250M). Signify’s $100M club is rounded out by Aidoc, Cathworks, Keya Medical, Deepwise Shenrui, Imagen Technologies, Perspectum, Lunit, and Annalise.ai.

US and China Dominate – On a regional basis, VC funding is going to companies in the US (almost $2B) and China ($1.1B). Following them are Israel ($513M), the UK ($310M), and South Korea ($255M).  

The Takeaway 

Signify’s report shows the continuation of trends seen in previous years that point to a maturing market for medical imaging AI. As with any such market, winners and losers are emerging, and VCs are clearly being selective about choosing which horses to put their money on.

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