Investors pile into health-care start-ups in 2015

Faber Report: Acquirers getting hit
Faber Report: Acquirers getting hit   

A record amount of money surged into digital health start-ups last year and, so far in 2015, the capital continues to rush into these private companies.

Specifically, venture funding of digital health companies, or those firms focused on the intersection of health care and technology, surpassed $2 billion through the first half of this year, according to a report released Tuesday by Rock Health, which provides seed funding for start-ups and conducts research in this area.

In 2014, these companies attracted a total of $4.3 billion in funding.

Digital health funding continues to grow faster than overall venture funding, as well as funding in the software, biotech and medical-device sectors. The categories attracting the most money include wearables, analytics and big data, and consumer tools for purchasing health-care products.

Why are venture capitalists enthusiastic about this space?

Malay Gandhi, Rock Health's managing director, points to two broad trends. For one, he says there is the powerful regulatory tailwind of the Affordable Care Act, which is allowing more people to access the health-care system.



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Are Americans becoming health care dropouts?   

Two, he argues that the health industry is a sector of the economy that remains under-penetrated by technological innovation.

"Most of the costs in health care are labor related," Gandhi told CNBC. "So, in order to improve labor productivity, meaning get more out of every worker, then we have to introduce more technology" into health care.

The most active venture investors in the first six months of this year, according to Rock Health, include HLM Venture Partners, NEA and Venrock. The companies that raised the most money include Jawbone, maker of wearable devices; NantHealth, which delivers real-time clinical data to physicians; and Virgin Pulse, part of Sir Richard Branson's Virgin Group, which designed an enterprise wellness platform.

So far this year, five venture-backed digital health companies have gone public, boasting a total market capitalization of some $11 billion. The five included Evolent Health, Fitbit, InVitae, Mindbody and Teladoc.

Two of those companies—InVitae and Mindbody—are trading below their IPO price.

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