For start-ups in the business of crunching data, there has never been a better time to raise capital, industry watchers say. Companies leveraging and analyzing data to deliver products made up almost half of the top 10 biggest U.S. venture capital deals so far this year, according to PitchBook.
These start-ups are applying data mining and analysis to industries in new ways and thus have the potential to be both substantially disruptive and extremely profitable, said PitchBook Vice President Adley Bowden.
They're also often high margin, easy to scale and grow quickly, he said. They operate in industries that have yet to fully realize the value of big data, such as health care and financial services.
Top 10 U.S. VC Deals Since 1 Jan. 2016
| Company Name | Deal Date | Month Deal Closed | Deal Size in Millions |
|---|---|---|---|
| Lyft | 04-Jan-2016 | 1 | 1,000 |
| Magic Leap | 02-Feb-2016 | 2 | 794 |
| Snapchat | 03-Mar-2016 | 3 | 713 |
| Oscar | 22-Feb-2016 | 2 | 400 |
| Flatiron Health | 06-Jan-2016 | 1 | 175 |
| Jawbone | 15-Jan-2016 | 1 | 165 |
| LendUp | 20-Jan-2016 | 1 | $100 million in debt and $50 million in funding |
| Domo | 22-Mar-2016 | 3 | 131 |
| DoorDash | 22-Mar-2016 | 3 | 127 |
Source: Source: Pitchbook
"There is a lot of room within health care for the application of data and crunching," Bowden said.
Oscar Insurance, which signs up members on and off the exchanges created by the Affordable Care Act, uses technology and data analytics to simplify health insurance. It has raised $400 million so far this year in a round led by Fidelity Investments. The company is now valued at $2.7 billion and counts Google Capital among its investors.
"Having technology in our DNA means that we create extremely short feedback cycles: learning from every single member interaction how to improve our overall system," said Oscar CEO Mario Schlosser in a blog post in March. "It means tracking and monitoring everything, to see how we are doing at all points in time."
Over the past three years, Oscar has built tools that can alert care managers to impending emergency room admissions, algorithmic workflows to better manage care, models to simulate its hospital and doctor network, and large-scale processing engines to analyze data in real time, Schlosser said.
Flatiron Health is a cloud-based oncology software and data analytics company, crunching data to enhance patient care and accelerate cancer research. Its customers are patients, physicians, life sciences companies and researchers. It raised $175 million in January In a Series C round led by Roche.
An example on the fintech side is LendUp, which offers an alternative to payday loans and credit card debt and is aimed at consumers with little or no credit. It crunches data from Fair Credit Reporting Act compliant sources including public records, specialty credit bureaus and bank statements, then feeds that information into a proprietary algorithm to assess creditworthiness and offer borrowers better rates. In January, it raised $100 million in debt from Victory Park Capital and $50 million in equity in a deal lead by Data Collective, Susa Ventures and Google Ventures.
On the enterprise side, Domo centralizes, normalizes and visualizes data. It draws on a range of sources to offer a real-time overview of all that's happening in a business. The platform combines information from more than 300 sources, such as Customer Relationship Management platform Salesforce, expense management system Concur and social media accounts on Facebook. The company closed a $131 million funding round in March, giving it a valuation of $2.166 billion. The lead investor was BlackRock.
Part of the reason some companies have been able to raise money so far this year is that they are among the market leaders with proven business models, said Bowden. Across all sectors, best (or even second best) in class start-ups are having no problem raising capital, despite a recent slowdown in funding.
Rounding out the top 10 when it comes to funding raised in the first quarter of this year are well-known consumer companies; Lyft raised $1 billion at a post money valuation of $5.5 billion, Magic Leap raised $793.5 million giving a post money valuation of $4.5 billion valuation, Snapchat raised $712.64 at a post money valuation of $16 billion, Jawbone raised $165 million at a post money valuation of $1.5 billion and DoorDash raised $127 million giving it a post-money valuation of $717 million. These large late-stage deals increasingly come with many strings attached to protect investors.
Overall, looking at venture capital deals in North America in the first quarter of 2016, $18.41 billion was invested across 1,863 deals, up from $18 billion invested across 2,208 deals in the fourth quarter of 2015, according to data from PitchBook. The final quarter of last year marked the lowest level of venture capital investment since the third quarter of 2014. So far this year, venture capital investment looks to be ticking up, albeit only slightly.
The top 10 VC deals globally so far this year make up $29.97 billion in venture capital investment and half of those deals happened outside the U.S., four in China and one in the United Arab Emirates, according to PitchBook. The two biggest deals year to date have been in China: group buying and restaurant booking site Meituan-Dianping raised $1.58 billion in January and streaming video service LeTV Sports raised $880 million in March.
CORRECTION: Domo has a valuation of $2.166 billion; the top 10 VC deals in N. America so far this year make up $18.41 billion, up from $18 billion in the fourth quarter of 2015; and the top 10 VC deals globally make up $29.97 billion. An earlier version misstated these facts.
