Technology investors, including VC firms and portfolio managers of large mutual funds, are increasingly targeting healthcare data firms as new sources for investments. A recent Reuters report highlights this trend with interesting detail.
Investors are finding firms that gather and analyze healthcare data appealing because of the growth of electronic records and consumer use of health tracking technology. In addition, investing in these companies would seem to present less of a risk than investing in biotech firms whose profitability hinders on the successful development of just a single or few drugs.
According to a report from digital health seed funding firm Rock Health, VC funding for healthcare technology firms was at $2.3 billion as of June 2014, which already exceeded the 2013 total.
Almost 50% of this funding comes from six categories: payer administration ($211 million), digital medical devices ($206 million), analytics and big data ($196 million), healthcare consumer engagement ($193 million), population health management ($162 million) and personalized medicine ($150 million).
Reuters, citing Rock Health information, reports that VC firms investing in healthcare technology companies this year include Andreessen Horowitz, Qualcomm Ventures and Google Ventures, while Intel, General Electric and Medtronic have acquired digital health companies.
Several large technology funds are committing a larger percentage of their portfolio to health companies. Reuters reports that the Hennessy Technology fund devotes a quarter of its portfolio to health technology companies, while the Waddell and Reed Science and Technology A Fund and the Ivy Science and Technology fund each now have about 14 percent of their portfolios in healthcare funds.
This trend is yet another example of investors finding new ways to invest in the thriving healthcare industry, even for those investors wary of taking reimbursement risk traditional provider-side investments who still wish to dip their toes into the broader industry.