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Venture Capitalists Say Health IT Investments are Poised To Grow in 2011. Predictions?

Posted on Monday, 3rd January, 2011

Last week, the National Venture Capital Association (NVCA) and Dow Jones VentureSource released a recent survey representing more than 400 U.S. venture capitalists and 180 CEOs of U.S.-based venture-backed companies. NVCA’s mission is to foster greater understanding of the importance of venture capital to the U.S. economy and support entrepreneurial activity and innovation.

The survey has prompted a lot of discussion surrounding 2011 predictions surrounding VC funding for tech/ innovation sectors.

Venture capitalists predict investments:

51% to rise
24% to remain the same
24% to decrease

Optimism prevails across predicting stage of development investment as well:

51% later-stage investment
49% expansion and seed investment
46% percent in early-stage investment

The upside for VC investments sat with technology in particular.

In a departure from recent years when asked about their predictions for industry sectors, more VCs expect investments in Information Technology (IT) to increase than in the Life Sciences and Cleantech sectors specifically VCs anticipated increased funding in:

82% Consumer Internet Applications & Digital Media
80% Cloud Computing
66% Mobile/Telecom

Interestingly enough when also asked about the bubble—and sectors likely to see “froth” (a term used among the venture community to suggest over investment), they stated

69% Consumer Internet & Digital Media
47% Cloud Computing

Noteably, the most bearish outlook was for hardware — 55%of survey respondents expected financing to decline in 2011. No surprise as software/applications have much larger portable applicability/market traction than any singular hardware/device.

A closer look at healthcare predictions for 2011

77% of VCs expect to see an increase in investment in the health IT sector over the next year

OK. Great. But as someone personally and professionally interested in healthcare I’m left with some questions.

What exactly does that mean for healthcare? What is the description of “health IT”?

– Is it strictly information technology (so vague).

– Is is more about understanding the scope of the privacy and security measures enacted with the American Recovery and Reinvestment Act (ARRA) of 2009 and how this is affecting Health Information Management?

– Is it how technology can being integrated into physician practices and workflow? Including EMR (Electronic Medical Records), ePrescribing, and RPM (remote patient monitoring) without the risk of liability re: HIPPA compliance (27011 accreditation). Great report available here to understand the impact of regulating digital healthcare systems.

It’s unknown according to the NVCA survey, (which is worth a read-3 page PDF, somewhat dizzying in dense predictive data and comprehension would have been best represented in an infographical manner, just sayin.) But, worth it for an overall view of understanding predictive uptake across all technology sectors. Charts showing the results of the entire predictions survey are available at www.nvca.org/VentureView11_slides.

No consensus on healthcare?

The real take away here for me is that there was no clear consensus on how medical devices and biopharmaceutical development investments would fare because VC opinions appeared to be split with even % expecting financing to rise, fall and stay the same.

The expected 77% growth in health IT investment could likely reflect increased federal pressure on hospitals and doctors’ offices to meet standardized electronic medical records or lose Medicare funding, but again complete speculation and nothing is certain without further documentation.

Today’s healthcare environment presents a constant storm of challenges. Recent regulatory changes and the privacy and security measures enacted as part of the American Recovery and Reinvestment Act (ARRA) of 2009 have thrown normal medical practices and HIPPA/patient communication into mayhem. We heard many opinions from healthcare practioners on WHY they are reluctant to engage in establishing EMR systems themselves nor partake in social engagement with patients here in “needs assessment” section at the bottom of the post. Both of which have become lower priorities resulting in risk adverse nature due to unknown technical applicability.

The fact remains there is a NEED for these regulated tech products in healthcare, so where are the predictions on funding such endeavors? As these regulations with stiffened penalties go into effect, healthcare providers need to address privacy and security measures now – spending time to overcome boundaries and penalties later– that is an opportunity for healthcare IT to move forward in 2011.

Healthcare predictions and uncertainties aside, the good news is that positive investment predictions are closely linked with, and signify the growth of our economy which has been on the rise throughout 2010.

Jessica Canning, global research director of Dow Jones VentureSource wisely states that “Venture investment is meant to be spent – on employees, technology, office space and other expenses – which means it reverberates throughout the economy. Raising capital also gives companies an opportunity to grow, adding to their headcount and spending power as they try to become the next Google or Apple.”

Perhaps seeing more VC supported ventures would be an welcome and “healthy” additive to healthcare and change the regulated status quo.

Questions remain behind understanding regulated public sectors in healthcare and how that does, or does not effect private sector/VC funding predictions: are VCs reluctant to put a stake in the ground with healthcare innovation due to the over-regulated environment and infighting between the lack of internet-based FDA guidelines, HIPPA regulations, or 510K medical device application & process?

This is a topic I will continue to peruse and comment on—lets see how the Quora community responds.

 

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