Health IT a new sweet spot for investors

As use of electronic health records by providers and health tracking devices by consumers becomes more ubiquitous, the health IT industry is gaining a reputation as an emerging sweet spot for technology investors, according to a Reuters report.

Several investors, according to Reuters, said they see health IT as more of a safe bet than an industry like biotechnology. While success in the former industry is linked to services and data being sold to insurers and providers, the latter's success hinges on the unpredictable drug market, the article notes.

"Healthcare is a massive market," Kevin Spain, a general partner at Emergence Capital Partners, tells Reuters. Spain says he invested close to $40 million in health technology startup companies like Augmedix, which is creating tools that can be used by providers wearing Google Glass to view EHRs.

Google (NASDAQ:GOOGL) also is looking to make inroads into healthcare via its Google Fit platform, which will aggregate data from fitness-tracking devices and health-related apps.

Apple (NASDAQ:AAPL) is another company with a lot of healthcare potential, according to fund managers like Robert Stimpson, due to efforts like its HealthKit platform and its impending wearable device, expected to be unveiled next week.

"The line between what is healthcare and what is technology has become blurred," Stimpson, lead portfolio manager of the Black Oak Emerging Technology fund, tells Reuters.

Apple's financial impact on the mobile healthcare industry likely will be worth billions of dollars, some analysts predict.

McKesson (NYSE:MCK), UnitedHealth Group (NYSE:UNH) and Boston Scientific (NYSE: BSX) are among the more traditional healthcare companies that investors who talked to Reuters said they are looking into.

Venture capital funding and mergers and acquisitions activity in the healthcare IT sector both saw record numbers in the second quarter of 2014, according to a report published in July by Mercom Capital Group. VC funding saw $1.8 billion raised with 161 deals, more than double the $861 million raised in the first quarter of the year--a 104 percent increase, according to the report.

A similar report published in July by San Francisco-based digital health seed fund Rock Health found that during 2014's first six months, 143 digital health companies raised $2.3 billion. Deal sizes grew from an average of $10 million last year to $15.6 million. The statistics only cover deals worth $2 million and up.

Despite the sunny predictions by some, investor and entrepreneur Anne DeGheest has been among those warning of a bubble in digital health funding, saying that entrepreneurs will face hard questions about their business plans when seeking a second round of funding.

To learn more:
- read the Reuters article