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All Things HIT

Aug 30 2011   10:17AM GMT

Venture Capital in health IT, alive and well, especially in Austin.



Posted by: AllinHIT
Angel investors, Health IT jobs, Health IT market, HITECH, VC funding, Venture Capital

The health care IT software and services market is projected to grow approximately 25% per year, till 2014.  While this growth is due to many factors, the primary credit can be attributed to the HITECH Act and its numerous technology initiatives.

HITECH has shifted the industry to a quality based model, which can be seen in the advancement of ACOs and a shared savings model.  It has fueled a vibrant mobile health market, which is expected to reach over $2 billion by the end of 2011.  All of this has also created an increase in new, innovative start-ups, and their availability in accessing venture capital.  Creating a hot bed of exciting new firms with high paying jobs, and available start-up capital, Austin, Texas is a shining example of an area whose health care IT scene has been impacted by HITECH.

The IBM Entreprenuer SmartCamp in Austin, an IBM Global Entrepreneur initiative, brings new technologies to market faster by creating an incubating system of matching start-ups to VC firms and angel investors. This competition also rewards the best start-ups with mentoring and consulting services, a critical tool in growing start-ups successfully.  Though based in Austin, the SmartCamp is open to all firms in the US, though it’s no surprise that Austin firms are well represented in the competition.

Austin based DxUpClose, who developed an electronic sensor that screens bacterial infections (big hospital play), and Tactical Information Systems, who developed a product called WanderID, a biometric fingerprinting identification system for patients unable to speak, are two of the finalists in the competition.  (I have to also give a “shout out” to a similar company I work with, BioSig-ID.  They received VC dollars from the State of Texas VC fund!).

On August 25th, 2011, Morgenthaler Ventures, a VC firm based in Menlo Park, CA, was named the top 11 finalists in their nationwide contest for seed and Series-A funding.  Finalists will present in front of leading VC firms and angel investors.  They received ” a tremedous response, showing health IT as sexy, as social media and games”, according to the Rebecca Lynn, partner at Morgenthaler Ventures and head of the firm’s health IT investing team.  She went on to say, “We received 117 applications that reflect how entrepreneurs are ‘thinking big.’ They are building powerful applications and services on top of today’s Web, mobile, social media, and cloud-based infrastructures to transform our healthcare system.”

Venture capital is alive and well in health care IT, and it is a welcome sign in the mist of this economic downturn.  The creation of jobs and new and exciting technologies in health IT will continue, thanks to the many funding initiatives.  This investment is smart and timely, so lets just hope adoption of these technologies continues to grow along with the investments!

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