Venture Capitalists Still See Healthcare as Major Investment Opportunity

 June 14, 2012 Khosla Ventures, the investment firm led by venture capitalist and Sun Microsystems co-founder Vinod Khosla, has invested in three mobile health companies in as many months, according to a story by Brian Dolan. In April, Khosla was part of wearable devices Misfit Wearables’ $7.6-million second round of funding, and this week Khosla “led the $10.5-million second round of funding for AliveCor,” according to the piece. Health IT companies pulled together $102 million for 18 deals in the first quarter of this year – “a 75-percent increase in capital and one more deal than was completed during the same period in 2011,” according to Dow Jones VentureSource. Khosla Ventures also recently invested $1 million in CellScope, part of Rock Health’s first class of start-ups in 2011. The company is developing smartphone peripheral devices designed for consumers to use for at-home diagnosis, including for ear infections, a common childhood ailment. According to the story, parents will simply attach the peripheral to a smartphone camera lens, sending an image of their child’s inner ear that physicians can use to make a diagnosis and then write a prescription if needed. The idea is to help parents miss less work “and potentially cut down on late night emergency room visits,” according to the startup. Cellscope began in bioengineering Professor Dan Fletcher’s lab at UC Berkeley, where CellScope founders Erik Douglas and Amy Sheng were actually working on developing cell phone-microscopy for remote diagnosis in developing countries, according to Dolan’s story. CellScope expects to move on from the ear to develop future products for remote throat and skin exams, including non-clinical apps for consumer skincare. In 2009, in the midst of the recession, hospitals were pulling back spending on everything from robots to stethoscopes, and one area they started looking at was remote medical devices. Venture capitalists soon had the same idea. Even hospitals are getting into the act. Rex Healthcare recently said it was putting $10 million into creating a new venture capital fund, Rex Health Ventures, that will invest in start-up healthcare companies “as part of a broader initiative to create a ‘culture of innovation,’” according to a story by David Ranii. Rex Healthcare is a Raleigh, N.C.-based private not-for-profit, which includes the 433-bed Rex Hospital, and is part of UNC Healthcare. “Health data, the key ingredient to useful analysis and diagnosis, is starting to explode exponentially – and CellScope is on the cutting edge,” Vinod Khosla said in a written statement. “Erik and his team are creating next-generation technology that will empower patients and help them access the best care in the most efficient manner possible.”