South by Southwest

Venture funds see growth in health care start-ups

Trends in Healthcare Technology

As health care reform begins to take shape, venture capitalists see emerging opportunities in digital health start-ups.

"We are really, really excited about the move in tech and health care," said Ted Maidenberg, a general partner at the venture capital firm Social Capital, on Sunday at a South by Southwest Interactive panel about digital health.

Maidenberg, who has been investing in young digital health care companies for several years, said that investors used to be afraid to invest in these kinds of start-ups, but during the last year have changed perspective.

"When we started putting together an early-stage health care portfolio, we were often the only party investing in this area. I think there was lots of concern from the traditional IT-only firms that health care was a morass, that it was like invading Russia in the Winter," Maidenberg said during the panel.

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"That still exists in some ways, but it's hard to think that in the next ten years there's not going to be some true disruption in the way that care is delivered," he said.

Since 2011 funding in the digital health sector has more than doubled, with one billion dollars being invested in 2013, according to Rock Health's Digital Health Funding report for 2013. Year over year, digital health funds were up 39 percent, said Malay Gandhi, chief strategy officer for Rock Health, in an interview with CNBC

"This will be another record year for digital funds," Gandhi, who was also on the digital health panel, said in an interview with CNBC. "Traditional health care investors are looking at the risk and return investments and saying 'is there something we could get a better reward for in digital health?' and a number of tech and internet investors are also making the move."

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New investors that have traditionally not invested in digital health are starting off small, Gandhi said.

"Dabblers are what they call guys who make one investment, those types of investors grew 70 percent versus 2012. Three quarters of these investors were new to space in 2013," he said. "It's really interesting in diversity in terms of investing. But yes, there are more investors coming into the space."

By CNBC's Cadie Thompson. Follow her on Twitter @Cadiethompson