With ever-increasing frequency, academic and nonprofit health systems are opting to take part in externally run venture capital funds to test new technologies from outside startups over developing homegrown intellectual property.
Healthcare Dive reports that hospital fund managers perceive the financial risk of corporate venture capital the same way they see other investments, only with greater flexibility. The strategy gives them a way to bring in and test new technologies and to help refine and improve new systems. If an investment succeeds, the outcomes are positive, both clinically and financially. And most don’t go in with the idea of hitting a financial home run, preferring instead to manage their risk by taking a minority stake in companies.
Large players like Mayo Clinic, Ascension and Cleveland Clinic historically have invested heavily in IP to test new products and services. But now, providers of all sizes, types and tax statuses, including Tenet, Trinity and Community Health Systems have begun investing in externally run funds. Intermountain, for example, launched its first $80 million venture fund this year. Its portfolio is partly made up of companies the health system spun out of its R&D efforts.
An early entrant, Ascension began its venture fund in 1999 with $125 million and now manages $805 million across four funds. Kaiser Permanente Ventures, meanwhile, manages $400 million in assets over four funds.
CB Insights says corporate venture capital across all fields, where corporate funds are directly invested in external private companies, has been growing rapidly. The fourth quarter of 2018, in fact, saw the highest number of active CVCs ever and 59 percent year-over-year growth.
If you know of a startup with promising, viable solutions that can help address the challenges health care systems face on a daily basis consider applying to the inaugural AHA Leadership Summit Startup Comptetion. Finalists will get an opportunity to present to leading health care systems at the AHA’s Leadership Summit.