Hospitals, Insurers Enjoy Growing Influence As VCs
This article was originally published in Start Up
Over a decade ago, hospital companies began establishing venture capital funds to ride shotgun with institutional VCs, hoping to get a glimpse of health care’s future. Today, under health care reform, VC groups sponsored by providers and payors increasingly find themselves in the driver’s seat, looking for the start-ups that might have solutions to the industry’s biggest problem – cost.
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Corporate VCs are increasingly becoming a stable supplier of capital to medical device companies. Corporate investors have been participating in a growing percentage of deals being done, according to Elsevier’s Strategic Transactions, and remain focused on later-stage rounds.
Limited partners require results in today’s difficult climate. Firms with a sound strategy to take advantage of this current climate can have success. Longitude Capital’s partners say the firm’s late-stage focus helped it secure $385 million for its second fund. Split Rock Partners, meanwhile, remains an active investor in early-stage companies in technology and medical devices, investing from a $300 million fund raised in 2009. However, the firm has adjusted its strategy somewhat since raising that fund. Split Rock now is making direct secondary investments as well. The firm is focusing principally on its own portfolio for opportunities, buying out co-investors or executives who may need liquidity.