Early stage life science companies looking to fill a funding gap now have another avenue: a hospital.
Rex Healthcare is creating a $10 million fund to invest in healthcare innovations and technologies. This new fund, called Rex Health Ventures, puts the Raleigh, North Carolina hospital among the few hospitals that have created venture capital fund. Other health systems that have also launched venture funds include Cleveland Clinic in Ohio and St. Louis, Missouri-based Ascension Health.
In addition to Rex’s initial $10 million commitment, the hospital is also trying to raise an additional $10 million from other investors. The new fund comes as many early stage life science companies continue to struggle securing venture capital funding that would help them bridge the funding gap often called “the valley of death.”
The Rex venture fund is part of a broader hospital initiative called Rex Strategic Innovations to more broadly support healthcare innovations. Besides the venture fund, the initiative includes:
Rex Impact Grants: A grants program to support businesses and organizations working to improve patient care or community health
Rex Innovation Facilitator: A way for Rex workers and leaders in the community to submit innovative ideas.
Rex Joint Ventures: A program to partner with thought leaders in technology, research and entrepreneurship — the goal being developing products and services to improve healthcare technology and healthcare delivery.
Rex said the hospital could serve as an incubator or laboratory for new concepts. It could also be a customer for products or services that emerge from these companies. Rex, a nonprofit hospital that is part of the UNC Health Care System, will take an ownership stake in the companies Rex Ventures invests in. Rex executive Robert Helmedag, who is overseeing Rex Strategic Innovations, told WRAL Tech Wire that the venture fund will invest alongside traditional venture capitalists and angel investors. Financial returns from exits will be reinvested by the hospital into new innovations and concepts aimed at improving the quality of healthcare.
Here’s the investment criteria for Rex Health Ventures lists on its website:
Stage Focus — Seed and Early Stage We will consider pre-revenue opportunities, but we generally like companies that have at least developed a prototype or beta product.
Sectors of Interest — Healthcare IT, Healthcare Services, Medical Devices, BioPharma Technologies
Investment Size — Initial investments of $250,000 to $500,000; Total Per Company Investment of $500,000 to $2 million
Management Team — At least one person currently with the company or opportunity around whom a team can be built. Previous small company or entrepreneurial experience preferred.
Strategic Fit — We will only invest in companies where we feel there is a strategic fit with Rex Health Care and where we can be a value-add investor.
Time to Exit — We target investments where there is a realistic possibility of exit within 5 to 7 years.
William Moore, chariman of Research Triangle Park, North Carolina-based research institute RTI International, said that Rex Health Ventures will help “bridge the gap between great ideas and great science.” He explained further in this Rex video: