The West Health Investment Fund is way more mission-driven than your standard VC, or so says CEO Nick Valeriani. The fund cherrypicks startups aimed at lowering the costs of healthcare, he says – and while financial gains are great, it’s more about the impact than the exits.
The San Diego-based fund, launched in 2011 with $100 million from area philanthropists Gary and Mary West, is focused particularly on startups that enable medical device interoperability, care coordination and healthcare price transparency.
West Health has invested in about a dozen companies since its launch, with a handful of exits that include Sense4Baby, RxAnte, Humedica and Change Healthcare. Other portfolio companies include goBalto and GlySens, which raked in $12 million apiece in new funding just last month.
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Valeriani says West Health’s more mission-driven than typical venture capital firms – that “the calculus to evaluate the effectiveness of our fund isn’t solely financial.” Returns are fed back into the West Health endowment, which funds the organization’s not-for-profit work.
Indeed, the whole West Health ecosystem – as employees like to refer to it – has been built around lowering the costs of health care, so it expects the startups it invests in to share that mission right as they introduce their value proposition.
“We are relentless about this cost goal we have – because we truly believe that the current trajectory in healthcare spending is unsustainable,” Valeriani says.
Valeriani spoke in broad strokes of what West Health’s looking for in a startup. Quite important, for instance, in crafting a plan that helps lower healthcare costs – does the startup hold any intellectual property?
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“Is there some thing there – patents or capabilities that represent a sustainable competitive advantage for this business?” Valeriani says. “There has to be something unique about it to ensure that the business has enduring impact.”
It’s key to suss out the quality of the management team right at the outset, he says. Startups are just made up of a small handful of folks, so it’s important that they’re quality. But even more important – is there market potential for the technology?
“Bad markets trump good management,” Valeriani says.
West Health scopes out who else is investing in the startups, as well. If they’re high quality investors with proven track records, that makes a startup all the more attractive. West Health’s after companies that are looking for growth capital – where the technical risk has been, for the most part, retired.
“We’re not interested in science projects,” Valeriani says. “We’re not interested in very, very early-stage technology or science development.”
But the bottomline when it comes to choosing a startup to fund?
“The bullshit meter’s always on,” Valeriani says. “You trust your intuition.”
