StartUp Health has closed their second fund, a $31 million investment vehicle backed by major global companies including Swiss pharma giant Novartis, Irvine, Calif.-based medical device maker Masimo and the venture arm of Chinese insurance firm Ping An.
The new fund, dubbed the StartUp Health Transformer Fund II, will be focused on strategic investing around 10 so-called “health moonshots,” which have the potential to effect more than a billion people around the world. The moonshots include problems like access to care, ending cancer, women’s health, children’s health, nutrition and fitness and brain health.
Another point of distinction with the company’s earlier $3 million fund is moving StartUp Health past seed-stage financing and into Series A and Series B rounds. Unity Stoakes, the co-founder and president of StartUp Health, said he expects the new fund to invest in around 200 companies in denominations up to $500,000.
“We are proud to partner with StartUp Health and support its global mission to solve 10 of the world’s biggest health challenges,” Fabrice Chouraqui, president of Novartis Pharmaceuticals USA said in a statement. “I believe that together we can help empower health tech leaders to transform the future of healthcare and bring new innovations to millions of patients.”
The new fund has already invested in a number of companies over the past few months including pediatric healthcare company CareDox, medical device maker Cohero Health and physician practice management startup Doctor.com.
“A major evolution are the strategic partners that have backed this fund, that’s significant because these partners are looking to invest further capital, become customers of these companies and help them scale up,” Stoakes said in a phone interview.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
StartUp Health was launched in 2011 as a way to help connect digital health startups to resources, expertise and capital to foster innovation and transform the industry. StartUp Health has grown from Stoakes and his co-founder and CEO Steven Krein to a team of 30 employees. The organization is headquartered in New York and currently building out a San Francisco headquarters as well.
So far the company has already built up a portfolio of more than 250 digital health companies across six continents and 21 countries. That global focus helps explains the investor roster StartUp Health has built with their new fund.
“We’ve focused on combining with with great U.S. and international partners because we see there’s a great global opportunity to change the system,” Stoakes said in a phone interview. “If we’re going to help a billion people that means looking to markets like China and India. These partners give us access to networks and beachheads around the world to drive innovation.”
The new capital will also be used to support companies within the Startup Moonshot Health Academy, a long-term mentorship and educational course that is meant to help digital health companies get access to customers, media opportunities, coaching resources and peer networks.
Digital health investing has grown steadily over the last few years, reaching an all-time high in 2017 with $5.8 billion invested in companies, according to Rock Health. This trend has continued into 2018, alongside a dearth of large exits through M&A and IPO. Those market fundamentals have led some to talk about a bubble in digital health investing.
Not so for Stoakes, who said that the nascent industry is still in the early innings, especially when considering the global digital health market as a whole.
“We’re very early in the innovation cycle, even $30 or 40 billion dollars invested is only dabbling in a $10 trillion dollar market globally that’s growing,” Stoakes said.
“There’s a lot of deal fatigue, there’s a lack of big exits, but I equate it to 1994 where websites were just launching, and the pipes and foundations and talent structures are just being laid. What we’ll see over the next 10 years is innovations that are not just building on top of, but leapfrogging our current system.”
Photo: akindo, Getty Images
