Presented by Providence Ventures
Before coming to Providence Ventures, I helped life science and tech entrepreneurs build business cases around their product ideas to fix healthcare problems. Included in that advice was always the sage quip, “Go talk to some people in healthcare, your customers — doctors, healthcare system leaders, administrators who make buying decisions — and test how compelling the value proposition for your product is.”
At the time, I was on the outside of the healthcare system. I was behind the massive moat that separates the community of talent trying to help the monstrosity that is healthcare better deliver service to its patients — who are also on the outside of that moat most of the time (fortunately). Little did I know how difficult my advice was to follow beyond getting some tactical input from a neighbor or old college roommate who happened to be a nurse, physician, or healthcare administrator.
I knew that healthcare was complicated — it only takes a couple of Explanation of Benefits statements to induce crossed eyes, furrowed brows, and the inevitable, “I have an advanced degree and I don’t have a clue what this means.” But only after being on the inside of a large, complex healthcare system did it really hit me: how unbelievably challenging delivering good healthcare is in this highly-regulated, fragmented, and misaligned ecosystem.
That is exactly why having a strategic healthcare investor can be a secret weapon in delivering value to your company.
Providence Ventures manages the $150 million venture capital fund of Providence St. Joseph Health (PSJH) — the 3rd largest non-profit healthcare system in the country. More than just being a financial resource for entrepreneurs, we leverage our health system’s size, geographic footprint, and relationships with other large health systems to offer significant scale to healthcare startups that demonstrate value to our industry.
Large health systems are complex, burdened by dated technology, and often move slowly. Providence Ventures understands these healthcare-specific barriers and minefields, and actively helps its portfolio companies navigate our organization and optimize for mutual success. Importantly though, we prioritize financial returns for PSJH, thus we see ourselves as a strategic partner with a financial investor’s lens that keeps us aligned with management and our syndicate partners.
To find the best companies that add the most value to our healthcare system and show attractive investment potential, we focus on three objectives:
1. Source companies that solve big healthcare problems
Like any venture capital investor, we like big markets. We seek venture-class returns from companies that add important value to PSJH. Given that we work side-by-side with our PSJH operating colleagues, we’re deeply informed by ongoing discussions that shed light on the system’s biggest challenges and our strategic approach to solving them. This internal visibility gives Providence Ventures unique insights into the day-to-day challenges of delivering healthcare, as well as the economic viability of various business models. When we engage our operating colleagues to uncover solutions, we add value to the organization by connecting them with leading-edge innovation that would otherwise be difficult for these full-time healthcare professionals to surface.
2. Perform due diligence that pressure tests alignment with PSJH
In addition to the traditional business diligence that any investor would perform, Providence Ventures asks, “What value will the company bring to PSJH caregivers and patients. How will Providence Ventures and the broader organization support the company’s success?” We bring PSJH’s operational leaders into our diligence process early-on to fully understand how a company’s offering may improve PSJH’s clinical outcomes, workflow challenges, and/or economics. We assess potential adoption barriers and how they can be addressed. And we often engage in pilot planning conversations with our operational teams to ensure that the right metrics are being monitored, and to give companies exposure to executive decision-makers, with an eye towards accelerated scale. The goal of this process is to gain high visibility into how a partnership with the company would work, and which key leaders would best support widespread deployment.
3. Post-investment, optimize for two-way strategic value
If we’ve done our jobs well, by the time Providence Ventures makes an investment, we’ll already have a plan in place with the company to drive value. While we make no guarantees that contracts will be signed and execution will be simple, we will have solid visibility on how we’ll engage, what the ideal internal relationship looks like, and what the tactical steps are to achieve success for both the company and PSJH.
In healthcare, there is a wide chasm between a pilot proof-of-concept and broad deployment at scale. Providence Ventures commits to partnering with our portfolio companies to de-risk their venture and drive scale because we’ve worked closely with our operational leaders to understand why the company’s solution is mission-critical. Additionally, because PSJH is a very large and complex organization, we believe that if we can help prove that a technology or platform works here, it is likely to work in the rest of the healthcare industry. Thus, we leverage our connections with other healthcare systems across the country to help our companies find other partners, and share our experiences as a reference customer.
Providence Ventures understands that healthcare is complex and challenging to navigate. We invest in companies we believe will be great partners to PSJH, and work hard to optimize those partnerships so that together, Providence Ventures and its portfolio companies can solve the biggest problems in healthcare.
Look for our next article in Venture Beat to read about some specific examples of how we’re working together with our companies to do just that.
Christiana DelloRusso is a partner at Providence Ventures.
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