A new venture capital firm named HC9 Ventures launched on Monday and announced the close of its first fund. The company is led by three founders — healthcare industry veterans Richard Lungen, Jon Gordon and Charlie Falcone. These three gentlemen will also serve as general partners for the $83 million fund.
“Our entire career has been in healthcare — starting, operating and building businesses,” Lungen said in an interview.
The venture fund’s healthcare expertise stretches beyond its founders, though — it’s also pervasive among its wide base of limited partners. The fund’s more than 125 investors are “intentionally and only healthcare executives,” according to Lungen. They come from a wide variety of healthcare company backgrounds — he named folks from UnitedHealth, Aetna, Cigna, LabCorp and private equity healthcare service companies.
When selecting which companies to invest in, HC9 will focus on startups raising seed and Series A capital. The fund’s limited partners have a vast range of healthcare business knowledge, which they have offered up to help these early-stage companies scale their go-to-market strategy and stand out from competitors, Gordon said.
As for the types of companies HC9 will invest in, the fund is interested in healthcare software and services.
“We don’t do devices, pharmaceuticals or anything with binary scientific risk. That’s outside the scope of what we’re doing here,” Gordon declared. “Similarly, in terms of the philosophy of companies we like to work with, we want to engage founders who are really interested in having a partner and working with us on building their business. Our belief is that capital is still available in plenty of places across this market. And if you want an investor who is just going to be quiet, we’re not going to be a value add from that standpoint.”
Lungen echoed his fellow general partner’s remarks. He said that while there’s no shortage of capital for healthcare startups, there is an “extreme shortage in the expertise and experience that these early stage founders and CEOs are seeking.”
Skills like structuring reimbursement, building company culture, maintaining operational excellence and mastering distribution aren’t necessarily taught in business school, but they’re vital if you want to build a scalable healthcare startup, according to Lungen.
To him, HC9’s “ability to be engaged and active” differentiates it from other healthcare-focused venture funds.
“We’re truly helping portfolio companies not just by deploying capital and being yet another name in a press release. We truly want to be in the boardroom working with teams, helping with all aspects of their growth. Not to be provocative, but we believe that the venture capital community has let their portfolio companies down at large by not doing the things that the CEOs and their teams have really sought after, which is to be a value add partner,” Lungen said.
HC9 has already invested in three companies: Forge Health, a provider of mental health and substance use care; Psych Hub, which has billed itself as “Angie’s List meets Match.com for mental health care;” and XP Health, a vision care platform.
Going forward, HC9 will continue to invest in companies that can demonstrate they are more than just point solutions. Lungen pointed out that there are a lot of “capabilities masquerading as companies” — he pointed out that providers and health plans are struggling with point solution fatigue more and more each day.
Over the next two years, the fund plans to invest in 10 to 12 companies, the general partners said.
Photo: HC9 Ventures