Last week, three of the Philadelphia region’s biggest players made a major announcement at PSL’s Founder Factory. Philly’s veteran venture firm, Safeguard Scientifics; Independence Health Group, the parent company of Independence Blue Cross; and venture firm Ben Franklin Technology Partners announced a $6 million funding initiative to support local, early-stage health IT startups over the next four years. The digital health startups selected for funding can receive anywhere from $50,000 to $1 million, and will also be mentored by the partners as they grow.
The initiative is an effort to “fuel Philadelphia’s innovative digital health ecosystem,” the partners said in a release. BizPhilly sat down with David Luk, a principal at Safeguard, to find out exactly why this initiative is being launched now and what it means for Philadelphia’s digital health landscape moving into 2017. Luk also shares why the team decided to focus on early-stage startups, a shift from Safeguard’s usual Series A and Series B financing.
Is this sort of funding initiative in partnership with other big Philly players unprecedented for Safeguard?
We have collaborated in this way before on an ad hoc basis. And we’re also part of the Health Care Innovation Collaborative, which incorporates a bunch of other players in the Philly ecosystem. But in terms of collaboration specifically between Safeguard, Independence Blue Cross and Ben Franklin, it’s certainly the biggest collaboration that we’ve done. And it’s the most exciting in terms of being able to support the regional healthcare IT entrepreneurship that’s got so much momentum behind it right now.
Why’d the team choose to focus on healthcare IT innovation now?
In Safeguard’s core business, we already have a lot of capital deployments in healthcare IT. We’ve been accelerating our interests in healthcare IT over the last several years and we think that we are at a pivotal moment for healthcare IT right now. What we’ve seen in the last few years is that almost all hospitals are using electronic health records. And now that records are computerized, all of the data is becoming a platform for new and emerging technologies that we can then build on top of. It’s really only within the last couple years that we’ve gotten to a point where we have ubiquitous electronic records in hospitals. So the foundation is already laid out for an intense period of innovation in healthcare IT going forward.
Some have made the argument that Philly needs to diversify its innovation, go beyond investing in just healthcare-related startups. What’s your response to this?
With every region, every business, and even in every person, it remains true that it’s most effective to invest in what you’re good at and in what you have expertise in, in what inspires you. In this case, as a region, we have some great strengths to build upon when it comes to healthcare. I believe the statistic is that one out of every six physicians in the U.S. has [been] trained in this region. For a region like ours to really become known on the national and international level, we do need to double down on the areas in which we already have an advantage.
Are there any particular local startups in healthcare IT that stand as models for what this initiative is looking to fund?
Yes. Cloudmine and Trice are both local healthcare IT companies that we’ve already invested in. Another one is Accolade, which we haven’t invested in. Comcast was an investor in that one.
Each partner has pledged $2 million to the fund. Why this particular size of investment?
The headline number of $6 [million] sounds quite sizable, but to be clear, at Safeguard we invest in Series A and Series B rounds of financing, so our typical check size in an initial single check to one individual company is typically between $5 million and $10 million. So for us, this investment is allowing us to invest earlier in the pipeline or maturity of a startup’s development and earlier in the ecosystem. Part of our motivation here is to build a pipeline for our future investments that fall in that $5 to $10 million range. We do think there is an opportunity in this region for more funding to support our local entrepreneurs that are at an earlier stage than our businesses core mission.
What do you want to ultimately come out of this?
I want to see more and bigger successful startups emerge in this region.
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