Echo Health Ventures, the US-based corporate venturing vehicle for healthcare provider Cambia Health Solutions and health insurer Blue Cross North Carolina, will maintain investments against the backdrop of Covid-19, it has told Global Corporate Venturing.
Partner Dusty Lieb told GCV: “In terms of how it is affecting our approach to the work we do externally, we are certainly thinking about how to be opportunistic in an environment where pricing is finally moderating.
“We invest in areas where pricing has been high relative to historic norms, and we are looking to play offence there. And then we are digging in very deeply with our portfolio companies to make sure they have the resources to weather what could be a challenging economic time.”
Echo Health Ventures focuses on strategic healthcare IT and services investments, and although valuations may become more appealing to investors, Lieb cautioned that for corporate venturers, the opposite is also true: existing investments may not hold the same financial value.
“What [a downturn] typically leads to is a flight to quality,” he said. “And so, we will see more attractive pricing on higher quality assets. We will see less companies coming out for funding in the venture arena; lower quality assets that do come out for funding probably will not be able to secure it in a way that they maybe have been historically.
“In the later stage, we will certainly see a contraction in the credit markets which will have an impact, and a major contraction in corporate war chests which have driven a lot of M&A activity over the past few years.”
The firm has four offices across the United States and already sees itself as a video-first culture, but chief operating officer Jon Eide told GCV that as the coronavirus spread in early March, it was faced with some tough decisions, particularly in a Seattle office located in an early US hotspot for the disease. Echo restricted travel, but regardless of how much a firm used video before, adjustments still have to be made.
“Much of the investment process and a lot of the value we can provide to our portfolio companies involves face-to-face meetings,” Eide said. “So there have been changes in evolving an approach to rely on video activity for connections outside of our platform and employee base.”
New investments are only one part of the situation of course, and Echo still needs to communicate and support its 25-strong portfolio. Healthcare technology is a mixed bag right now according to Lieb, which means different companies have different needs.
“Generally speaking, the companies that are more exposed to consumer purchasing behaviour are the ones that are going to be hit a little bit harder,” Lieb said. “Those are the ones we are making sure we are shoring up and supporting through this time.
“Then, on the flip side of things, the companies that can address a new reality in healthcare delivery and how we need to react to Covid-19 as a healthcare industry – those are the ones seeing near-term demand spike. And you support those companies because while that creates a positive dynamic in some ways, it still comes with challenges in experiencing that kind of rapid growth.”
Some of the portfolio companies experiencing a significant uptick in business include Dispatch Health, which provides acute and semi-urgent care at home on demand, and telehealth platform developer Tyto Care, which raised $50m last month.
That support goes in more than one direction, and this is a time when having that strategic investment outlet can be useful for a corporation. Echo is speaking to its parent companies and evaluating how it can benefit them while continuing to amplify the commercial opportunities for its portfolio.
“We are prioritising the work and strategic engagements that are supporting our parent companies’ responses,” Eide said. “Trying to be helpful with (providing) insight from within our portfolio companies as well as what knowledge we have in the market through evaluations we have done on areas or sectors that might not have led to an investment at this stage.
“I think that pre-standing relationship has been very useful and is really something that demonstrates the use case of the Echo model.”
