Brazil-based pharmaceutical firm Eurofarma’s corporate venture capital (CVC) arm seeks to identify digital technologies that can disrupt the healthcare ecosystem, Paulo Braga, head of the unit, told Global Corporate Venturing.
The vehicle was formed last month and has the capacity to invest up to R$45m ($11.7m) in early-stage healthcare technology developers.
“We do not focus solely on healthcare itself because we are looking for startups with solutions to transform any part of the value chain,” Braga said.
Areas that can benefit the healthcare ecosystem, including primary care, patient engagement and the medical retail sector, are for investments, with technology areas including digital technologies, the internet of things and industry 4.0 all being considered.
“We are now in the process of generating deal flow and analysing opportunities in the healthtech scene,” he added. “We are looking for startups with technologies that can be applied to the health sector and pharmaceutical companies.”
The unit’s first portfolio company, content marketing software developer Rock Content, shows how broad the scope can be. Braga said that as patients in Brazil tend to look for physicians online, interacting with them through online content and advertising can give insights into their behaviour.
As for other areas of interest, Braga put forward insurance technology due to the pace of change in that part of the healthcare ecosystem, and added: “We might be interested in exploring biotech in the future too, but we will need to create a new vehicle for that.
“We do not invest in biotech, advanced materials or life sciences for now. As we focus on everything digital, we do not step into the research and development domain because the strategy is quite different.”
Braga leads Eurofarma’s corporate venturing efforts, which can be largely divided into three areas. He explained: “The first one is what we call ‘create’, which helps entrepreneurs with a hard-science background – scientists who want to become entrepreneurs. We want to help them create their companies, going from the lab bench to the market.
“Then we have the ‘relationship’ area, which is open innovation. We have a joint program with [non-profit organisation] Endeavor Brazil, which provides mentoring and helps entrepreneurs accelerate to the scale-up phase. We will help them carry out special projects through Eurofarma in order to understand the healthcare industry.”
The last area is the funding process, which could eventually include a biotech-focused vehicle according to Braga, who added: “Within the next two to four years, we expect to have this biotech segment refined.”
Eurofarma’s corporate venturing vehicle has a separate management structure to the parent company, and although it acts like a traditional VC fund, startups can benefit from Eurofarma’s resources.
“With Eurofarma’s assets, we can elevate and permeate growth faster,” Braga said. “That said, portfolio companies are not forced to partner Eurofarma.
“Eurofarma has branches all over Latin America, and our portfolio companies can leverage that network. We would also take board or observer seats to liaise between the portfolio companies and Eurofarma if the entrepreneurs would like to engage further.”
The fund invests roughly $130,000 to $1m per deal, targeting seed and series A-stage companies, mainly in Brazil. However, it is also seeking investments outside Brazil, especially in Israel and the US.
Braga said: “We can invest in any company in the world, although for cross-border deals, we do consider two factors. First, we will not lead the round because it is important to have a lead investor closer to the company. And second, we want to help the companies enter the Latin American market.
“We look forward to partnering and co-investing with other funds that are keen on the Latin America region.”
Two or three more deals are expected to be closed by the end of 2019, and Eurofarma plans to make a total of 12 to 16 investments through the vehicle according to Braga, who said: “We will first be developing the portfolio, and after that, in about three years time, we will either expand the vehicle or create a new one.”
Eurofarma has tasked the corporate venturing team with exploring the local healthcare ecosystem, Braga explained, adding: “Two years ago, it would have been unthinkable for VCs or CVCs to invest in healthcare companies because they were only getting angel funding.
“They are starting to get traction, and around 300 to 400 Brazilian startups are now ready to receive seed and series A investments. Similarly, five to seven years ago fintech almost did not exist, but now all the major unicorns are from fintech companies. Movement is also happening with the Brazilian healthtech ecosystem.”
Braga said he intends to raise larger funds in the future from different sources including hospitals, drugstores and the healthcare system itself, as well as financial institutions such as the state-affiliated BNDES (National Bank for Economic and Social Development).
“We hope to build partnerships with them to deploy more capital and help the healthcare ecosystem in Brazil develop faster,” he concluded.
