Trust usually needs to be earned. It is rare for untested corporate venturing units to be regarded as the highest among their peer group. For that to happen would imply the people in the team have earned trust before.
In hiring David Schulte from its peer Kaiser Permanente Ventures in September, therefore, US healthcare provider McKesson has aligned its $250m ventures unit to more than a decade of superlative experience and grabbed the attention of many industry players.
Tom Rodgers, the senior vice-president and managing director of McKesson Ventures, said of the appointment: “Schulte joins McKesson with a notable and high-profile recent string of digital health investments.
“McKesson has made six investments in its first 10 months since launch so Schulte is joining a team with strong momentum.
“He is well respected and liked – which isn’t always the case in venture! – with a broad network.
“Having him on board definitely played a role in McKesson being ranked the number one most trusted corporate venture capital (CVC) firm in digital health by MedCity News.”
As the managing director of McKesson Ventures, Schulte has more than 17 years of experience as an investor and investment banker at JP Morgan – under the defunct name of Hambrecht & Quist – UBS and Piper Jaffray. His strength is “partnering with entrepreneurs to grow innovative healthcare and technology businesses”.
Before McKesson Ventures, Schulte spent 12 years helping to build and grow Kaiser Permanente Ventures, the corporate venturing unit of the hospitals group. In his tenure there, he led an investment team whose IT and digital health investments included Omada Health, Proteus Digital Health, Health Catalyst, Kit Check, Validic, Ingenious Med and MetricStream.
“At Kaiser Permanente Ventures, my greatest success was helping to build an investment programme from $20m to $400m in assets under management and identifying exceptional entrepreneurs such as Andrew Thompson at Proteus Digital Health and Sean Duffy at Omada Health.
“It is a privilege to work with brilliant and creative entrepreneurs. I am inspired by their passion, risk-taking and resilience.
“When done well, corporate venturing provides expertise and partnership opportunities that accelerate the growth and development of emerging businesses. In some instances, corporate venturing is the best place from which one can help an entrepreneur. This is perhaps especially true in healthcare.”
As well as the successes, though, Schulte has had to deal with challenges in venturing. He wants to apply these insights to McKesson. Schulte said: “At KP Ventures, like many corporate VCs, the greatest challenge was navigating organisational politics and delivering on the promise of corporate venture. It is difficult to consistently provide tangible benefit to portfolio companies.”
To make this a stronger industry, Schulte believes all CVCs could think about holding themselves accountable for providing tangible value to their portfolio companies. He thinks CVCs should align their own incentives with the success of their portfolio companies and provide more efficient and transparent decision-making. He also believes CVCs would benefit from adopting National Venture Capital Association standard term sheets and eliminating right of first refusal terms from their deals.
As a former Minneapolis state soccer and basketball player, Schulte’s biggest concern is “dreading my young children’s first ‘legitimate’ victory” in their back-garden games.