Seae Ventures, the impact venture firm set up by three ex-members of corporate VC vehicle Zaffre Investments, is aiming to reduce the equity gap in US healthcare.
The firm was set up to target healthcare technology developers with women and/or BIPOC (black and indigenous people of colour) founders, and it recently closed its debut fund at $107m.
Managing partners Jason Robart, Pete Sally and Tuoyo Lewis had all worked together at Zaffre, which invested on behalf of health insurer Blue Cross Blue Shield of Massachusetts, and it gave them an insight into the barriers minority founders face.
“We knew that, through our investing experience at Blue Cross, the venture community was not serving the needs of women and BIPOC founders well at all,” Robart said.
“We knew that the gulf of health disparities was growing, it wasn’t getting narrower, and looking at traditionally underserved populations, whether it’s low-income populations, racial and ethnic minority populations, rural populations, we knew there was significant inequity within the healthcare community in this country.”
The challenge any corporate venture group faces
The overwhelming majority of US startups still have white male founders, and connections to prestigious universities like Stanford and Harvard can still be key to raising money.
Startups tackling problems affecting communities outside the white, male, urban and financially healthy demographics can struggle to raise funding, an issue amplified by the influence of those within and surrounding a corporate investor. If a corporate has established commercial partnerships for instance, it can complicate investment relationships that could potentially boost up-and-coming competitors.
“The challenge I think any corporate venture group faces is that you have all the stakeholders of that corporation,” Robart said.
“If you’re a health insurer in Massachusetts, which we were, not only did we have Blue Cross Blue Shield as an entity in Massachusetts, but we had the provider community who had contractual relationships with Blue Cross Blue Shield of Massachusetts, we had health systems, state regulators, all of the corporate accounts that were buying health insurance from Blue Cross Blue Shield of Massachusetts.
“When you put all of the interests of all of those groups together it actually narrows the playing field of opportunities you might pursue for fear of running afoul of the interests of one particular group of another.”
Another issue in Zaffre’s case was regionality. Its parent company was focused on Massachusetts, the US state with the second largest average income, which itself narrowed the scope of investments strategically. But that regional concentration can also make things unnecessarily complex, with Sally citing an occasion where funds backed by separate Blue Cross plans invested in four separate multiple sclerosis therapy developers in two months.
“Effectively, you’d make a decision that impacts you regionally based on the business you have,” he added. “The benefit we have (now) is you can make a bigger, more macro-level decision.
“We have seven Blue Cross Blue Shield plans among our limited partners, so when we look at an opportunity, we have good insight in terms of knowledge of how it is going to apply on a greater scale and not just in a single region, and how that’s going to scale beyond a state or part of the country.”
We started with health plans
Health Care Service Corporation, Blue Shield of California and Blue Cross Blue Shield of Minnesota are among Seae’s 30 LPs, as is pharmaceutical firm Eli Lilly. The firm specifically targeted health insurers for the fund, and they in turn communicate their needs to portfolio companies while providing them with market research and deidentified patient data.
“We started with health plans, Robart said. “It was an area we knew very well through our work at Zaffre Investments. We’d engaged with every Blue Cross plan in the country as well as the Uniteds, Humanas and Aetnas of the world, so we started there, in part because the payer in healthcare is a customer, and usually the primary customer for most of our portfolio companies and the companies we anticipate investing in.
“We also knew from our work at Zaffre what the value of these types of early-stage companies could and would be to health plans because we put it in place ourselves. To articulate that value to health plans was a natural place to start.
“Since then, we’ve added a dental insurance plan, the American Hospital Association is an investor, we’ve added another large health system in the south-east part of the country as well as a number of endowments and foundations that are focused on healthcare and particularly care to traditionally underserved populations.”
The firm is open to diversifying its LP base in a prospective second fund, especially with health systems, but Robart and Sally are happy with the profile of their backers, and for now will look to add to a 16-strong startup portfolio and follow a philosophy of widening the bracket in the healthtech VC space.
“The way we make investment decisions is ensuring it isn’t solely about picking a woman or BIPOC founder who’s created technology that will service the healthcare industry,” Sally said.
“It’s also looking at the technology and the way they’re validating these clinical studies or the sensitivity and specificity. How robust is the analysis you’re doing, how big is the population you’re looking at, what’s the diversity within that?
“It’s about ensuring that when we do make an investment decision, those things have been thought through, so it’s not just an application that will address 10% of the population, it’s something that’s going to raise the bar for everyone and not just individual subsets.”
Photos courtesy of Seae Ventures.
