Name of new venture capital firm HC9 Ventures started on Monday and announced closing its first fund. The company is led by three founders – healthcare industry veterans Richard Lungen, John Gordon and Charlie Falcone. These three gentlemen will also serve as general partners for the $83 million fund.
“Our entire careers have been in health care — starting, running and building businesses,” Lungen said in an interview.
However, the healthcare venture fund’s expertise extends beyond its founders—it is widely distributed among its broad base of limited partners. More than 125 of the fund’s investors are “intentionally and exclusively healthcare executives,” according to Lungen. They come from a wide variety of backgrounds in healthcare companies – he pointed to people from UnitedHealth, Etna, Cygna, LabCorp and private health service companies.
When choosing which companies to invest in, HC9 will focus on startups raising seed and Series A capital. The fund’s limited partners have a wide range of healthcare business expertise that they have brought to help these early-stage companies to scale their go-to-market strategy and differentiate themselves from competitors, Gordon said.
As for the types of companies HC9 will invest in, the fund is interested in healthcare software and services.
“We don’t make devices or pharmaceuticals or anything else with a binary scientific risk. That’s outside the scope of what we do here,” Gordon stated. “Equally, in terms of the philosophy of the companies we like to work with, we want to engage founders who are genuinely interested in having a partner and working with us to build their business.” We believe capital is still available in many places in this market. And if you want an investor that’s just going to keep quiet, we’re not going to be a value-add from that perspective.”
Lungen echoed his fellow general partner’s remarks. He said that while there is no shortage of capital for healthcare startups, there is a “tremendous shortage of expertise and experience that these early-stage founders and CEOs are looking for.”
Skills like structuring reimbursement, building company culture, sustaining operational excellence and mastering distribution aren’t necessarily taught in business school, but they’re vital if you want to build a scalable healthcare startup, according to Lungen.
For him, HC9’s “ability to be engaged and active” sets it apart from other healthcare-focused venture funds.
“We really help portfolio companies beyond just deploying capital and being another name on a press release. We really want to be in the boardroom working with teams, helping with all aspects of their growth. Not to be provocative, but we believe the venture capital community has let portfolio companies down as a whole by not doing the things that CEOs and their teams have really been looking for, which is to be a value-added partner,” said Lungen .
HC9 has already invested in three companies: Forge healthmental health and substance use care provider; Psychic centerwhich is billed as “Angie’s List meets Match.com for mental health care;” and XP Healthvision care platform.
Going forward, HC9 will continue to invest in companies that can prove they are more than point solutions. Lungen pointed out that there are many “opportunities masquerading as companies” – he pointed out that providers and health plans are fighting point solution fatigue more and more every day.
Over the next two years, the fund plans to invest in 10-12 companies, the unlimited partners said.
Photo: HC9 Ventures