In the tech industry, venture capital is all about ROI. From Silicon Valley to Shanghai, firms make big bets on founders and companies with the hope that their portfolio contains the next Facebook, Amazon or Uber.
But in some cases, venture funds are run by companies already bringing in billions of dollars a year. The healthcare industry features a handful of these, and their goal is as much about driving innovation as it is realizing returns.
Johnson & Johnson, Amgen and Baxter International provide three examples of how medical companies are driving innovation in healthcare by investing in startups and giving founders the resources and access to expertise they need to develop new medications, technology and devices.
Johnson & Johnson
Their business: Johnson & Johnson is a healthcare company whose portfolio includes consumer products, pharmaceuticals and medical devices. In addition to operating a venture fund, the company has established startup incubators in 11 cities across the United States.
Their fund: Johnson & Johnson Innovation has been active since the 1970s and has invested over $12 billion across almost 500 funding rounds. The fund’s president, Tom Heyman, said in a company Q&A that Johnson & Johnson Innovation has a team of 12 investors spread across the globe who collectively evaluate thousands of investment opportunities per year. The fund made 13 investments in 2019 and has made six as of July 2020. Although Johnson & Johnson has invested billions of dollars in hundreds of companies, Heyman said in his Q&A with the company that his team isn’t motivated solely by profit when evaluating deals.
“We do not make investments with the goal to simply make money for Johnson & Johnson,” Heyman said. “Instead, we invest in companies that have technologies, platforms and business models that are strategically important today, or could be in the future, to one of our sectors. Everything we do has to be financially sound, but it’s about strategy first, and all else follows.”
One portfolio company to watch: Johnson & Johnson Innovation has participated in the Series B and Series C rounds of Willow, a Mountain View-based company that has developed a wearable breast pump. Willow has raised over $100 million in funding and recently welcomed a new CEO, Laura Chambers, formerly a VP at eBay and general manager at Airbnb.
Their business: Amgen is a biotechnology company that researches and manufactures medications designed to treat serious illnesses like cancer, kidney failure and osteoporosis. In 2014, the company launched the “Golden Ticket” program for startups in the life sciences and biotech industries, which provides a year of free lab space to two companies.
Their fund: Amgen Venture Investments launched in 2004 and invests in biotech startups and serves as a limited partner in funds that invest in life science companies. According to Crunchbase, Amgen has committed $200 million to its venture fund and made 83 investments. Jani Naeve has served as the fund’s managing director since 2004, and in an interview with Amgen she said one of the reasons the fund has found success is its close relationship with the company’s scientists.
“My teammate Gladys Nunez and I manage $625 million in funds and have made more than 70 investments, and we couldn’t have done it without the scientists,” Naeve said. “We have helped educate them on venture funds, while they bring the scientific point of view that Amgen is so well known for in the biotech industry. The scientists are integrated into what we do and are key in helping us determine the best path for companies we invest in to become successful.”
One portfolio company to watch: Akili Interactive has created the first prescription video game to treat attention deficit hyperactivity disorder. The game, EndeavorRX, was designed by neuroscientists and video game developers for children ages 8-12 and is meant to be used in conjunction with other treatments. Akili Interactive was founded in 2011 and has raised $140.9 million in funding.
Their business: Baxter International is a medical product manufacturer that specializes in intravenous fluids and delivery systems, surgical devices and dialysis devices. The company was founded in 1931 and is headquartered in the Chicago suburb of Deerfield. In 2017, Baxter announced it was partnering with MATTER, a Chicago healthtech incubator, to provide resources and expertise to help founders accelerate their work.
Their fund: Baxter Ventures is a $200 million venture fund launched in 2011 that targets early-stage startups around the world developing medical technology. According to Baxter, the fund invests in companies whose technologies or products address unmet clinical needs and that have long-term growth potential. Its areas of interest include healthcare information technology, pharmacy technology tools and in-hospital solutions and therapeutics.
Anne E. Sissel, the fund’s managing director, said in a company Q&A that Baxter Ventures casts such a wide net because of the company’s mission.
“Our mission at Baxter to save and sustain lives inspires where we focus our innovation efforts,” Sissel said. “In a larger company such as Baxter, the technology has to fit within the overall mission and strategy to justify investment and focus. We have to stay disciplined and choose those opportunities carefully where we believe we can have the biggest impact, but recognize that any given technology is only one piece of the broader picture.”
According to Crunchbase, Baxter Ventures has made 16 investments and led six rounds, the largest of which was a $41.8 million Series D for the biopharmaceutical company Mirna Therapeutics in 2015.
One portfolio company to watch: Outset is a San Jose, California, medical device manufacturer behind Tablo, a compact dialysis machine designed to be less bulky and more intelligent than what’s currently on the market. Tablo features a touchscreen control system and automatically transmits data to the cloud and receives updates over Wi-Fi. According to Outset, medical personnel need just hours to learn the device’s ins and outs, and the FDA recently approved it for at-home use by patients. Crunchbase data shows that Outset has raised $447.3 million in funding.