As customer needs, business models and technologies in healthcare are rapidly changing, how do corporate companies stay on top of new things? How do health startups grow to market readiness?
One of the answers is corporate venturing or structural cooperation between corporate businesses and health startups or scaleups. Corporate venturing goes beyond project cooperation and adds external investment to it: corporate venture capital (CVC). According to Dealroom, corporate venturing in 2018 already counted for 22% of all investments in European startups.
Many farmaceutical corporate businesses have their own CV-fund, but also insurance, telecom and (surprisingly?) publishers are quite active with corporate venture capital in health and care.
What are we talking about: what is corporate venturing?
Corporate venturing is all about corporate businesses ‘setting up structural collaborations with external parties to drive mutual growth’ (Van Peteghem and Mohout, 2018). It’s about establishing long-term collaborations between traditional companies and startups or scaleups, generating profits for both. The goal of corporate venturing is the protection of the market position, business growth, or steering the enterprise into new directions.
And these collaborations should be a win-win for both health startups or scaleups and the corporate company. It brings support and capital to ‘the small boats’ (startup or scaleup), and agility and innovation to ‘the mother ship’, according to Van Peteghem and Mohout.
How does it work?
Corporate companies collaborate by setting up their own corporate venturing capital (CVC) funds or by investing directly in health startups from their balance sheets. In Europe, more than half of CVC investments in all industries are made in B2B scale-ups.
And although corporate venturing might give the impression of being exclusive to large and deep pocket companies, smaller companies and SMEs are definitely interesting partners for collaboration as well. They more often invest directly from their balance sheet.
Where is corporate venturing capital in the external financing mix for health startups or scaleups? ?
CVCs may invest in start-ups from an early stage up to merger and acquisition (M&A), and every step in the venturing process has its own opportunities. But you will probably be interested in corporate collaboration after you’ve had the micro-financing for your business.
How important is healthcare corporate venturing?
Worldwide, digital health is on top of corporate venture industries (source: CB Insights).
Since 2015, corporate venturing capital (CVC) in Europe has almost doubled from 259 deals representing 2.6 billion euros to 468 deals representing 4.9 billion euros in 2018.
10% of all European corporate VC investment in 2017 was in HealthTech, making it the number 2 industry after FinTech (Source: Van Peteghem and Mohout, 2018).
But Europe should be careful not to lag behind: in 2018, most (41%) of the CVC investments in healthcare went to North American startups, already 38% to Asian companies and 17% to European startups and scaleups. (Source: CB Insights)
Anyhow, if you run a healthcare startup or scaleup, cooperation with a corporate company is definitely worth considering.
Where to turn to if your health startup wants to try corporate collaboration?
Most pharmaceutical companies have their own CVC fund, and so have large telecom and insurance companies. But also publishing company Alex Springer, for example, already invested in healthcare.
In the USA, large health systems have their own CVC fund too. In Europe, hospitals often designate an innovation fund to finance internal innovations or innovations by doctors and employees. But these do not (yet) enter into structural financing for external health start-ups.
Here are some of the most active CVC-funds in healthcare worldwide:
This is just a selection of CVC-funds with an important portfolio share in healthcare. In the ‘basics to grow’–ebook you can find information on 15+ health CVC-funds and their activities.
Be aware they most often collaborate with startups in their home market. So if you’re located in a country where there is not (yet) an office for one of the health-focused CVC’s, setting up a successful collaboration will be more difficult.
But here too it applies: if you don’t dare you don’t win. And as indicated above: corporate cooperation based on balance sheet investments is then a more commonly used option. A lot of ‘smaller’ and SME companies are now actively working on this.
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Want to know more? In my new ebook ‘basics to grow in health’ I tell you much more about CVC-funds and the financing mix for healthcare entrepreneurs.