Heritage's latest investors bring more diversity to the expertise of the fund's advisers at a time when healthcare companies are looking for more ways to work across the industry's sectors, said Paul Wallace, managing director of the Heritage Group.
The fund will invest up to $15 million in as many as 15 companies during the next five years. Wallace said the fund is seeking to invest in companies that need cash to grow, not for early development. “We are not going to be investing in science experiments,” he said.
However, the fund may also build a company from scratch to address a strategic need for its investors, he said. “We are spending some significant time” identifying gaps in the marketplace, Wallace said. Heritage began to consider investments in the spring of 2011 and has reviewed roughly one potential investment a day, he said.
Investors said they expect the investment to deliver more than a financial return. The fund, which has an investment committee and four advisory committees with members from investor companies, provides executives with early exposure to new products, services and technology.
An investment in the Heritage fund positioned Amedisys “to look at the best of the best first,” said Bill Borne, the company's founder and CEO. Amedisys already vets potential products and vendors internally, but helping to screen potential investments for Heritage has increased that activity, said Borne, who serves on the fund's investment committee.
Such exposure is highly valuable in the market for healthcare information technology, which is rapidly evolving, said Joy Grosser, chief information officer at Iowa Health System. “We see a need for a faster throughput” of new and niche vendors, she said.
Grosser, who serves on the fund's technology advisory committee, speaks several times a month with Heritage about potential investments. She also refers companies to Heritage and contacts the private equity firm with questions about potential vendors. Heritage may have vetted a company and be able to provide some insight, she said. “I send them things often,” she said.
Jim Bosscher, senior vice president and chief investment officer for Trinity Health, said the system's representatives on the fund have not considered any companies as potential vendors. But the exposure to new ideas and companies may turn up a company with products and services needed by the Novi, Mich.-based system. With changes under way in healthcare, he said, “it is a time when we really need to think along as innovative lines as possible.”
Trinity was among the five original corporate investors. Bosscher said the diversity of newly added investors adds strength to the fund.