Healthcare giant McKesson Corp. plans an aggressive move into venture capital funding for healthcare technology, planning to commit several hundred million dollars over the next five to eight years and hiring a VC industry veteran to head its VC initiative.
McKesson's undertaking joins a crowded field of corporate venture capital firms investing in healthcare and digital health. Qualcomm Ventures is the most active corporate digital investor, said Stephen Kraus, a partner at Bessemer Venture Partners. Merck & Co. and Blue Cross and Blue Shield also have active healthcare funds.
McKesson's venture capital arm will invest in 15 to 25 companies over the next two to three years, said Tom Rodgers, McKesson's new managing director for strategic venture capital operations. The company, which had $137.6 billion in revenue in 2014 and offers a wide range of software, distribution and business services to healthcare clients, already has made one undisclosed investment.
Rodgers and his team will focus on startups in four areas: direct-to-consumer products such as decision-support software for patients; alternative care-delivery methods such as house calls and telehealth; employer-enabled healthcare focused on wellness or getting employees to use healthcare more effectively; and data analytics, particularly software that helps doctors manage data from wireless sensors and social media.
The commitment suggests McKesson may become one of the most active digital health investors overall. According to data from healthcare accelerator Rock Health, the most active investors have made seven deals through the third quarter of this year.
Corporate venture funds have historically had a mixed reputation in Silicon Valley. Kraus said corporations have often hired the wrong talent, relying on internal finance or business development staff rather than experienced venture capitalists.
Rodgers acknowledged that “most corporate venture firms fall well short of their promise.” He intends to build an internal team to actively assist firms post-investment, helping companies to establish relationships with McKesson clients.
“Building a company in healthcare can be a slow, painful process,” Rodgers said. “It may take eight to 12 years for these companies to reach maturity and grow into what their value should be.”
Healthcare business consultant Lisa Suennen said the entry of McKesson and other corporate VC funders comes at a welcome time because many traditional investors are fading away. “This capital has filled the big black hole left in healthcare by the exit, demise, or zombie state of so many venture funds,” she said.