Editor's note: This article was edited to appear in the print edition of Modern Healthcare. Experience the multimedia version of this special report.
When Vivify Health sought additional capital last year, the healthcare software developer had a multitude of traditional venture capital funds to choose from.
The company, which offers clinicians remote monitoring of chronically ill patients, was an attractive investment. It already had millions in revenue, 500 hospital customers and proven technology and processes.
Rather than go with New York funds or one from Silicon Valley, Vivify chose one of the hospital system-based investment funds that have sprouted in recent years. Besides money, the venture arm of UPMC, the giant Pittsburgh-based health and hospital system, offered to help Vivify scale up its operations to reach even more customers, Vivify founder Eric Rock said.
Moreover, UPMC, unlike many venture capital funds, promised to hold onto its Vivify equity indefinitely rather than pressure the company to sell itself in two or three years so it can monetize its investment, “It was not a flip-and-turn approach,” Rock said.
These are boom times for healthcare startups, which are flourishing amid the historically high investment directed their way by venture capital firms. In 2016, venture capital funding in healthcare companies surpassed $5 billion for the first time after hitting $4.6 billion in 2015 and $4.7 billion in 2014, according to Mercom Capital Group.
Each of those years saw a huge step up from 2013, when venture capital investment reached $2.1 billion; $1.2 billion was invested in 2012, Mercom reports.