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Andreessen Horowitz, a venture capital firm based in Menlo Park, California, announced a similar, non-financial partnership in November with rural health system Bassett Healthcare Network based in Cooperstown, New York.
Bassett President and CEO Dr. Tommy Ibrahim said Andreessen Horowitz has not pressured the system to work with any particular companies and no financial commitments are required for either party. But there’s potential in the future to gain equity, he said.
“There could be opportunities for us to earn royalties, particularly as we demonstrate the success factors of these solutions,” he said. “That might be out there. But as of this moment, there really isn’t any financial or economic benefit.”
There is a practical benefit, however: The rural health system doesn’t have the bandwidth to solve many of its biggest challenges around staffing and operational efficiencies. Partnering with Andreessen Horowitz allows it to bring in already-vetted startups to address these challenges at no cost, Ibrahim said. For example, Bassett offers its employees access to resources and support through Homethrive, a family caregiving tech platform.
In return, health systems provide a testing ground for firms’ portfolio companies. Dr. Vineeta Agarwala, a general partner at Andreessen Horowitz, said real feedback is one of the reasons it entered into the agreement with Bassett.
“We’re not trying to have partnerships where we install companies and then don’t hear anything about what went right or if they decided not to work with the [startup],” Agarwala said. “Feedback is a gift to startups and there’s no better place to get it from.”
Startups are more likely to work with a venture capital firm with health system connections, said Michael Cantor, board chair of Connecticut Innovations.
“We can make one phone call and get them in touch with [Hartford],” Cantor said.
Rather than turning to outside firms, some health systems have created their own in-house venture capital arms. The arrangements vary based on the provider organization, but are typically an opportunity for systems to commercialize intellectual property derived from their research and pilot projects.
Rochester, Minnesota-based Mayo Clinic has a $250 million fund focused on venture capital and growth equity opportunities. The health system said the startup investments from its ventures arm last year were valued at $176 million. The value is determined by sales and financial performance of the startup, management representation and market analysis, according to Mayo.
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