Safeguard Scientifics and Independence Health Group, the parent company of insurer Independence Blue Cross, have teamed up with Ben Franklin Technology Partners of Southeastern Pennsylvania to set up a $6 million fund. The fund will be used to support early stage digital health startups in Philadelphia and the surrounding area, according to a news release. The initiative is designed to encourage entrepreneurs to stay in the area and build on the region’s healthcare landscape.
The new fund was announced at the Philly Startup Leaders Founder Factory conference this week. The move underscores a broader trend of public-private partnerships to stimulate healthcare business development.
Each of the fund partners contributed $2 million to the fund. They will also be responsible for sourcing potential companies for investment and provide guidance and support to these seed stage companies, the news release said.
Startups will be evaluated based on criteria such as the quality of their business model, their technology’s viability, and the management team’s vision. The size of the investments will span $50,000 to $1 million.
Ben Franklin Technology Partners SEP, an initiative from Pennsylvania’s economic development arm, will manage the fund and lead the due diligence process for companies of interest. The fund will be open to other investors, but they will be required to make matching investments in each round.
Early stage funding can be tough to come by for startups so area entrepreneurs will welcome the new fund. Ben Franklin Technology Partners SEP has made several health IT investments at the early stage such as Life.io and Arcadian TelePsychiatry. Independence Blue Cross is a partner with Dreamit’s accelerator program to nurture healthcare startups and is part of the selection committee for selecting applicants for the University City Science Center Digital Health Accelerator.
Four years ago, the City of Philadelphia launched a $6 million seed stage fund called StartupPHL Seed + Angel Fund managed by First Round Capital which invested backed 10 area companies, including medical device business Velano Vascular. Most of the investments were technology-focused.
Although Safeguard’s investment strategy tends to revolve around investments in companies at the Series A and B round stage, it has backed early stage companies before, noted Safeguard Principal David Luk in emailed responses to questions. In September, Safeguard led a $750,000 seed round for software company MedCrypt, which supports medical device security. Safeguard also participated in an early stage round for population health software business Noble.MD. Health IT businesses represent approximately one-third of the investment firm’s portfolio companies.