Previously, CVS Health has made more than 20 investments in companies like LumiraDx (a diagnostic health startup) and Unite Us (a health tech startup focused on health care and social service workers). “Forming CVS Health Ventures will build on our successful track record of scaling innovation and driving change in health care,” said Karen S. Lynch, president and CEO of CVS Health.
While CVS Health has not disclosed detailed investment criteria, history offers a guide. In addition to LumiraDx and Unite Us, CVS Health has invested in HealthEdge and Quest Analytics. HealthEdge, a startup business founded in 2004, offers health benefits administration software. Based in Wisconsin, Quest Analytics is a startup company that helps health plans manage their provider network.
CVS Health Ventures Team
Even though a large company backs the venture capital fund, the fund has a small team. As of May 2021, the investing company has five employees. Jason Hawbecker, co-founder and managing partner of CVS Health Ventures, has a long history in corporate development and M&A (merger and acquisition) investment banking. Michael Pimental, a partner in CVS Health Ventures, played a role in the $70 billion acquisition of Aetna in 2018. VJ Patel, partner and co-founder of CVS Health Ventures, joined CVS in 2015. Before CVS Health Ventures, Patel played a role in the CVS Health talent program by setting up the CVS digital leadership program. The leadership program is aimed at attracting early career technology professionals to CVS. Before joining CVS, Patel worked at Bain Capital and H.I.G. Growth Partners.
Health Tech Investing
In the world of venture capital, a $100 million venture capital fund is not the largest. However, there is good reason to believe that the corporate investment fund will grow over time. In 2020, CVS generated $268 billion in total revenue, an increase of $11 billion over 2019. The company has also achieved consistent profits: $7.1 billion in 2020 net income, up from $6.6 billion in 2019. With a multibillion-dollar profitable parent company, CVS Health Ventures may double or triple its investing portfolio over time as the health tech business continues to grow.
Even with the resources of CVS Health, the new venture capital business unit has significant competition. Data from Deloitte indicates that $14 billion in venture funding went to the health tech business in 2020, compared to $4.6 billion in 2016.
Non-traditional investing is helping to drive the growth in health tech investing. For example, Optum Ventures, a venture capital business unit launched by UnitedHealthcare Group in 2017, started with a $250 million investment fund. Optum Ventures has invested in Dispatch Health (a Colorado startup company with more than $400 million in funding) and MindStrong Health (a mental health startup company founded in 2014). Beyond the corporate world, large healthcare organizations are getting involved in startup business investing. Johns Hopkins Technology Ventures, affiliated with Johns Hopkins University, has helped more than 100 startup companies to grow since 2014.
About the Author
Bruce Harpham is an author and marketing consultant based in Canada. His first book "Project Managers At Work" shared real-world success lessons from NASA, Google, and other organizations. His articles have been published in CIO.com, InfoWorld, Canadian Business, and other organizations. Visit BruceHarpham.com for articles, interviews with tech leaders, and updates on future books.