Flare Capital Raises its “Series C”

Today we announced the closing of Flare Capital’s third fund with a total of $350 million of committed capital. Typically, when our portfolio companies raise their Series C rounds, they have established product / market fit which feels quite relevant to us now. The narrative around the transformation of the business of healthcare being a source for new company creation is profoundly compelling, even more so in light of the pandemic.

This fund is quite a bit larger than our prior fund and was well-above the initial target. We are quite pleased by the reception from both our existing and new investors, which reflects a high level of interest in this extraordinary market opportunity. Industry dynamics today demand innovative business models and novel technologies that will leverage advanced analytics and mobility to enable value-based healthcare. The overarching pressures for better outcomes at lower costs will create important and valuable new companies.

An important dimension to our story, and that we believe is an asset for our entrepreneurs, is the composition of our investor base. A significant amount of the capital is provided by strategic investors representing leading provider systems, national and regional payors, healthcare retailers, device companies, lab operators, and pharma companies. Our portfolio companies have sold several hundred million dollars of products and services to these investors. The majority of the capital comes from sophisticated endowments, family offices, sovereign wealth funds, and other financial institutions, many of which have been active co-investors in our portfolio companies. The diversity of our limited partners underscores the broad appeal of the sector and the potential to build significant new companies.

When we started the firm in 2014, over $4.5 billion was invested in healthcare technology companies; in 2019, when we raised our prior fund, $8.1 billion was invested. Arguably, in part due to the pandemic exposing such significant issues, nearly $29.1 billion was invested in the sector in 2021. Notwithstanding that the 1Q22 amount of $6.0 billion suggests a more moderate investment pace for 2022, this year will also see an extraordinary level of activity, likely to be ~60% greater than 2020, which was the second strongest year for digital health investing. A decade ago, healthcare technology was less than 5% of all venture capital activity; now it is trending to be ~10% of all venture investments.

And the adoption of healthcare technology solutions is accelerating. Many companies launched over the last five to ten years can now point to measurable impact on outcomes and costs. Companies more often than not are able to claim real attribution for the successes of their products and services; that is, they are able to calculate an ROI with actual data. Robust and scalable business models exist and are now better understood (product development timelines, successful “go-to-market” strategies, revenue models, etc). The sector is reaching an important threshold level of maturity.

While this is an important milestone for Flare Capital, we will continue to be heads down assisting our entrepreneur partners to build important and valuable healthcare technology companies. Even in light of recent public stock volatility and troubling geopolitical issues, the next few years promise to be terrific vintage years for healthcare technology investors. We are excited to play a small role in this sector’s future successes.