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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

SEMCAP has launched SEMCAP Health, dedicated to high-growth health tech and tech-enabled health care services businesses, the Philadelphia-based firm tells Sarah.

Driving the news: With two deals already under its belt, SEMCAP Health is in the market with a $400 million target for its inaugural health care growth equity fund, says managing partner Brett Moraski, who heads the investment team alongside Victor Kats.

Details: SEMCAP Health, one of three impact-driven strategies at SEMCAP, targets businesses that leverage technology to advance health care quality, affordability, health equity and access. 

It takes minority or majority ownership positions, targeting businesses that are profitable or near profitable.  

Its typical check size is up to $50 million, but the firm can go up in size with co-investments.

SEMCAP Health anticipates a first close early next year for the vehicle. 

The backstory: SEMCAP Health stitched together a roster of experienced investors and industry advisers, with track records as operators and leaders within health care's various key constituents: health systems, managed care and payers, pharma services and the government.

Moraski was most recently an operating partner at Frazier Healthcare Partners, and he previously led strategic investing and corporate development activities at WellPoint (now Anthem) and Highmark Blue Cross Blue Shield.  

Kats is a former leader at Ascension Ventures, the strategic venture capital arm of Ascension, one of the country's largest health systems. Before that he led corporate development at Allscripts.

The chairman of SEMCAP Health, Ralph Muller, is the former CEO of the University of Pennsylvania Health System.

What they're saying: Meshing strategic market insights with the traditional investor playbook, SEMCAP Health is positioned to help proven businesses at inflection points to scale and navigate the complexities of the health care ecosystem, Moraski says. 

Its bench of investors and nine operating partners know firsthand the pain points and how to transform midsize businesses into market leaders, he says. 

SEMCAP Health investors and partners were "oftentimes the partners and customers of these companies we're [SEMCAP Health] targeting."

Catch up quick: SEMCAP Health has made two pre-fund investments.

NeuroFlow, a Philadelphia-based provider of behavioral health integration technology, collected $25 million in growth capital led by SEMCAP Health in October.

SafeRide Health, which leverages technology to support on-demand nonemergency medical transportation, raised undisclosed Series B funding in November led by Sands Capital alongside SEMCAP Health and others. 

What's next: SEMCAP is eyeing companies applying disrupting technologies across various health care themes, Moraski says, including:

Workforce optimization support and technology in the clinical care setting to address labor challenges.

Moving care from institutional settings into more cost-efficient settings like ASCs or the home. 

Member patient engagement with health care payors to improve decision-making and access to care. 

1 big thing: SEMCAP Health debuts

Illustration of a sack of money with a medical cross symbol on it.

Women's health tech is poised to be in the spotlight with midterm elections looming and abortion care under attack, industry experts tell Erin. 

"A ripple effect of Dobbs is honing a light on the women’s digital health industry, even beyond abortion," says Goodwin partner Delphine O'Rourke. 

Why it's the BFD: Venture leaders, investors and entrepreneurs are responding to the Dobbs ruling and preparing for the upcoming election in a handful of ways. 

Virtual-first primary care and other in-home or remote services are gaining steam as women delay in-person care because of fear of criminal prosecution. 

There's been an explosion of venture capital interest in women's digital health, with the formation of new VC groups — such as VCs for Repro, which launched today — with an exclusive focus on abortion rights, maternal health and reproductive care.

Increased awareness around data privacy is prompting data-tracking companies — especially those that manage menstrual cycles and other fertility-related information — to reevaluate their privacy policies.

Yes, and: There has been a proliferation of women's health startups spanning the DTC and B2B realms, offering cash-based and insurance-covered reproductive health services.

More virtual-first women's care companies targeting women earlier in life, such as mental- and reproductive health-focused Caraway, which recently debuted with $10.5 million in seed funding.

Zoom in: RH Capital managing director Elizabeth Bailey says many entrepreneurs are now focusing on "engaging women earlier."

"When it comes to contraceptive deserts — this is where digital health is going to shine in terms of expanding access," Bailey adds. 

The other side: Some stakeholders, including pharmacists and providers, are responding to legal concerns by pulling back or refusing to fill prescriptions, citing issues with potentially aiding and abetting abortion care. 

State restrictions on abortions are even leading some airline executives to mull their potential role in aiding and abetting abortion care, says O'Rourke.

What they're saying: Investors tell Axios their plan for the women's digital health sector is simple: The more restrictive laws get, the more money they'll inject into the area.

"We’re funding solutions that’ll democratize women’s health and sexual health and I think we’re leaning into areas we might not have leaned had there not been legislation curbing these things," says Amboy Street Ventures founding partner Carli Sapir, who recently invested in telemedicine abortion care provider Hey Jane.

Sapir says abortion access is one of Amboy Street's focus areas, meaning every limited partner affiliated "is comfortable with that." She says, "We are happy to be in headlines saying we support abortion access companies."

The bottom line: It is the best of times, it is the worst of times for women's health, and as legislative crackdowns threaten basic rights and protections, industry experts are doubling down on filling a looming care gap. 

Go deeper for detail on the numbers, the politics and what's next. 

2. The BFD: Women's health dominates midterm talk

Illustration of a caduceus over a divided red and blue background with elements of ballots.

As health tech valuations continue to fluctuate, fertility technology is top of mind at ACME, partner Aike Ho told Erin on Wednesday. 

Why it matters: The firm is weighing an investment in an unnamed fertility technology company that aims to automate the embryology process, Ho told Erin during Wednesday's Axios Pro Deals subscriber event, Axios' Claire Rychlewski writes.

Leveraging robotics, machine learning and computer vision, the company (and potential ACME investment) aims to curb human errors that Ho says occur often during the embryology process.

What they’re saying: “My wife and I will probably go through this process sometime next year or the year after that,” Ho said. 

“And the result that we're going to get may vary on whether or not the embryologist had too much coffee in the morning and has the shakes," she added.  

State of play: ACME's potential investment would come amid a volatile, less generous health care technology market. 

“We’re not in the 2021 crazy momentum world anymore,” Ho said. “Prices have definitely rationalized on the growth side.”

“Series A's are no longer your $75 (million), $100 million post-money valuation,” Ho said, noting early-stage valuations have dipped 30% to 50%.

“You don't see people investing now in pre-launch, pre-revenue companies at the Series A with, like, a $25 million round,” she added.

The question: Will the already-volatile funding market be compounded by reproductive rights policy changes when it comes to investing in women’s health tech?

As Erin noted in her piece on midterm elections and women's health, dealmakers are preparing for various scenarios around abortion access.

“On the women's health side of things a lot of the funding that has happened — at least of the companies that I know of — happened in 2021,” Ho said. 

Their next fundraises will determine whether the macropolitical environment has chilled or fueled valuations, Ho said.

The intrigue: Ho predicts aggressive M&A from payors like UnitedHealth Group and Cigna in the coming years, particularly as valuations have come crashing down to earth.

“They’re sitting on a ton of cash on their balance sheet and now they could go hunting and buy companies on the cheap, versus 2021 valuations,” she said.

3. ACME's Aike Ho eyes fertility investment

Illustration of a pregnancy test with a dollar sign appearing on the screen.

WindRose Health Investors acquired Trevose, PA-based Bank's Apothecary, merging it with the firm's existing behavioral health pharmacy platform Terrapin Pharmacy and Ganse Apothecary. https://banksapothecary.com/

Verity Acquisition, a health care SPAC led by Bing Lin (Protocol Asset Management), withdrew registration for a $175m IPO. https://axios.link/3Drqza6

4. Deals o' the day

Stacey Seltzer joined Gurnet Point Capital as a partner. She previously was with Aisling Capital. www.gurnetpointcapital.com

Whoop named former Hims & Hers chief medical officer Patrick Carroll its chief medical officer.

5. It's Personnel

💀 Sarah watched two documentaries this week on the catastrophic Woodstock '99 festival and is simply... horrified. 

🙏🏻 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Brad Bonhall. Please ask your friends and colleagues to sign up.

November 03, 2022

1 big thing: SEMCAP Health debuts