Term Sheet — Wednesday, March 6


Medicine and money can be a dangerous combination. The rapid rise of health system venture capital funding is surfacing some thorny ethical dilemmas, according to a Healthcare Dive investigation.

We recently noted that corporate investment funds broke records in 2018. (Corporate venture capital refers to the type of funding where corporations buy into startups through an investment arm.) More specifically, deals involving at least one healthcare provider-linked corporate VC fund totaled roughly $1.3 billion last year, a record high nearly triple the amount recorded five years prior, according to PitchBook. To put that number in context, deals involving hospital-affiliated VCs were mustering less than $50 million in total value in 2008 and 2009 combined.

Here’s where it gets tricky — is it possible for health systems to properly separate clinical and investment decisions along with general policies designed to prevent improper influence from their corporate VC arms? A new article in Healthcare Dive explores the slippery ethical situation that could surface conflict of interests when a health system’s hospitals adopt products from companies backed by the affiliated VC.

The investigation brings up one private medical device startup as an example. Gauss Surgical has raised more than $50 million in venture funding and its backers include 10 nonprofit health systems. Sixteen of their hospitals use the flagship device in clinical practice.

At one of those hospitals — St. Joseph Hospital in Orange County, Calif. — 10 physicians signed a letter to the hospital’s chief medical officer to voice their concerns about whether the device improved patient outcomes and whether its use was influenced by the hospital chain’s investment. (The hospital is owned by Providence St. Joseph, which invested in Gauss through its VC arm, Providence Ventures.)

"We suspect that their use has been mandated by the health system due to investments made by the Providence Venture Capital Fund, and that the insistence that they be used has more to do with ensuring a return on investments than with improving patient care," the doctors wrote, according to a copy of the letter obtained by Healthcare Dive.

The issue is much thornier than what I've summarized from the story above, but it’s an important one considering that non-profit systems are beginning to establish VC arms at a rapid rate. Several ethicists interviewed for the story told the reporter that they were unaware of any published or ongoing studies examining hospital-affiliated VCs and the ethical questions surrounding the capital they deploy.

"That is an issue of institutional conflicts of interest, which is, frankly, completely unsolved in general in healthcare," Steven Joffe, a bioethicist at the University of Pennsylvania, told Healthcare Dive. "We don't have clear-cut mechanisms to make sure institutional conflicts of interest are navigated well."

And that is troubling.

Read the full investigation here.

THE GENDER GAP: Silicon Valley Bank released its annual Women In Technology Leadership report this morning. It surveyed tech and healthcare executives and founders in the US, the UK, China and Canada, and concluded that “we must do better.” Here are a few interesting insights:

28% of startups have at least one woman on the founding team.
The gender of the founder often determines women's roles at the company. Just 5% percent of startups with only men on the founding team have a female CEO, and they are much more likely to have women leading HR and marketing.
56% of startups have at least one woman in an executive position, and 40% have at least one woman on the board of directors.
Startups with at least one female founder are more likely to engage with small investors.
59% percent of startups have programs in place designed to support gender diversity, the highest percentage SVB has seen since the report's inception in 2014.

FULLY VESTED: Goldman Sachs is loosening its dress code for all employees. Goldman CEO David Solomon has been on the job for several months, and he’s already shaking things up at the investment bank. Solomon — who is also an electronic dance music DJ in his spare time  — sent a memo to the firm’s some 36,000 employees explaining that the flexibility in dress is necessary due to “the changing nature of workplaces generally in favor of a more casual environment.” More than 75 percent of Goldman employees are members of the Millennial or Gen Z generations—people born after 1981.

Some of this has happened organically as we’ve seen the rise of the infamous fleece vest. (I’m wearing one as we speak, but that’s beside the point). Last year, The Wall Street Journal did a quasi-investigative piece on how the gray fleece zip-up vest became America's corporate uniform. A 25-year-old investment banker said, "Now it's the new thing: It's not suspenders and a bengal-striped shirt. It's a Patagonia vest and a button-down shirt." The banker rotates through the vests during the week, unless he’s meeting with a client, in which case he wears a suit.

HI, SXSW: I’m leaving for Austin tomorrow morning to attend South by Southwest, so if you’re in town, say hi after my panel on Friday. If you won’t be there, I’ll be documenting it all on my Twitter account here. And finally, please send all deals to my colleague Lucinda.Shen@fortune.com that you’d like to see in the newsletter tomorrow and Friday.


Grab, a Singapore-based ride-hailing company, raised approximately $1.5 billion from the SoftBank Vision Fund.

Wefox Group, a Germany-based insurtech startup, raised $125 million in Series B funding. Mubadala Ventures led the round, and was joined by investors including Creditease.

Eargo, a Mountain View, Calif.-based hearing aid maker, raised more than $52 million in Series D funding. Investors include New Enterprise Associates, the Charles and Helen Schwab Foundation, Nan Fung Life Sciences, Maveron and Future Fund.

Matterport, a platform that enables users to create cloud-based 3D and virtual reality models of real-world spaces, raised $48 million at a $325 million valuation, according to TechCrunch. Investors were not named. Read more.

Pie Insurance, a Washington D.C.-based provider of workers’ compensation insurance directly to small businesses, raised $45 million in Series B funding. Investors include SVB Capital, Sirius Group, Greycroft, Moxley Holdings, Aspect Ventures, and Elefund.

Pantheon, a website operations platform for marketers, raised $40 million in Series D funding. Sageview Capital led the round, and was joined by investors including Foundry Group, Scale Venture Partners, and Industry Ventures.

Fictiv, a San Francisco-based builder of hardware products, raised $33 million in Series C funding. G2VP led the round.

FutureFuel.io, a Boston-based technology provider of student debt employer benefits solutions, raised $11.2 million in Series A funding. Rethink Impact led the round, and was joined by investors including Breton Capital, First Data, G9 Ventures, The Impact Engine, Reach Capital, Salesforce Ventures, SixThirty, and Vulcan Capital.

Brodmann17, an Israel-based developer of an architecture code for pedestrian detection, face detection, and other tasks, raised $11 million in Series A round funding. OurCrowd led the round, and was joined by investors including Maniv Mobility, AI Alliance, UL Ventures, Samsung NEXT, and the Sony Innovation Fund.

Alto, a Nashville, Tenn.-based platform that helps investors add alternative assets to their IRAs, raised $2.8 million in seed funding. Byron Smith, managing director at Mountain Group Partners, led the round, and was joined by Foundation Capital, Sequoia’s Scout Fund and Amplify.LA.

OpenMartech (previously ZIO), a provider of an open-source marketing platform that provides intelligence-driven solutions for retailers, raised $1.5 million. Investors include Elevate Ventures, The IU Philanthropic Venture Fund and the Innovate Indiana Fund.

SYNQY Corporation, a Pleasant Hill, Calif.-based brand engagement platform, raised $1.2 million in funding. The investors were not named.

Max-bone, a Los Angeles and New York-based pet label, raised Series A funding of an undisclosed amount. Colle Capital led the round, and was joined by investors including Cooley LLP.


Secura Bio Inc, a Henderson, Nev.-based biopharmaceutical company focused on oncology therapies, raised $145 million in funding, from Athyrium Capital Management LP.

Beam Therapeutics, a Cambridge, Mass.-based biotechnology company developing precision genetic medicines through base editing, raised $135 million in Series B funding. Investors include Redmile Group, LLC, Cormorant Asset Management, GV, Altitude Life Science Ventures, F-Prime Capital, ARCH Venture Partners, Eight Roads Ventures, and Omega Funds.

Erasca, a San Diego-based cancer drug developer, raised $64 million in Series A funding. Investors include ARCH Venture Partners, Andreessen Horowitz and Reneo Capital.


KKR acquired BrightSpring Health, a Louisville, Ky.-based home and community-based health services provider, for approximately $1.32 billion, with an affiliate of Walgreens Boots Alliance Inc serving as a minority investor. As part of the deal, BrightSpring has merged with KKR portfolio company PharMerica, a pharmacy services provider.

Cinven agreed to acquire INSEEC U, a France-based institution of private higher education and research. Financial terms weren't disclosed.

Cologix, which is backed by Stonepeak Infrastructure Partners, acquired Metro Optic, a Montreal-based infrastructure provider. Financial terms weren't disclosed.

Behrman Capital made an investment in Emmes, a Maryland-based healthcare contract research organization. Financial terms weren't disclosed.

Berkadia acquired Central Park Capital Partners, a New York-based real estate capital advisory firm. Financial terms weren't disclosed.

Polytek Development Corp, which is backed by Arsenal Capital Partners, acquired BCC Products Inc, a Franklin, Ind.-based provider of specialty tooling, mold making and casting polymers. Financial terms weren't disclosed.

Abrigo, a portfolio company of Accel-KKR, acquired Farin Financial Risk Management, a Wisconsin-based provider of enterprise risk management solutions. Financial terms weren't disclosed.

Tyto Athene, a portfolio company of Arlington Capital Partners acquired Island Information Technology Consultants Inc, a provider of mission-critical unified communications solutions to the intelligence community. Financial terms weren't disclosed.


Cognizant acquired Meritsoft, a Dublin, Ireland-based financial software company. Financial terms weren't disclosed.


PolyPid, an Israel based maker of drugs that prevent surgical site infections, withdrew its $75 million IPO. The firm previously planned to offer 3.3 million shares priced between $21 to $24. Goldman Sachs, Cowen, and Cantor Fitzgerald were underwriters. It planned to list on the Nasdaq as “POLY.” Read more.

EHang, a Chinese drone maker, is planning a U.S. IPO for 2019 that could raise between $400 and $500 million, Reuters reports citing sources. Firms including GGV Capital have funded the firm. Read more.


Fleetcor Technologies Inc agreed to buy Nvoicepay Inc, a Beaverton, Ore.-based provider of cloud software that automates payments for suppliers. Financial terms weren't disclosed. Nvoicepay had raised approximately $22 million in funding from investors including Napier Park Financial Partners, Mosaik Partners, Silicon Valley Bank, and Women’s Venture Capital Fund.

One Equity Partners agreed to buy Walterscheid Powertrain Group, a Lohmar, Germany-based maker of shafts, gearboxes, attachment systems, clutches and other parts for off-highway applications, from GKN Ltd. Financial terms weren't disclosed.

Wind Point Partners and Wellspring Capital Management agreed to acquire Paragon Films, a Broken Arrow, Okla.-based manufacturer and supplier of stretch film products, from Wind Point.


Summit Partners, a Boston-based private equity and venture capital firm, raised $4.9 billion for its 10th growth equity fund, Summit Partners Growth Equity Fund X.

Wavecrest Growth Partners, a Boston-based private equity firm, raised more than $190 million for its debut fund.


Partners Capital promoted Elizabeth Trotta and Adam Watson to managing director.

Route 66 Ventures promoted Pat Wilson to partner.

Greg Rosen joined Bedrock as a partner. Previously, he was a principal at Benchmark.

Owl Rock Capital Group hired Pravin Vazirani and Erik Bissonnette as co-portfolio managers. Previously, Vazirani was a managing director at Menlo Ventures, and Bissonnette was a managing director at CapitalSource.

FinTech Collective promoted Sean Lippel to principal.

Nick Bell and Ashlyn Gentry have joined Human Ventures as managing directors.


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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.

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