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Health tech fund raises $800 million as COVID speeds up change in the medical industry

April 14, 2022, 3:34 PM UTC

It was already well underway prior to COVID—the wave of innovation in health tech, that is. But no one could have convinced so many people so quickly that visiting their doctor on the other end of a phone screen was a good idea.

Take April 2020, for instance. The number of patients doing virtual office visits or outpatient care rose by 78 times the levels in February, according to McKinsey

COVID “advanced what normally would have taken 10 years of telehealth growth and collapsed it into six months,” says Todd Cozzens, co-founder and managing partner of Transformation Capital, a growth equity firm focused solely on health tech companies.

It’s proved an opportune time for Transformation Capital—whose predecessor entity was co-founded in 2016 by Cozzens, formerly with Sequoia Capital, and Jared Kesselheim, a former Bain Capital Ventures partner—to go back to market for its third fund. The firm closed it at $800 million, and the demand was off the charts, Cozzens says.

“We could have probably raised a much higher amount—you know, $1.5 billion if we had wanted to—but we learned at Bain and Sequoia that smaller, tighter funds do better,” he says, noting that when they were raising their first fund, which was $313 million in size, limited partners were skeptical of whether digital health was a big enough asset class. 

The newfound attention on virtual medical solutions and digital technologies may feel fresh to many consumers, but Cozzens says COVID hasn’t really been a point of transformation for health tech innovation—even if it certainly has been one for adoption. Companies like TeleDoc and Livongo had already been around, and people already knew they were a more efficient alternative to traditional doctor visits. It was just a matter of getting hospitals, doctor’s offices, and patients to use them. “All of a sudden, everybody was scrambling to provide a virtual care solution,” Cozzens says.

Instead, Cozzens describes the major inflection points in health tech to be the wide use of electronic medical records, when the HITECH Act in 2009 set aside cash for doctors and hospitals to digitize their records, and The Affordable Care Act, when there was a shift to value-based care from fee-for-service reimbursement, which required computers and tracking systems to keep up with patients post-treatment.

“Healthcare has been lacking in technology virtually through its entire existence. We’ve got great CT scanners and MRIs—but from a digital software, enterprise software perspective, we were always in the dark ages,” Cozzens says.

But that’s changing. Last year, there were 79 digital health IPOs, per CB Insights, and there are now 91 unicorns in this sector. In the first quarter of this year, $10.4 billion in venture funding has poured into this space, already nearly half of what was invested the whole calendar year of 2019.

The Transformation Capital team at a dinner after closing its third fund.
The Transformation Capital team at a dinner after closing its third fund.
Courtesy of Transformation Capital

Cozzens has been part of this evolution himself. He founded and led Picis, a health information services company that a UnitedHealth Group subsidiary acquired in 2010 (one of the largest health tech acquisitions at the time) and would later co-lead Sequoia Capital’s healthcare investing. But he left Sequoia wanting to start a firm that would put all of its resources into the single sector. In his perspective, it needed—and warranted—its own attention.

“Healthcare is so complex. The reimbursement system, the 49 regulatory bodies that govern healthcare, how payments work… The dislocations and the disenfranchisement and the inequity make it a very complex area to invest in,” Cozzens says.

Cozzens has been building out the team at Transformation Capital over the past few years, hiring Julie Murchinson, former CEO of health tech network and conference company Health Evolution as partner near the end of 2020. Cozzens’ former Sequoia Capital colleague Mike Dixon joined the firm at the end of 2019.

The team has evaluated more than 5,000 health tech companies to land on the 30 or so startups currently in its portfolio, which include Mint.com founder Aaron Patzer’s new health tech venture Vital, and medical staff matching solution CareRev, which was founded by a former trauma nurse. 

With a fresh bout of capital, you can expect the firm will be adding more to the mix shortly.

Thanks for reading. Term Sheet is taking the day off tomorrow, alongside the stock market, so I’ll see you next week.

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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VENTURE DEALS

- Tata Power, a Mumbai-based electric utility company, plans to raise $525.8 million in funding from BlackRock Real Assets and Mubadala Investment Company

- Kpler, a Brussels-based data, analytics, and market insight provider, raised over $200 million in funding led by Five Arrows and Insight Partners

- Salsify, a Boston-based commerce experience management platform for brand manufacturers, distributors, and retailers, raised $200 million in Series F funding led by TPG and was joined by investors including Permira’s Growth Opportunities Fund, Neuberger Berman Funds, and Cap Table Coalition

- Wagestream, an Arlington, Va.-based wage management platform for frontline workers, raised $175 million in Series C funding led by Smash Capital and BlackRock.

- Filevine, a Salt Lake City, Utah-based legal work platform, raised $108 million in Series D funding led by StepStone Group and was joined by investors including Golub Capital, Signal Peak Ventures, and Meritech Capital

- Obsidian Security, a Newport Beach, Calif.-based SaaS security and compliance company, raised $90 million in Series C funding. Menlo Ventures, Norwest Venture Partners, and IVP led the round and were joined by investors including Greylock, Wing, and GV.

- CDR-Life, a Zurich-based cancer treatment biotechnology company, raised $76 million in Series A funding. Jeito Capital and RA Capital Management and were joined by Omega Funds.

- MedTrainer, a Las Vegas-based health care credentialing, training, and compliance management company, raised $43 million in Series B funding led by Vista Equity Partners and was joined by Telescope Partners

- Twingate, a Redwood City, Calif.-based zero trust security implementation company, raised $42 million in Series B funding led by BOND and was joined by investors including WndrCo, 8VC, and SignalFire.

- Iris Telehealth, an Austin-based telepsychiatry company for clinics and hospitals, raised $40 million in Series B funding led by Concord Health Partners and Columbia Pacific Advisors

- DoControl, a New York-based automated SaaS security company, raised $30 million in Series B funding led by Insight Partners and was joined by investors including StageOne Ventures, Cardumen Capital, RTP Global, and the CrowdStrike Falcon Fund

- Welcome Tech, a Los Angeles-based digital services platform for immigrant families, raised $30 million in funding by investors including TTV Capital, Owl Ventures, SoftBank Group Corp’s SB Opportunity Fund, Mubadala Capital, and Next Play Capital

- Shipium, a Seattle-based supply chain platform for ecommerce, raised $27.5 million in Series A funding led by Insight Partners

- Raptor Maps, a Boston-based analytics, insights, and productivity software provider for the solar lifecycle, raised $22 million in Series B funding led by MKB and was joined by the Microsoft Climate Innovation Fund.

- EvolutionIQ, a New York-based claims guidance platform for insurance carriers, raised $21 million in Series A funding led by Brewer Lane Ventures and was joined by investors including FirstRound Capital, FirstMark Capital, Foundation Capital, Altai Ventures, and Asymmetric Ventures

- Noogata, a New York and Tel Aviv-based data analytics platform for businesses, raised $16 million in Series A funding led by Eight Roads and was joined by Allon Ventures.

- DUOS, a New York-based digital health company focused on senior care, raised $15 million in Series A funding led by Imaginary Ventures and was joined by investors including Forerunner Ventures, Declaration Partners, and Optum Ventures

- Compt, a Boston-based employee perk stipend software company, raised $13 million in Series A funding led by Battery Ventures

- NODAR, a Somerville, Mass.-based 3D vision company, raised $12 million in Series A funding led by NEA and was joined by Rhapsody Venture Partners

- Tagboard, a Redmond, Wash.-based cloud production and graphics platform, raised $10.3 million in Series A funding from investors including West River Group, Spivy Private Capital, and Sports Loft.

- Union.ai, a Bellevue, Wash.-based workflow orchestration platform provider, raised $10 million in seed funding led by NEA and was joined by angel investors.  

- OFFOR Health, a Columbus, Ohio-based health care company that coordinates on-site anesthesia and specialty medical services for dental and medical offices, raised $9 million in Series A1 funding led by AXA Venture Partners and was joined by investors including SpringRock Ventures, LOUD Capital, Delta Dental, and MBX Capital

- Pictor, a Los Angeles, Calif. and New Zealand-based in vitro diagnostics company, raised $6.1 million in funding from investors including K1W1, former Morrison and Co. CEO Marko Bogoievski, and others.

- Mikuna, a Santa Barbara, Calif.-based plant-based food producer, raised $5.6 million in seed funding from angels including skateboarder Leticia Bufoni, surfer Mick Fanning, and snowboarder Sage Kotsenburg.

- Design Pharmaceuticals, a Cambridge, Mass.-based company focused on small molecule drug discovery, raised $5 million in pre-seed funding from Virtus Inspire Venture Partners

- Ugami, a financial rewards solution for gamers, raised $4.8 million in seed funding led by Harlem Capital Partners and ULU Ventures and was joined by investors including FJ Labs, Origins Fund, and Top Corner Capital

- Coginiti, an Atlanta-based collaborative data management and analytics platform, raised $4 million in funding led by Circadian Ventures.

- Loop, a crypto company providing autopay for Web3, raised $4 million in seed funding led by a16z and was joined by investors including a_capital, Alchemy Ventures, CoinList, Lauren Stephanian, Paul Veradittakit, Imran Khan, Alex Svanevik, and others. 

- Chattr, a Tampa, Fla.-based HR automation software, raised $3.7 million in seed funding from Florida Funders.

- Replan, a London-based supply chain technology company today, raised £2 million ($2.6 million) in funding led by Hoxton Ventures

- The Joy Club, a Bristol, U.K.-based community-based platform for retirees to discover events, passions, and friendships, raised £1.1 million ($1.4 million) in funding from investors including Google Maps co-founder Lars Rasmussen, Calm/Storm Ventures, Alma Angels, and other angels.

- Altogic, an Istanbul-based backend app development platform, raised $1 million in seed funding led by ScaleX Ventures and was joined by others.  

PRIVATE EQUITY

- Bregal Sagemount acquired a minority stake in PayArc, a Greenwich, Conn.-based payments technology company. Financial terms were not disclosed.

- Navacord, backed by Madison Dearborn Partners, acquired Beneplan, a Toronto-based co-op buying group for employee benefits. Financial terms were not disclosed.

EXITS

- Westinghouse Electric Company agreed to acquire BHI Energy, a Weymouth, Mass.-based project management and staffing provider to the nuclear, fossil, wind, hydro, and government energy markets, from AEI Industrial Partners. Financial terms were not disclosed.   

OTHER

- Halozyme Therapeutics agreed to acquire Antares, a Ewing, N.J.-based pharmaceutical company, for $5.60 per share. A deal would value Antares at approximately $960 million. 

- Bosch acquired Five, a Cambridge, U.K.-based autonomous vehicle development and safety assurance platform. Financial terms were not disclosed. 

- Handshake acquired Talentspace, a Berlin-based virtual and hybrid recruiting event platform in Europe. Financial terms were not disclosed. 

- PolySign acquired MG Stover, a Denver-based digital asset fund administrator. Financial terms were not disclosed. 

IPOS 

- Steinway Musical Instruments Holdings, a New York-based piano manufacturer, filed for an IPO. The company reported $538.4 million in total revenue in Dec. 2021 and reported $59.3 million in net income.

FUNDS + FUNDS OF FUNDS

- One Equity Partners, a New York-based private equity firm, raised $2.75 billion for a fund focused on mid-market technology, industrial, and healthcare businesses.

- Commonfund Capital, a Wilton, Conn.-based asset manager, raised $233 million for a fund focused on companies in the environmental sustainability sectors. 

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