Goodwin’s Digital Health team sat down with Co-Founder and General Partner, Michael Greeley of Flare Capital, and discussed collaboration across the healthcare industry, emerging and current trends, and why they, like so many others, have chosen Goodwin as their trusted counsel.
We are starting to see venture capital firms partner with health systems and healthcare providers to conceive new businesses together versus doing more traditional investments in healthcare startups. How is Flare Capital collaborating with other key players in the healthcare industry to “co-create” new companies?
Flare Capital is excited to be at the forefront of this trend where we can invest in new companies that are not pure startups, but are rather businesses or assets developed in high-quality settings and in many cases are purpose-built to solve pressing strategic problems. In these transactions, we typically partner with a health system or payor in the founding and initial financing of the new business, outside of the corporate setting in which it was conceived.
Co-creation offers a set of unique monetization opportunities. With co-creation, we are co-investing with highly qualified partners leveraging strong relationships and chemistry, compared to the traditional model in which you meet compelling entrepreneurs in a highly competitive environment, bidding for assets that may not be well-built or developed and may never be.
In a more traditional model, entrepreneurs often struggle with access to capital, early customer validation and recruiting of key talent. In the co-creation model, there is a quality to the asset that has been developed, you have a differentiated and validating initial launch customer, we provide the capital and do all of the recruiting. As a result, we are often able to attract exceptionally high-caliber management teams to these co-created businesses. Having said that, we need to be convinced the co-created company will go on to be broadly applicable and an industry utility for many other customers.
In some ways, we are flipping the traditional process on its head. In most cases, venture capitalists look to identify the entrepreneurs and founders, then give them capital so that they can build the product. In this model, the product is mostly built at the outset, and then we provide the capital and find the people.
Do you see this emerging trend persisting in healthcare?
The healthcare industry is enormously complicated. The greatest investment risk we typically take centers around product/market fit, and this approach helps to address that concern. We want to continue to invest in companies that improve the quality of healthcare with maximum impact and lower the cost of care while providing better health outcomes. Other companies have heard of this approach to building new innovative companies and have reached out. So, yes, we expect to pursue this model and to see others seek to replicate it.
Co-creation offers a qualified set of assets, where the “voice of the customer” is front and center in telling us what they need. This early market feedback allows us to strategically build a company that aligns with customer needs.
Of course, we need to do a meaningful amount of diligence to ensure we are creating a broad enough product to service an expanded customer base, not just for the initial sponsoring partner.
Why did you turn to Goodwin?
To structure and execute these deals and develop these co-created businesses successfully, Flare Capital needs to lean on service providers more than in our traditional venture deals. Goodwin in particular has helped us tackle a number of issues across various sectors that come up during transactions. There is a greater degree of complexity around these deals, including complicated governance, tax, antitrust, healthcare regulatory, intellectual property and licensing issues. All of this needs to be handled by experienced and trusted counsel.
Flare Capital turns to Goodwin because they are able to pull all of these resources together quickly and help us think through the issues. They are a true partner, and our teams work so seamlessly together and often on these deals that we can practically finish each other’s sentences.
Goodwin’s teams understand the model and we know how they are going to think about various issues at hand, which helps remove friction from the process. Speed to close is critical in this environment.
About Flare Capital Partners
Flare Capital Partners strives to help build significant healthcare technology, digital health and healthcare services companies to improve health outcomes and broaden access while lowering costs of care. We partner with inspirational entrepreneurs who seek to transform the business of healthcare by developing innovative and impactful products and services. Flare Capital is a team of proven healthcare technology investors and senior operating executives known for thought leadership and unparalleled strategic industry resources. Our firm has raised some of the industry’s largest dedicated venture capital funds focused on early stage opportunities in healthcare technology innovation. We are full lifecycle investors in our portfolio companies as we support and work alongside entrepreneurs over their entire company-building journey. Learn more at Flare Capital Partners and follow us on Twitter @flarecapital.
This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.