Why Partners HealthCare invested $80M in 2 new funds to fuel future growth

On Oct. 21, Boston-based Partners HealthCare launched two new investment funds that support the health system's continued innovation.

Partners Healthcare Innovation's initial fund grew from $35 million when it launched in 2008 to $171 million this year, including 37 portfolio companies and spin-offs. The new funds focus on life sciences, artificial intelligence and digital technology development.

The Partners HealthCare Artificial Intelligence and Digital Translation Fund has initial funding of $30 million over five years and the Translational Innovation Fund was launched with $50 million over six years. The new funds are very different, and Roger Kitterman, vice president of venture at Partners Healthcare Innovation, sees them both adding huge value to the health system and patient care.

The TIF was developed to help companies with the last leg of funding between research discoveries in the lab to commercialization. Life sciences companies, including medical devices or drugs, make funding sources available to prove the initial idea viable, but often don't have access to funding to complete the precommercial work in product development for patients.

"It's really that last mile between the discovery and commercialization that we see in our research and innovation centers that needs additional resources so these ideas can be developed as products for patients," said Mr. Kitterman. "Some of the funding goes toward technology development and some goes to the business side."

The TIF was designed to invest in projects that begin in Partners' labs and are ready to move to market; the AIDIF, on the other hand, invests in both internal and external startup ideas. This is Partners' first foray into external investment, and it is looking for technologies developed by small, early-stage companies that could improve the patient experience, patient care or health system operational efficiency.

"We have been working with companies in this space for a long time, but we haven't had an opportunity to put our money to work at that," said Mr. Kitterman. "We are looking to co-develop products with these companies to make sure it's right for the kind of clinical applications we see. The AI and digital fund allows us to do that."

With the AIDIF, Partners is looking for companies to develop a deeper relationship with; the ideal company would offer products that could be used at one or more Partners hospitals and the system would help pilot or co-develop the technologies. Partners is also looking for opportunities to license to the companies and add to their investment pool down the line.

"We are looking for technologies that will improve patient care, patient experience and the efficiency of operations to bend the cost curve," said Mr. Kitterman. "It would start with the process we have had in place for a long time, where we work with our digital leadership to identify companies that are a specific fit for this fund and then start having conversations."

The health system built its initial investment team with experts in investment capabilities; the next capability it's looking to add to the team is individuals that can help deliver on the projects. Over the next two years, Mr. Kitterman and his team plan to build out the team to include people with experience in operational success and launch the first few projects for the funds.

"These are long term investments," he said. "They take time to develop. We have the long game in mind and want to start executing on these projects. It will take a few years before we know how successful we've been, and we are building on our success from the past few years."

Partners hopes to replicate the success it had with Partners Innovation Fund investing in companies like Health Catalyst, which launched its IPO in July. The innovation fund initially partnered with Health Catalyst when it was a small company and over several years became a customer, co-developer and licensor to the technologies. Realizing similar success with additional innovative companies and ideas is an important part of the health system's overall strategy for success.

"The funds originate from Partners Healthcare," said Mr. Kitterman. "We make investments and the idea is that if the investments are successful, they will return to refresh the fund and return resources to the hospital so we can do more on the patient care side as well. After getting past the research side, commercialization is a necessary step for reaching the patient and we are trying to accelerate that process."

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