Heritage Group, a venture-capital firm specializing in the health-care industry, has completed the first two investments in its new Heritage Healthcare Innovation Fund Limited Partnership, with real-time location systems (RTLS) provider Awarepoint receiving $7.5 million from the fund’s total account of $157 million.
According to Paul Wallace, the Heritage Group’s managing director, the investment in Awarepoint signals the fund partners’ interest in the benefits that RTLS technology provides to the health-care industry. In addition, he says, the ZigBee-based RFID solution offered by Awarepoint made it a desirable choice for RTLS end users, since the system is less expensive to install than many others, and is less likely to pose an interference problem with existing communication systems, such as Wi-Fi.
The Heritage Healthcare Innovation Fund was established in January 2011, to identify and finance innovative businesses that deliver improved quality, service and efficiency for the health-care market, and to develop companies focused on solving problems identified by investors. The fund is also intended to enable its investors to benefit from the commercialization of innovative solutions they have been developed internally, through the development and launch of new companies. Its nine limited partners include some of the United States’ leading hospital systems and health-care companies, which provide guidance to the fund’s managers via four advisory committees: clinical, technology, finance and operations.
The fund’s participants, Wallace says, intend to invest up to $15 million apiece in 10 to 15 companies that provide not just a financial return, but strategic benefits for the funds’ limited partners, six of which operate hospitals. “We have a diverse group of investors,” he states. The four latest partners are home health-care and hospice company Amedisys, pharmaceutical and medical product firm Cardinal Health, insurance company Health Care Service Corp. and Memorial Hermann Healthcare System. The other investors are Community Health Systems, Iowa Health System, LifePoint Hospitals, Trinity Health and Vanguard Health Systems.
To date, Wallace reports, the fund’s four advisory committees have examined 500 businesses and their product offerings. The committees include members of each of the nine partner companies, who send recommendations to an investment committee consisting of fund managers and the partner firms. Thus far, the fund recipients are Awarepoint and data-management company Explorys.
“What’s critical to our process,” Wallace says, “is, ‘What do our limited partners need?'” The committee was just as interested in strategic benefits as those that would simply save money, he notes. “RTLS has been proven in the near term, with a validated ROI.” When it comes to seeking innovative solutions, he adds, “I know people often think in terms of futuristic services with soft ROIs that could be three, four or five years.” However, Wallace says, RTLS provides a shorter return on investment and real benefits—not only by locating assets, but also by tracking patients and workflow.
Awarepoint’s technology, Wallace says, is unique, in that it employs a ZigBee-based mesh network, allowing a comparatively simple installation. With Awarepoint’s aware360° Suite for tracking assets, patients or workers, he explains, users can install 2.4 GHz sensors, which simply plug into wall outlets and transmit over an independent network that should not interfere with Wi-Fi networks.
The investment money will help Awarepoint develop its technology for enterprise-wide solutions, according to Matt Perkins, Awarepoint’s CTO, though he declines to provide specific plans.
“As with any growing company, we are trying to keep up with demand,” Perkins says, noting that the Heritage Group funding “will help us stay ahead of that.” Awarepoint, he adds, had traditionally had its finger “on the pulse of the market.” A few years ago, Perkins reports, most interest was in asset tracking, while Awarepoint developed a workflow solution that is used in operating units, for example, to manage every room, including when patients enter for surgery and leave, thereby enabling hospitals to better manage their surgical scheduling, patient care and operating room use. “Now, people see significant value in workflow management,” he states. Recent Awarepoint customers include the Royal Wolverhampton Hospitals National Health Service (NHS) Trust, located in England (see Royal Wolverhampton Uses RTLS to Manage Assets, People, Hygiene).
Simultaneous to receiving $7.5 million from the Heritage Group, Awarepoint was also awarded an additional $6.5 million in funding from its existing investors, including Kleiner Perkins Caufield & Byers, Cardinal Partners, Venrock, Jafco Ventures, Avalon Ventures, New Leaf Venture Partners and Top Tier Capital Partners (see RFID News Roundup: Awarepoint Secures $27 Million in New Financing).
“We plan to stay ahead of the market, and we will use the funds to do that,” Perkins says, adding that his company intends to focus on hardware improvements, software enhancement and maintenance services. The Heritage Group, he says, indicated that it selected Awarepoint for investment not just because of the ZigBee-based hardware, but also because it provided an enterprise-wide solution, supplying hardware, software and maintenance, while many businesses offered only hardware or software.
With the investment, a Heritage Group representative has also been appointed to Awarepoint’s board. Having a Heritage Group member on the company’s board, Perkins says, will help Awarepoint remain connected with the industry’s needs.
During the next five years, Wallace says, the Heritage Group plans to continue dispersing its investment money to other companies offering desirable innovations.