Philadelphia now has a $6 million fund to back local health IT startups

Early-stage health IT startups in Philly are getting one more door to knock on for seed capital: a new $6 million investment fund focused exclusively on local startups, backed by public-private venture firm Ben Franklin Technology Partners, Independence Health Group (the parent company of Independence Blue Cross) and venture firm Safeguard Scientifics.
The official announcement will happen this afternoon during Philly Startup Leaders’ Founder Factory conference. But, for now, you should know each company will kick in $2 million to the fund, which plans to dole out its funds over the coming four years. (That is, provided it can find companies to fund. Remember what happened with the StartUp PHL seed fund’s first year?) Investments will be between $50,000 and $1 million, which is, yes, a big range. Along with the cash, young companies will receive mentorship as they grow, according to a press release.
The fund is close to finalizing its first investment, according to Safeguard’s David Luk, who’s leading the effort on the firm’s side. It’s a local company run by familiar faces, he said. (Hit us with your predictions!)
In the release, Ben Franklin President and CEO RoseAnn Rosenthal emphasized the importance of the partnership with IHG and Safeguard.
“Joining with these leaders who bring domain knowledge and expertise strengthens Greater Philadelphia’s position to support one of its most thriving technology sectors,” she said. “Such a collaboration enhances and multiplies the quality of assessment, feedback and opportunity available to the region’s digital health entrepreneurial talent, promoting development of solutions to benefit our community.”
It’s a big deal that Safeguard, the region’s veteran investment firm, is on board. Recall that the venture firm did not sign on, the way Rittenhouse Ventures and Ben Franklin did, to fund startups through the Health Care Innovation Collaborative, the wide-ranging partnership announced in 2015 that aimed to propel the region’s health IT sector.
Participation in this fund is in line with a trend we’ve been seeing in Safeguard’s moves for a while: a bigger focus on health IT over traditional life sciences companies. But even though this fund is geared toward seed-stage companies, Safeguard’s president and CEO Steve Zarrilli says the firm isn’t moving away from its usual (relatively) later-stage investments size.
“While we will always focus on our traditional ‘sweet spot’ of Series A and Series B financings, we believe that it’s also important to put a stake in the ground and allocate resources to a broader spectrum of opportunities to support the full ecosystem of innovation and entrepreneurship,” Zarrilli said in a press release.
And, Luk pointed out through a spokesman, seed-stage companies are a way to set up a pipeline for those later-stage investments.
As for IBX’s parent company, the benefit is kinda obvious: bigger and better health IT companies in the ecosystem means the Philly region continues to grow its profile as a health IT town. Plus: strong health IT startups — potential IBX vendors — represent a path for the insurance firm to deliver better service.
“At our core is the belief that innovation is always knocking at the door,” said Daniel Hilferty, president and CEO of IHG. “We want to champion healthcare entrepreneurship in our region and could not have found better partners for turning game-changing ideas into real world applications that will improve our members’ well-being.”
IBX’s participation is notable because the firm is putting money where its mouth is, in its most locally focused effort to date. Past IBX funding opportunities include:

• DreamIt Ventures accelerator DreamIt Health. For the last four years, IBX has contributed dollars that went toward both startup investments and operating costs for the accelerator. IBX innovation director Tom Olenzak, who’s leading the effort on this collaborative fund with Ben Franklin and Safeguard, said IBX has a small equity stake in most of the DreamIt Health companies.
• The company’s $50 million innovation fund. This is not focused exclusively on local companies. Olenzak said IBX doesn’t disclose details of this fund but mentioned the company’s investment in secure messaging service Relay in Radnor, of which IBX has been a longtime customer, and health engagement platform Accolade in Plymouth Meeting, plus a small follow-on investment in DreamIt Health grad DNA testing company Biomeme.

What would be just as helpful? Running paid pilots with these early-stage startups, as one local health IT CEO has pointed out.
We’ll certainly be keeping an eye on news from this fund, which sounds like one way of attaining that goal of becoming a regional health IT powerhouse.