Our Favorite Few that Got Away — 2024 Edition
It is that time of year again… to reflect on a year filled with peaks, troughs, twists, and turns. And of course, a year filled with the wonderful companies and remarkable entrepreneurs with whom we work in our portfolio and the ones we met along the way. We’re lucky to do what we do, but we can’t partner with everyone. Sometimes it’s timing, fit, or simply a more competitive valuation 😉! That said, we always enjoy taking this opportunity to spotlight a few of the companies, people, and ideas that inspire us. So, let’s get started!
First, we’ll share a few reflections on the market and how we are ending the year, and then onto the few that got away. We are cautiously optimistic and beginning to see a nice recovery from the challenges of 2022–2023. While the pace of recovery has varied, the overall story has been one of steady improvement.
Signs of Market Resilience
The public markets showed strong growth this year. The S&P 500 recorded an impressive annual return of over 25% (through December 15), while the NASDAQ surged by more than 30%. The Fed’s actions to cut rates, coupled with CPI dropping below 3% by mid-year and stabilizing in the 2.5% to 2.7% range are nice indicators of a healthier macroeconomic environment.
In the private markets, dry powder remained near record-high levels, but the pace of deployment continued to be measured. For most companies, fundraising processes lengthened but for the select few (i.e. frequently, the buzzy generative AI companies). Exit activity remained relatively muted.
Health Velocity Capital: Back on track investing in more affordable, sustainable, consumer-friendly healthcare
Reflecting on our own journey, 2023 was an unprecedented year for us, as it marked the first time in our collective investing careers that we did not make a single new investment. We were not alone, however. According to recent data, the 2022 vintage fund deployment has lagged prior vintages, signaling a broader industry-wide slowdown.
We saw the tides begin to turn in the latter half of 2024. Post-summer, we observed a meaningful uptick in the quality of our pipeline, which was filled with companies with strong product-market fit, scalable models, capital efficiency, and clear paths to profitability. The renewed market life led to two closed investments and two additional deals under term sheet, likely to close in the coming weeks (fingers crossed!). We’re thrilled to say: we’re glad we were patient, and we’re excited to partner with these world class teams.
Finally, before we get into the “few,” we wanted to take a moment to celebrate an outstanding year of liquidity for our firm. Thanks to the great work of our portfolio company partners, we had 3 successful partial or complete exits in 2024, and we made cash distributions to our LPs during 2024 that exceeded 100% of our fund size. This fund has now had 3 companies partially or completely sold for values in excess of $1 billion, and has had 8 partial or complete successful exits (out of a total of 17 investments and with 9 portfolio company positions remaining).
Our Favorite “Few” that Got Away:
As has become a tradition, we would like to highlight a few wonderful companies that raised capital (albeit not from us!). These are companies that we found intriguing and/or mission-aligned and for a variety of reasons the stars and moons did not line up, but we are huge fans and rooting for them from the sidelines.
Jukebox Health combines clinical expertise, technology, and a nationwide provider network to deliver home modifications that help high-need patients live safely and independently. Using their proprietary platform, occupational therapists conduct in-home assessments to identify and orchestrate home modifications for safety and functionality. These modifications reduce reliance on personal care and lower the risk of unnecessary nursing home placements. The platform simplifies the process by converting clinical recommendations into work orders, coordinating with vetted contractors, and ensuring projects are completed on time and within budget.
The Health Velocity team has spent significant time exploring opportunities in the Medicaid Long Term Services and Supports (LTSS) segment. LTSS, which funds personal care assistance and nursing home care for elderly and disabled individuals, represents over $300 billion in annual spending, much of which is driven by challenges within the home environment that health plans have traditionally struggled to assess and manage.
Grant was introduced to Romanos, Seung, and Oren earlier this year (thanks to Scott Law!). After a few introductory Zoom conversations, we convened for a full-team pitch meeting at the HLTH conference in Las Vegas… in the middle of a cocktail bar… during happy hour. After aggressively loud ping-pongs of Q&A, we all became big believers in the team and in the business. Kudos to the Rom, Seung and Oren for performing under the lights.
While we don’t have the privilege of calling Jukebox Health a portfolio company partner, we are thrilled they will be working with some good friends.
Regard provides a software platform to health systems that supports clinicians in their daily diagnosis and documentation workflows. The software integrates seamlessly into EMRs as an easily navigable tab. It reviews all patient data in the EMR to recommend diagnoses and draft progress notes. Physicians can simply accept or deny Regard’s recommendations, ensuring that notes are complete and accurate and saving substantial documentation time. Health systems benefit from meaningful revenue cycle improvements through enhanced diagnosis capture.
Our annual survey results have consistently shown that the majority of our health system strategic limited partners and broader network have identified clinician burnout as a top priority. It is well-known that healthcare providers spend an excessive amount of time on documentation, with some providers dedicating over 40% of a typical 10-hour shift to data entry and spending approximately 50% of their workday interacting with screens. This not only reduces direct patient interaction but also contributes to physician burnout. The complexity of EMR systems and the high volume of patient data further exacerbate these issues, making it challenging for healthcare providers to maintain accurate and complete records while delivering quality care. Regard’s product provides a welcome solution to ease that burden while also improving billing accuracy.
We were originally introduced to Eli and Nate back in 2018 after they had gone through the Cedar-Sinai Accelerator program in the class following Health Velocity portfolio company Artera. Intrigued by their thoughtful approach to ease the burden of clinical documentation, we continued to keep in touch as the business matured and added more health systems that validated the value of their product. Earlier this year, we were re-introduced by a mutual friend (thanks to Mandira Singh!) and noticed the considerable progress they made in product development and commercialization. And, to their credit, they ran a fundraising process akin to one we haven’t seen in 3 years!
We’re pleased to see that Eli and Nate had chosen to work with our great friends at Oak HC/FT, and look forward to following along in their next chapter together.
Penguin AI offers a healthcare-specific platform designed to streamline administrative workflows. The company is building pre-trained healthcare-specific language models for payor, provider, and digital health customers. These language models are smaller and have fewer parameters compared with the large open-source language models, offering lower latency, more responsiveness, and affordability for SMBs and regional players. Specifically, Penguin AI delivers AI infrastructure and tools, digital assistants, and governance solutions built for healthcare use cases.
Generative AI has garnered significant attention and investment across sectors. Businesses are exploring its impact on their models, especially in healthcare, where it could revolutionize clinical, administrative, and research experiences. The Health Velocity Capital team has produced two white papers in collaboration with our strategic limited partners, and believe, notwithstanding the huge potential clinical and administrative benefits, much of the healthcare industry will likely adopt it cautiously due to potential risks associated with poorly implemented generative AI efforts. Penguin AI’s team is one that not only understands healthcare data but also healthcare operations. Founder/CEO Fawad Butt is a former Chief Data Officer at United, Optum, and Kaiser Permanente. The technical team is made up of developers who were formerly at UHG/Optum with skills in AI, ML, data science and healthcare analytics with 30 years of collective experience solving problems for health plans.
Kristin and Fawad have been close friends for many years. When our team set out to understand the rapid rise of generative AI, Kristin knew Fawad was the perfect person to help us get up to speed quickly and thoughtfully. Fawad impressed everyone with his deep expertise and sharp wit, seamlessly fitting into the team. At the time, Fawad was beginning to explore the idea of what would become Penguin AI. Over the past year, those early ideas evolved into a well-defined business plan and a talented team poised for impact. Fawad raised capital from friends and family, and we hope we’re on the short list for Penguin’s future financings!
We’re excited to follow Jukebox Health, Regard, and Penguin AI as they continue their trajectory. As we like to say, there’s still a lot of company building left in front of them, but they are run by talented teams, supported by strong investors, and have a group of cheerleaders pulling for them.
Though these three made our list of the ones that got away this year, they represent a small subset of the incredible entrepreneurs working in ways that are aligned with our mission of building successful companies contributing to a more affordable, sustainable, consumer-friendly healthcare system. If you are an entrepreneur building a business that is aligned with our mission, we would love to hear from you.
To learning more about our work and how partner with companies transforming healthcare, please visit https://www.healthvelocitycapital.com.
