ProVen Broadens Focus To Exploit Healthcare Niche

Venture funds focusing on the Mid-Western US are few and far between, in stark contrast to the concentration of capital targeting early-stage technology businesses on the East and West coasts.

Prompted by the relative dearth of funding sources in the Mid-West, together with the thriving healthcare sector in the region, ProVen Private Equity of the UK has teamed with strategic partner GMA Capital of Detroit to launch The Investcare Products Fund, which is targeting $100 million (euro 90 million) for investment in Mid-Western healthcare businesses.

At the beginning of February, The Investcare Products Fund was well on the way to its target, having closed $45 million. Director Malcolm Moss said ProVen is “reasonably confident” of taking the fund to its target level by the end of April.

“The fund has been well received here”, said Malcolm Moss. “We chose the Mid-West because there is such a shortage of venture capital here despite the fact that Michigan, where our US office is located, is the eighth largest state in economic terms and is currently enjoying a boom, with one of the lowest unemployment rates in the US”. Although there are seven other funds based locally, none specialises in healthcare, so the ProVen fund is positioned to benefit from better deal flow and less competition than it would encounter elsewhere, Malcolm Moss said.

The Investcare Products Fund will provide later-stage growth capital, concentrating on companies that are, or soon will be, profitable. Malcolm Moss said the fund will focus on three specific areas of interest: infomedics, outsourcing and medical devices. Infomedics – the application of information technology for healthcare providers – encompasses software design to wireless technology, remote scanning and information access systems. The infomedics sector offers considerable potential for growth because hospitals and other healthcare providers, which have tended to be relatively slow adopters of IT, are now facing cost squeezes and are therefore looking for more efficient ways to handle information.

The greater emphasis on cost control among medical institutions is also driving development of the outsourcing sector as hospitals increasingly subcontract services – ranging from laundry and catering to radiology – to external providers.

For its medical devices investments, ProVen expects the fund to benefit from its proximity to the University of Michigan, a leading-edge research centre in a number of medical fields, particularly oncology, and an active supporter of the formation of spin-out enterprises.

GMA Capital, which has operated in the region since 1988, has built an extensive network of contacts and enjoys strong proprietary deal flow. Malcolm Moss pointed to GMA’s track record in negotiating realisations as a further advantage of the strategic partnership.

Marketing for the Investcare Products Fund has so far focused principally on its target investment region. Approximately half the first closing total was committed by the Oakwood and Botsford hospitals and a further 15% to 20% came from private investors, Malcolm Moss said. Two unnamed institutional investors have also signed up for the fund, and ProVen reports strong continuing interest in the ten-year-life vehicle.

ProVen set up its US office following its own buyout from Guinness Mahon Holdings in the spring of 1998. ProVen is best known for its Global Rights Development Funds and their interest in the intellectual property rights of, among others, Thomas the Tank Engine and Basil Brush. Although The Investcare Products Fund is the first medical fund raised by the current team, they are experienced in managing healthcare investments, having inherited a portfolio containing several 1980s medical sector investments from an earlier Guinness Mahon team. Malcolm Moss also has a healthcare background, having joined Guinness Mahon from Baxter in 1989. “We initially focused on media investments, but it has always been our intention to raise funds in areas where we have the expertise to exploit niche opportunities”, Malcolm Moss explained.