Traditional charitable giving may be on the decline for ordinary Americans, according to several reports released in the past few years. Whatever the reason for the decline, signs point to trouble ahead for non-profits that solely rely on donation-based funding.
The Atlanta-based American Cancer Society (ACS), for example, has seen a gradual decline in annual donations from over $1 billion in 2008 to $779 million in 2016.
But the ACS, which is the largest private, non-profit funder of cancer research, has a first-of-its-kind plan to not only support new cancer innovations, but also make up for the philanthropy gap it’s experiencing: a venture capital fund.
BrightEdge Ventures will be a $100 million-minimum VC fund that invests in early-stage companies with products related to cancer therapeutics, diagnostics, devices, screenings and care provisions. It will launch in January 2019 and hopes to make its first investment that year.
“We see ourselves at the strategic investment arm of the ACS, with the goal of creating a sustainable revenue stream by investing in commercial opportunities that coincide with the great ACS mission,” says BrightEdge’s recently-hired Director of Operations David Heenan. Heenan formerly co-founded the digital health startup Aces Health, which was acquired this year.
ACS has also brought in Bob Crutchfield, formerly of Birmingham’s Harbert Growth Partners, to serve as Managing Director of the fund. Crutchfield led the investment firm’s healthcare practice.
Heenan says they have already closed about $25 million to kick off the fund and will be open for business in January. They hope to raise as much as $150 million in 18 months.
The plan is to make $5-8 million initial investments in 8-12 early-stage companies, earmarking additional capital to participate in follow-on rounds. ACS will take equity in its portfolio companies, possibly garnering board seats as well.
Heenan says the ACS has much to offer healthcare startups beyond capital, though. The 105-year-old organization has been funding cancer research for over 70 years, granting about $4.6 billion to researchers and scientists.
The four top-grossing cancer drugs by revenue came out of ACS-funded research, according to Heenan. “Imagine if we were collecting returns on that,” he says. “We’d be able to turn around and fund much more.”
“The idea is that not only can we accelerate and enhance the mission of the ACS by funding these companies, we can use the Society’s depth of scientific expertise, our giant network and 100 years of experience to foster those companies to have higher success rates, get into the market, provide better care to patients.”
BrightEdge’s fund has a broad thesis, since cancer touches so many parts of the healthcare system. They will consider startups working on therapeutics, diagnostics, medical devices, ‘healthtech’, and tech-enabled services. The fund is stage-agnostic.
“We could have gone into agtech, clean energy, way more sectors, so we actually feel like we did manage to narrow down at this point,” Heenan says.
He believes that, if this model sees success, it could serve as a model to help other non-profits create a more sustainable funding stream that also encourages innovation within their sector. Though philanthropic giving may be declining, social impact investing is increasingly being recognized as a legitimate investing route to both create positive change and engender financial return.
“Not only are we disrupting cancer, but we can disrupt how philanthropy and non-profits are viewed and how they work,” Heenan shares. “They don’t have to be passive, they don’t have to be just grant vehicles, they can be active. Through BrightEdge Ventures, we are actually giving the patients that ACS advocates for a market voice.”