Private Equity: Healthcare Heroes or Hucksters?

We've seen an influx of private equity capital into healthcare in recent years. Has it been a good thing? This month IE CIO Priya Parrish and VP Sophia Friedman write for PE Hub (paywalled).

Critics say PE leads to poor patient outcomes due to a focus on profit over patients. A recent study led by researchers at Harvard Medical School found that patients at private equity-owned hospitals are more likely to fall, get new infections and experience other forms of harm during their stay.

But it doesn't have to be this way.

Private equity investment in healthcare need not lead to negative outcomes. There are a myriad of positive motivations for focusing on the sector and thus we as investors can seek competitive private equity returns while ensuring that the companies deliver high-quality, accessible and often improved healthcare solutions to consumers. That has been our experience investing with several buyout and growth equity firms, including Martis Capital, Ascend Capital Partners, and The Vistria Group.

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Bridgespan, Capricorn, & Skoll: Can Foundations Achieve Greater Impact? (PDF)

IE CEO Jessica Droste Yagan writes: I've been glad to see for myself, anecdotally, that more charitable foundations and donor advised funds (DAFs) are considering the impacts of their investments on their missions, and taking intentional steps to make those impacts more positive. This study, by Bridgespan Social Impact, Capricorn Investment Group, and Skoll Foundation, helped me put that observation in perspective by presenting broader data about the field and its embrace of impact investing (or lack thereof).

While it is true that the numbers are growing, the median foundation is allocating only 5% of its investable assets to impact investments. Interestingly, the largest endowments (over $1B) showed much less impact investing as a percentage than their smaller counterparts. 

It's clear to me that foundation endowments and DAFs, controlling $1.2T in tax-advantaged dollars that are legally committed to charitable purpose, should be first in line to ensure positive impacts from their investments. This report also includes some practical solutions for those looking to move the needle further in this direction, and organizations like Mission Investors Exchange and Confluence Philanthropy (specifically for philanthropists) stand ready to support this movement. I'm optimistic it will continue in the right direction and at a faster pace as more philanthropic leaders realize what is possible!

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FCA: Finalised Guidance on the Anti‑Greenwashing Rule (PDF)

Ander Iruretagoyena, IE VP writes: Following the SEC's announcement on Climate-Related Disclosures this month, the British equivalent, the Financial Conduct Authority finalized its guidance on their own new Anti-Greenwashing Rule. This guidance applies to all firms communicating in respect of a financial product or service’s sustainability characteristics, to persons in the UK – and it goes into legal effect in June. The guidance makes it very clear that any reference to sustainability characteristics must be “capable of being substantiated” and also “complete.” It goes on to warn that “firms should think carefully about whether they have the appropriate evidence to support their claims”.

They set out some examples of what they consider greenwashing, which are helpful for the industry. The $1M question will obviously be how stringently the rule will be enforced, and what consequences violators will face. However at least now there is a clear legal basis against it.

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Alcanza Clinical Research, the medical investigation network that boosts underrepresented patient populations, unveiled three new facility acquisitions in the past month that will expand its reach. First, Innovation Medical Research Center in Palmetto Bay, Florida. Second, FDI Clinical Research based in San Juan, Puerto Rico. And third, Kansas City Research Institute in Missouri. These mark Alcanza's 9th, and 10th, and 11th public acquisitions since 2021.

Next Billion, a fund investment of ours, announced a $250 million close of its first Digital Growth Fund. With participation from Impact Engine as well as Capricorn Investment Group, responsAbility Investments AG, and others, the fund is geared toward market-leading tech investments in emerging markets.

Vacuumschmelze, the rare earth permanent magnet maker, was awarded a $111.9 million federal tax credit for the construction of its first US-based manufacturing facility in Sumter, South Carolina. The tax credit, which comes as part of the US Inflation Reduction Act, will help VAC produce magnets for use in electric cars by automaker partner GM, among other uses. The grand opening is planned for 2025.

Why We Invested in Mae Health

By Sophia Friedman

The United States is facing a maternal mortality crisis. Maternal mortality rates in the US exceed rates in other high income countries (by more than ten times in some cases, such as compared to Australia, Japan and Spain). Specifically, Black women are most negatively impacted and are 3-4x more likely to die from pregnancy-related complications. Further, 15% of Black births are premature, 35% of Black births are via c-section, and Black women are twice as likely to experience pregnancy-related complications. Various factors drive this inequity in care including access to care, social determinants of health (SDoH), and structural racism. Notably, structural issues such as implicit biases of caregivers and a lack of cultural competency materially contribute to these outcomes. 

Solution

Mae Health is a culturally competent digital health platform connecting Black expectant mothers with critical resources to elevate the standard of care for Black women, with a focus on improving maternal health outcomes. Mae works in concert with healthcare payers and states to address the significant disparities in maternal health outcomes for Black mothers across the country by pairing a community-based model of doula support with best-in-class digital interventions.

Mae’s core offerings include continuous digital engagement and culturally aligned support. The continuous digital engagement provides multi-modal touchpoints such as culturally aligned content, virtual, small group ‘Mae Momma classes’ that offer programming on specific topics, SDoH monitoring, care flags to identify risks early and track data, and analytics to share with healthcare providers and payors. Mae’s culturally-aligned support offers virtual or in-person perinatal support from credentialed doulas. Mae connects expectant mothers with doula networks for the provision of care and also provides various levels of support to doulas including a client management interface, workflow tools, and billings and claims submission support.

Why We Invested

We believe that Mae’s approach is unique as it is entirely focused on reaching Black expectant mothers, and their sales traction to date has been 100% with Medicaid payors (though the company does have D2C users who can access free content). Some competitors have avoided contracting with Medicaid payors because of the complex reimbursement dynamics that vary by state, and inherent challenges to engaging these patient populations, but Mae has tackled this head-on and is a first mover in this space. Mae has proven a  strong value proposition to payors by clearly mapping the cost savings of providing doula support and has seen great success with signing and launching new Medicaid payor contracts in recent months.

Further, the doula-centric approach is also unique, and Mae has made progress ahead of other players in building out a bench of doula talent. While there are several players in the maternal health market broadly, Mae’s approach is unique in its focus on optimizing doula benefits for Medicaid populations. Doula support has been directly linked to improved health outcomes as women who give birth with a doula present have a 22% lower risk of undergoing a c-section. By employing this model, there is significant impact potential in a market that not many companies have been willing to focus on. Lastly, the team is extremely impact motivated and brings relevant lived experience to the platform. Founder and CEO Maya Hardigan has prior experience on the innovation team at Pfizer and as the mother of three young girls, she has personally experienced the inequities that she is trying to address.  

Impact

Mae aims to elevate the standard of maternal health care for Black women, with a focus on improving maternal health outcomes. Believing that many of the disparities Black women face are driven by biases in care, its model prioritizes on-the-ground support from community-based doulas who are known to improve pregnancy experiences and outcomes. Mae has already begun to demonstrate improvements, and its solution is linked to reduction in maternity cost of care, improvements in health performance metrics (HEDIS metrics), and enhanced member literacy, satisfaction and engagement.  From an access perspective, at the time of investment, Mae’s enterprise users were 100% Medicaid patients, and several quantitative measures suggest that the approach is driving positive health outcomes amongst this population. Specifically, Mae has shown a 31% reduction in c-section rates and a 58% reduction in preterm birth rates amongst its users. 

While not specific to Mae, many of the tactics Mae is employing have demonstrated a direct link to an improvement in clinical outcomes. For instance: women who attend a childbirth education classes are 26% more likely to have a vaginal delivery than those who do not; women who have a birth plan are 98% more likely to have a vaginal delivery than those who do not; and, mothers who use a lactation consultant are almost 71% more likely to exclusively breastfeed within the first month of the baby’s life. Thus, with time, Mae expects to collect additional data to prove its positive impact on health outcomes.

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Our investment in Mae Health was part of a fundraising round led by Jumpstart Nova.

Impact Engine Honored as #1 Impact Investing Firm on Top Impact List

Download Press Release PDF

REAL LEADERS®️ UNVEILS ITS TOP IMPACT COMPANIES LIST OF 2024

Chicago, IL — January 17, 2024 — Real Leaders® is thrilled to announce its 2024 rankings of Top Impact Companies from around the world, recognizing Impact Engine, an independent, women-led and employee-owned institutional investor managing venture capital and private equity strategies, as a 2024 Top Impact Company in the global impact economy.

With over 500 applications from over 15 countries, this year’s awards mark an outstanding achievement for Impact Engine, securing the No. 1 spot in the Impact Investing category. Additionally, among the hundreds of companies considered, the firm is listed as one of the Top 25 Impact Companies for 2024, coming in at No. 21 overall.  

For over a decade, Impact Engine has worked to bring more capital into a market where financial returns are linked to positive social and environmental impacts. The firm specializes in private equity and venture capital funds and companies in the environmental sustainability, health equity, and economic opportunity sectors and is well-known for its specific sector expertise and its longstanding track record of generating measurable impact.

“Impact Engine is honored to be among the remarkable group of impactful organizations recognized by Real Leaders,” said Jessica Droste Yagan, CEO, Impact Engine. “From the beginning, our team has committed to investing in business models that align financial and impact returns such that there is minimal or no trade-off between the two. We’re honored that Real Leaders has recognized our firm as the number one impact investing company. It’s truly a testament to the hard work and collaboration of our team, investors, and community of leading-edge thinkers in the impact space.”

Now in its sixth year, the Real Leaders Awards rank privately-owned companies by asking 30 questions within six categories of I.M.P.A.C.T (Intention, Model, People, Accountability, Collaboration and Transformation) to vet and rank companies based on those parameters.

“After five successful years of producing the go-to list of the ‘Top Impact Companies,’ it was time for Real Leaders to expand its mission by growing an impact awards community that preserves its integrity while scaling its impact,” said Kevin Edwards, Real Leaders’ General Manager.

Click here to view the full list of Impact Awards rankings.

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About Impact Engine

Impact Engine is a women-owned and led Chicago-based venture capital and private equity firm investing exclusively in funds and companies driving positive impact in economic opportunity, environmental sustainability, and health equity. Impact Engine’s multi-faceted investment approach ensures that it operates at the center of the impact innovation ecosystem, giving the firm unique access to differentiated, high-quality deal flow and comprehensive knowledge of the market. Additional information about Impact Engine may be found at www.theimpactengine.com.

Media Contact:

Katy Wilner

Confluence Partners

424-207-7332

kwilner@confluencepartners.com

About Real Leaders

Real Leaders is the fastest-growing community for impact leaders backed by a global media platform dedicated to driving positive change. Founded in 2010, Real Leaders recognized and advocated that businesses take more responsibility to be as cognizant of their impact on employees, society, and the planet as they are on their bottom line. Real Leaders is an independently owned certified B Corporation and member of the UN Global Compact. Our mission is to unite farsighted leaders to transform our shortsighted world.

Media Contact:

Madelyn Dwyer

Real Leaders

Madelyn@Real-Leaders.com

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All content contained herein is intended for informational purposes only and should not be construed as a solicitation or offer of securities. Compensation was provided in exchange for consideration for inclusion in the third-party rating. Impact Engine is not otherwise aware of any material conflicts of interest arising from any rating.

How Impact Investing Changed in 2023

By Jessica Droste Yagan and Priya Parrish

The end of one year and the beginning of the next is naturally a time for reflection. And, wow, did 2023 have a lot to reflect on! It was a paradox. It both flew by and also seemed to last forever. It was both full of volatility and new challenges and also reinforced many things we already knew and believed. It was both heartbreaking and hopeful. We expect 2024 to be similar in many ways, and while we remain optimistic, we are also grateful that our team brings the experience necessary to manage through a variety of markets, so we can face whatever might come our way.

The venture capital and private equity markets experienced a meaningful slow down this year. After a multi-year period of significant capital inflows for funds and companies, investors slowed their pace of deployment into illiquid assets as they evaluated the changing macroeconomic environment. Companies with cash runway, or options to extend cash runway sustainably, waited to raise more capital or exit, hoping to see the market shift back in their favor. In the meantime, the muted exit market meant that fund managers slowed distributions to investors. This in turn led to investors slowing commitments to new funds. This cycle is still in play, and it shifts the negotiating power to funds with dry powder that are in a very strong position to find great companies at lower prices.

We are seeing all of the above across our firm, and have been focused on supporting our portfolio companies while remaining disciplined about deploying new capital with the capital we do have. Our team includes investors and operators that have managed through these market cycles before and know that those companies that make it through will be the leaders. We are confident that many of our companies and our funds’ companies will be the leaders not only from a financial perspective but in scaling market-driven solutions to critical social and environmental challenges. 

A big positive this year was continuing to see more investors move from talk to action and from indifference to acknowledgement regarding the impacts of their investments. Family offices and individuals continued their steady movement in this direction, often driven by younger generations taking on more power and influence, but the real shift we saw this year was from charitable foundations, whose legal responsibility it is to address social and environmental issues.
Charitable foundations have long drawn a line between their grant and investment decisions, assigning the former to drive the mission and the latter to fund it. A handful of very early leaders started decades ago in acknowledging that their endowments and investments often affected their missions, whether they wanted them to or not, and started acting intentionally to shift their investments as much as possible toward achieving those missions, or at least not working against them. As they demonstrated the possibilities of that approach over time, while continuing  to meet their fiduciary duties and financial needs, others have had the confidence to follow. Now we are starting to see them follow in larger and larger numbers.

On the down side, fewer investors of any type are willing to invest in managers without a track record, and the vast majority of impact funds as well as funds led by women or people of color are in that category (also known as emerging managers). So, while impact investing dollars continued to increase in 2023, it is almost entirely going to mega firms who are raising separate sleeves of capital to capture impact demand. We are worried about what that means for emerging managers and how it might lead the industry to backslide on its progress toward more diversity and more impact. We hope to collaborate with others to support this segment of the industry. 

Government’s role in all of this will continue to be important as well. This year, we saw the government play two notable roles in the evolution of impact investing, both generally positive. 

First, both European and US governments began to step into a gap in regulation related to impact investing. In the US, the SEC shared draft rules related to transparency marketing around ESG and impact. In Europe, the interpretation and implementation of SFDR articles 6/8/9 were in full swing. Second, the US government's decisions about what and how to impact market forces continues to affect the work we do. For example, the end of ESSER funding has affected the ability of schools to afford education tools from the types of edtech companies we invest in, while on the other hand the IRA created notable tailwinds for the clean energy transition, which was already gaining steam. 

All in all, this year has seen some major challenges and we will continue to face them and more in 2024, not least of which is political risk as 2 billion people around the world will go to the polls this year to elect their leader, including here in the United States. But, as in 2023, we believe that impact investing and intentional management of ESG factors in business will only continue to grow.

We are seeing increased sophistication of impact management and measurement even from the largest, most mainstream players, as well as multiple industry-led efforts to create alignment around what and how to report data in this space. The political backlash against ESG is not going to stop what is fundamentally a market driven movement: a demand for corporations, which are enabled and supported by governments and therefore the people, to be a net positive for those people. This is the future of capitalism and we are proud to play a role in its progression.

We are grateful to all those who partner with our team on this, including our investors, the GPs we invest in, the CEOs we invest in, and all others doing their part to make capitalism the best it can be. Happy New Year - more to come in 2024!