UNC Rex’s venture fund expands by $8 million

Bobby Helmedag
Bobby Helmedag

UNC Rex Healthcare, which four years ago committed $10 million to create a venture capital fund that invests in startup health care companies, has set aside an extra $8 million for further investments.

The board of directors at Rex, which is part of the UNC Health Care System, has authorized the fund, Rex Health Ventures, to reinvest the $8 million that it has already reaped from its investments. That decision was made a few months ago but wasn’t publicized.

The new authorization, which comes on top of $2 million from the fund’s initial allocation that hasn’t yet been invested, leaves Rex Health Ventures with a total of $10 million to invest.

The additional money is both an endorsement of the fund’s financial performance to date and a testament to its ability to keep Rex in the loop on advances in health care, said Steve Burriss, president of Rex.

“It has exposed us to this whole world of innovation that exists,” he said.

Rex Health Ventures, one of just a few venture capital funds nationwide created and operated by a hospital, has invested about $8 million so far. Of the eight companies it has invested in, five are based in the Triangle: Aerial BioPharma, baebies, Midnight Pharma, Phononic and Target PharmaSolutions.

Venture capital investments are high-risk investments that can take years to pay off – if they pay off at all.

None of Rex Health Ventures’ portfolio companies have been acquired or have gone public – key events that trigger payouts to investors. But the fund has received $8 million in distributions to date from its portfolio companies – most notably from Aerial Biopharma, which sold the rights to an experimental drug for a $125 million upfront payment plus up to $272 million based on the achievement of undisclosed milestones.

The remaining seven companies in the fund’s portfolio are “doing very well,” said Bobby Helmedag, director at Rex Health Ventures. “They are meeting or beating expectations in terms of how they are operating.”

Rex Health Ventures recently moved from the Rex campus into a small office at HQ Raleigh, a space for startup companies in downtown Raleigh. The new location gives the fund greater exposure to local entrepreneurs, said Anita Watkins, director of strategic innovation at Rex.

About twice each week, physicians, administrators and others at Rex are asked to take a look at the new technology or service being developed by a startup that the fund has identified as having valuable potential. Although the fund passes on most of those potential investments, professionals at Rex “tell us is that it gives them an opportunity to think about things differently,” said Watkins.

Interacting with hospital personnel also can be invaluable for the businesses the fund does invest in.

Phononic, a Durham company with more than 100 employees, used Rex as a proving ground for it next-generation medical-grade refrigerator and improved its design based on feedback from the hospital.

“If you believe your technology, product or service adds value to a hospital setting, there is no better way to find out than to have your product in that climate,” said Tony Atti, Phononic’s founder and CEO.

Staff writer John Murawski contributed.

David Ranii: 919-829-4877, @dranii