By Kristen Oliveri
The nature of a single-family office has always been
somewhat of an enigma to the overall financial industry. Private capital run by
the world’s largest families often flies under the radar in terms of how they
invest and the causes they support.
But today’s family office, run by many next-generation
family members, is taking a different, mission-driven approach. Family offices can
be deliberate in their investment strategies, utilizing creative,
out-of-the-box problem solving to further their individual family’s mission.
Markets Group’s Kristen Oliveri,
Head of Private Wealth Content, sat down with three leading family offices to
discuss the healthcare-related missions they are building out and what the
overall impact may be.
Below is one family’s journey.
John Parker, Principal and Founder, Springhood, and Vice
President, Board of Trustees, Charles H. Hood Foundation
John Parker grew up in the family office world. His great-grandfather,
Charles H. Hood, set out to revolutionize the dairy industry in New England in
the 1800s with the founding of H.P. Hood and Sons. The company’s original
mission was to improve sanitary milk production to increase the survival rate
for infants in their region.
This successful 140-year-old family-run business was founded
in 1846 and sold in 1980. The family eventually created a family foundation in
1942 that was configured as an early-stage venture program to fund the family’s
mission: supporting pediatric research.
While Parker went on to have his own successful investment
career, he found his way back to the family foundation through the work he was
doing with his father. He saw a great opportunity to invest in pharmaceutical
drugs and digital health, and to fund important pediatric research. “It’s been
an awesome journey,” Parker says. “I’m wearing a lot of hats with our family
investments and within our family foundation.”
Today, the foundation has a true venture component to
it—with a portfolio of 12 companies including drugs, devices and digital health
solutions. The companies fund issues such as pediatric cancer, rare disease,
autism, and the many
complications children face in the newborn intensive care unit (NICU).
“We’re
very interested in health access, reaching low-resource settings and other
overlooked markets,” Parker says. “There’s so much going on in healthcare, but
what we’re looking for is a unique combination of an area that has been
overlooked but presents opportunity because of changes in technology.”
When Parker joined the foundation, he was amid a new
generation of trustees who went from viewing the foundation’s mission as
personal philanthropy to instead being stewards of the organization. “We began
with a review of operations, successes, and failures. We confirmed that we have a great track record of funding
important pediatric research in New England. Our researchers went on to great
career success, and the work we funded was frequently published in the top
medical journals. But what we found was that successful research too often
didn’t reach actual children,” he says.
The foundation wanted to take its impact to the next level,
changing the way it makes grants with a focus on medical technology to solve
problems. “We are very deliberate around how we pursue our mission and solve a
problem to further the goal of our family,” he notes.
Parker
vets his investments through a wide variety of sources, including clinical
research institutions, leading universities, accelerators and incubators,
entrepreneurs, and other investors. “At a high level, our first question is:
does this company have the potential to significantly improve outcomes for
children? We view this broadly but are looking for solutions that change the
paradigm of care,” he says.
Once
a thematic fit has been identified along with basic screening around size and
stage, Parker’s vetting process focuses on four core pillars: robustness of
science and/or technology, the business model and development plan through
sales; management and other key people; and investment economics. “We spend a
lot of time getting to know companies,” he says. “We’re not the fastest
investors. We also spend time tapping into our network of experts from clinicians,
hospital administrators, industry execs, regulators and patients to better
understand the strengths or weaknesses of each company.”
One particular example that Parker shared centered around an
infant sleep device
that helps babies rest and relax. A stochastic vibration stimulates pacemaker
neurons in the brainstem to help with relaxed breathing and a lower heart rate.
While the company had interesting potential as a consumer infant sleep device,
the decision to invest was based on research showing that the technology could
improve outcomes for opioid-exposed newborns who suffered from neonatal opioid
withdrawal syndrome, explains Parker.
While
the vetting process is thorough, risks are always involved, admits Parker. The
specific risk factors the foundation has identified are product risk, capital
risk and time. “We’re early investors in medical and healthcare companies.
Until trials have been completed or other evidence of improved outcomes
has been generated, there is always a risk it doesn’t work,” he says. He also
makes sure that the foundation doesn’t run out of money before the next
critical value inflection point for each investment and that it searches for
situations where the pediatric focus can speed up a specific process.
“One
of the things I love is when we develop something that solves an important, unmet
need in a smaller market and use it as a launching point to get into
much bigger markets. We’re able to start with pediatrics and take it to adults
or start with medical and take it to consumer,” he says.
“While
I’ve known my family’s foundation since I was a kid and was excited to join our
board, I had no expectations that I would do anything more than show up for
trustee meetings a couple of times a year. Instead, it took over my life—in the
best of ways. Hopefully, the foundation can be helpful and solve real problems
that real people are having in those early years of life.”
Stay tuned for our second installment on how family
offices are reshaping the healthcare industry.