Rock Health has raised its third fund and will up its contribution to new companies from $100,000 to $250,000, the company announced this morning. The lead investors in the fund are Bessemer Venture Partners, which is working with Rock for the first time, and long time supporter Kaiser Permanente Ventures. It includes participation from KPCB, Montreux Equity Partners, and Great Oaks Ventures.
"We’ve really moved to a stage beyond the accelerator stage," Rock Health founder Halle Tecco told MobiHealthNews. "We certainly were an accelerator when we started. And we still have that kind of reputation. But we’re not taking companies at the idea stage. We’re really working with them when they’re a little bit more mature and we’re investing substantial capital compared to the amount that accelerators generally invest."
The new fund will last through 2017. Tecco said that the move continues a trend of being more selective but more impactful for the companies Rock Health supports.
"Understandably, we’re trying to find companies that are really ready for that amount of money," she said. "...Being able to put in a larger amount is certainly more appealing to the entrepreneurs and helps them get their fundraising goals. And we’re probably going to become even more selective. We have been under the 2 percent mark and will probably become even more selective with this new fund as well. We’ll probably have more people come to us and we’ll be doing even fewer deals a year. We’ll see. We’ve never really had a set number of companies but it has been getting smaller throughout the years."
Part of that increased selectivity is that Rock Health has become less concerned with where its companies are physically located so more companies are applying to Rock Health. Thirty percent of Rock Health companies are now located outside of the Bay Area, including Kit Check in Washington, D.C., Aptible in New York, and a handful of companies in Boston.
"A lot of the companies that are very active are outside of San Francisco and we’re totally fine with that," Tecco said. "We used to require that companies work from our office and I look back at that I kind of laugh, because I don’t know why we required it."
Rock Health's transition from accelerator to seed fund comes at a time when health accelerators, the category Tecco helped pioneer with Rock Health, are proliferating at an impressive rate. A report last month from the California HealthCare Foundation says there are 115 dedicated healthcare accelerators worldwide, with 87 in the United States alone. Tecco said Rock is looking forward to working with companies that have been supported by other health accelerators in their early stages.
"We want a lot of these accelerators to succeed," she said. "Most of them are really good and offer a ton of value. There are some that are probably not so great. But we love funding companies that have come through accelerators. We want to find strong companies regardless of how they were started. We’ve actually funded four or five Y Combinator companies and that has been a great accelerator for us to work with. We have not yet funded a company that has gone through a health accelerator, but I imagine we will."
In terms of the types of companies funded, Rock Health will continue to cast a wide net. Tecco said that about half of Rock Health's current companies have a combination of direct to consumer and business to business sales models, a quarter are just D2C, and a quarter are pure B2B administrative offerings.
"We’re always so deligthed and surprised by new concepts and new areas of opportunity we’re not privy to," she said. "We try not to be too dogmatic because we don’t want to miss out on any new big ideas."