Define Ventures raises $460M to invest in early-stage digital health startups

Define Ventures has raised a hefty $460 million across two funds to fuel early-stage digital health investments.

The venture capital firm invests in incubation, seed, series A and series B stage startups, and, with roughly $800 million under management, it's one of the few Silicon Valley firms focused solely on early-stage digital health startups. 

Define Ventures’ two new funds include Fund III, which will focus on new investments, and Opportunities Fund to support its existing partners.

Define Ventures currently backs 21 companies including women's health startup Tia, health and wellness brand Hims & Hers, virtual LGBTQ+ care provider Folx Health and mental health company Concert Health. 

“The healthcare system is evolving rapidly as multiple healthcare, technology and consumer trends converge, and even with the progress over the last few years, it remains a $4 trillion market opportunity that desperately needs greater digital transformation," said Lynne Chou O’Keefe, founder and managing partner at Define Ventures.

"At Define Ventures, we are at the center of that convergence and combine the best of Silicon Valley thinking and deep healthcare operating experience to better understand how enterprise and consumer models will intersect to become the future of healthcare," Chou O’Keefe said.

According to the digital health investor, the $460 million raised for Define Ventures' Fund III and Opportunities Fund is one of the largest early-stage, digital health funds. 

The COVID-19 pandemic catalyzed digital health innovation, investment and regulatory reform throughout 2020 and 2021. Digital health companies had a blockbuster year in 2021, raking in a record $29.3 billion in funding, which followed $14.7 billion in 2020, according to Rock Health.

After a wild ride in 2020 and 2021, digital health funding slowed in 2022 with startups pulling in $15.3 billion in funding dollars, about half of 2021's sky-high total.2023 is on pace for the lowest level of annual funding since 2019 as the first quarter saw fewer, bigger deals, according to Rock Health's report. Given the volatility of the financial market and in the wake of Silicon Valley Bank's collapse, there has been a pullback in the market.

In the first quarter, U.S. digital health funding closed with $3.4 billion across 132 deals, with a heavy representation of megadeals. 

While the market cooled down from two years ago, Define Ventures sees massive opportunities for digital health startups that are bringing innovation to healthcare.

"We've gone through so many things together as like an entrepreneurial community and I really hope that entrepreneurs see that we're doing the right things," Chou O’Keefe told Fierce Healthcare. "Digital Health is a sector that will change the way we live and this fundraise is to signal that."

"What does success look like to our entrepreneurs?" Chou O’Keefe said. "Why are you in this? The answer always has to be back to creating a better healthcare ecosystem for all. That has to be at the core." 

Chou O’Keefe pointed to the firm's early investment in Folx Health, a population health company serving LGBTQ+ populations, as proof of its interest in putting healthcare equity and evolution first.

Partnerships, she said, must be born from a similar ethos between investors and startups, one of which for Define is a focus on long-term goals. When looking at health tech companies that rose and fell all within the scope of the pandemic, Chou O’Keefe said investment in digital health should be about "long-scale, meaningful change."

"We have a maxim sort of: 'as if for our family,'" she said. "Which means we should feel like every solution and product that our partners develop we would use for our family." 

According to Chou O’Keefe, the VC firm also takes a unique approach to investing by forming deep partnerships with entrepreneurs to create "commercial opportunities, foster world-class teams and build a unique digital-health community."

The firm calls its portfolio of companies "partners" and connects entrepreneurs to its network of leading payers, providers, employers, retailers and life-science companies. The firm also has relationships with influential strategic advisers that span the healthcare, consumer and technology ecosystems that provide experience in creating and scaling industry-shaping companies, she noted.

"In the early stages of our company, Define Ventures stood out to us as a partner because its team has an established network from all corners of the healthcare ecosystem from providers to payers," said Dan Brillman, co-founder and CEO of Unite Us, a Define Ventures partner company. "Having Define's experience in helping companies scale across multiple categories from enterprise to consumer models was invaluable, and we look forward to continuing to partner with Define as we expand our impact on people's health in the community."

Editor's Note: This story features additional reporting from staff writer Annie Burky