By: Mary Childs
Shared by: Michael Ivey
The American Cancer Society’s new venture fund, BrightEdge, is continuing its push to invest in start-ups that are developing cancer treatments and technologies.
BrightEdge is a charitable fund that invests in for-profit companies and reinvests its gains in research and services, giving investors a tax deduction and a chance to advance medical care and treatment.
Blood-diagnostic company Freenome said today that it closed $160 million in Series B financing, with BrightEdge as one of its investors. The San Francisco–based biotechnology company said it would use the proceeds to further develop a blood test for early cancer detection.
RA Capital Management and Polaris Partners led the financing. Other investors include Perceptive Advisors, T. Rowe Price Group, Roche Venture Fund, and Kaiser Permanente Ventures. They join existing investors from Andreessen Horowitz to GV (formerly Google Ventures) and Verily Life Sciences, a subsidiary of Alphabet.
“We want to put our money to work alongside those high-quality syndicate partners,” Bob Crutchfield, BrightEdge’s managing director, says.
It is BrightEdge’s second investment since the fund was created in late 2018. The first, announced in April, was Castle Biosciences, which develops diagnostic and prognostic tests for dermatologic cancers.
Private equity has rushed into “life sciences” in recent years, with firms from Blackstone Group to Bain Capital raising money and making investments. Like a traditional private-equity firm, BrightEdge plans to hold investments for up to seven years and then list shares on a public exchange or sell it.
BrightEdge, however, will “reinvest the fund’s investment gains returns into other cancer therapies and American Cancer Society programs and services.” Investors don’t receive any of the returns; instead, they get the tax deduction.
BrightEdge accepts money, starting at $1 million, from private donors, family offices, and biotech and pharmaceutical companies.
The fund invests in for-profit companies and mid-to-late-stage start-ups that are focused on cancer therapies, diagnostics, devices, technologies, and services like software platforms that are in clinical trials or are already on the market or close to it.
“Traditional philanthropy is shifting,” Crutchfield says. “There’s a new type of philanthropic donor that wants to not just do transactional giving, but really put money to work in an investment-like way. And then they want to see how those dollars are being used, for the impact effect.”
BrightEdge started with a $25 million commitment from the American Cancer Society, the biggest nongovernmental provider of cancer research funding in the U.S. It’s seeking up to $125 million more from private donors.
The fund’s success won’t be measured only in financial terms, BrightEdge says. It will also look at the “overall impact on the human condition and funding levels in cancer research and treatment.”
For-profit health-care companies must tread more carefully as the industry has come under intense public and government pressure. Democrats and Republicans alike have made reining in drug prices a top priority, which has hurt shares of pharmaceutical companies.
BrightEdge will update donors the same way venture funds do—with quarterly performance reports and annual returns on investments. It will also report its “mission impact,” such as how many human lives it is saved and which therapies it helped bring to patients.
“Every dollar donated is attributed back to the donor—they get to see where every dollar is used,” Crutchfield tells Barron’s. ”As we have liquidity events, they’ll see the boosting and compounding effect from their original donation as those events occur.”
The American Cancer Society, which has invested more than $4.8 billion since 1946 and currently deploys more than $100 million a year, isn’t alone in the idea for a venture fund. The Multiple Myeloma Research Foundation also recently started such a fund, joining CureDuchenne and the Juvenile Diabetes Research Foundation’s JDRF T1D Fund, and Cystic Fibrosis Foundation.
The idea resonates with investors who have become wealthy from start-up ventures, according to Crutchfield.
“We’re seeing a new type of philanthropist being made as a function of the wealth being created” in entrepreneurial endeavors, he says.
Barbara Jacoby is an award winning blogger that has contributed her writings to multiple online publications that have touched readers worldwide.