The behavioral health market may see another active investor bringing private equity to the space.
Summit, New Jersey-based Concord Health Partners announced Monday the final close of a $150 million fund focused on growth-stage companies that either have innovative technologies or improve care access, improve quality or lower costs.
The fund is called Concord Innovation Fund II, according to a news release.
Concord Health Partners has so far deployed 50% of the capital committed to the fund. That capital went to several health care companies including the Austin-based telepsychiatry company Iris Telehealth and Switzerland-based neurology digital therapeutics company MindMaze, according to the release.
Concord Health Partners and Seattle-based Columbia Pacific Advisors led the $40 million Series B round for Iris Telehealth. It was announced in April.
Other behavioral health-related portfolio companies for Concord Health Partners include cognitive behavioral therapy-based digital tool provider Learn To Live.
The latest fund marks a new step in Concord Health Partners’ evolution, the release states. The firm is exploring additional near-term offerings in the areas of emerging innovation and behavioral health.
The firm hopes to position itself for what may be a wave of behavioral health companies seeking growth-stage capital following the increase in venture capital flowing into health care technology and tech-enable services over the last few years, James Olsen, founder and managing partner at Concord Health Partners told Behavioral Health Business.
“Broadly speaking, we see a very significant opportunity set,” Olsen said of investing in behavioral health. “We know that it is attractive, given the needs and given our strong alignment with significant providers and payers in the industry, all of whom are focused on innovative technologies and solutions that address behavioral health. It’s a great fit for us.”
Olsen highlighted Iris Telehealth and Learn To Live as exemplifying the fund’s approach.
“These are truly innovative technologies that are increasing access to quality care, increasing utilization and engagement at the front end, and addressing some pain points in behavioral health,” Olsen said. “Those are the kinds of things that we’re going to be focused on. … [There are] a lot of opportunities there.”
The Concord Innovation Fund II is 300% larger than the firm’s inaugural fund, which closed in November 2019. It includes more than 50 limited partners (LPs).
LPs involved in the fund include family offices, endowments, institutional investors as well as payers and health care organizations, including the American Hospital Association.
“Concord has quickly proven its ability to source and execute on investment opportunities across the continuum of care,” Rick Pollack, president and CEO of the American Hospital Association, said in the release.
Overall dealmaking in behavioral health is running behind a banner year in 2021, with some exceptions for private equity deals, according to the M&A consulting firm The Braff Group.
It has tracked 102 behavioral health deals through the first half of the year, 20% fewer than the same period last year. Deal volume in the autism treatment space, however, is about 15% higher than in 2021, according to data proprietary to the firm.
“The story is a little bit different when it comes to private equity investment activity in behavioral health,” The Braff Group said in a recent report. “While down, sponsored transactions are running only 11.4% behind last year.
“But if we break it down between market-entry platform deals vs. follow-ons, the data tells us a bit more. While platform volume is down 28.6%, follow-ons are running a scant 5.6% behind 2021.”
The Braff Group tracked 251 deals in 2021, about 33% more than another very good year for dealmaking in 2020.
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