A new source of funding for local early-stage companies has attracted a familiar corporate investor.
Officials at Blue Cross Blue Shield of Nebraska told The World-Herald the company is a partner in the Aksarben Discovery Fund, a venture capital fund started by Omaha angel investor Jim Young Jr. and Ken Moreano, executive director of the Scott Technology Center.
That program uses a hypothesis-driven approach to scrutinize and develop early-stage companies’ ideas into viable business models.
“I want to use this (Lean LaunchPad) platform for a different type of investment approach you don’t usually see at the early-stage level,” Young said. “We are looking for qualitative and quantitative data to determine how and when a seed investment is made.”
The benefits for Blue Cross, the largest commercial health care insurer in the state, could be multifaceted.
Jerry Byers, senior vice president of finance at Blue Cross, said that since the company lacks a pool of money dedicated to innovation, the opportunity to invest in a company with ideas that could translate to the insurance industry is attractive.
The number of corporate venture capital investments have increased every year since the economic downturn of 2008. Officials at the National Venture Capital Association attribute this trend to the dissolution of internal research and development operations as well as an increasing amount of corporate cash on the sidelines.
But that doesn’t mean Blue Cross gets a special say about which kinds of companies go through the program.
“To be clear, we are not dictating to the fund that these businesses solve our problems,” Byers said. “It isn’t going to work if you’re forcing an entrepreneur to solve a problem they don’t have a passion for.”
While more than 50 percent of the insurer’s investment portfolio is in bonds, a small allocation of its assets is directed to private equity investment. Because the Aksarben Innovation Initiative focuses on technology-based business models, the financial upside of a high-growth potential startup emerging from it could be significant.
Meanwhile, the early-stage funding needs of companies under the watch of the Aksarben Innovation Initiative are small enough to mitigate the risk typically associated with sinking money into startups.
Moreano said a reasonable range of investment for companies would be between $25,000 and $75,000 each, and that those funds most would likely be used for early product development.
Having Blue Cross on board helps validate the program, which just finished with its first class of companies, Moreano said.
“There’s certainly one project that shows promise,” he said, “but it’s still a little early to tell.”
Date: September 01, 2014