TL;DR – We are pleased to share that we have closed Questa Capital III at $397M and promoted Brian Butler to partner. Expect us to invest the capital in 10-14 growth-stage healthcare companies over the next three to four years.

Dear Friends,

We are pleased to announce the closing of Questa Capital III, a $397 million venture growth equity fund dedicated to making a concentrated number of investments in transformative healthcare companies.

We have now raised more than $1 billion since we launched Questa seven years ago, and our mission remains the same: to partner with outstanding healthcare entrepreneurs striving to build disruptive companies that improve lives and provide better and more efficient care.

As we review our activities over the past seven years and look forward, we are thrilled to see Questa portfolio companies recognized as industry leaders creating positive impacts across a variety of markets. Questa is the largest shareholder in DispatchHealth, which has grown into a clear category leader in providing hospital-at-home care and other complex care in the home. Cortica and Vynca are emerging as value-based care leaders in their respective markets, with Cortica continuing to deliver superior neurocognitive care services to children with autism spectrum disorders, and Vynca using technology to align the intensity of palliative care with patients’ (and their families’) personal values and preferences. Avive and Eko are pioneering a connected-device revolution that promises to improve care and save lives – from early intervention to life-saving emergency care. Pocket Health is using cloud technology to displace antiquated systems for medical image sharing, giving patients control and convenient access to their own personal health information. Bicycle Health, a virtual platform for the treatment of opioid use disorder, offers a new level of accessibility to patients and is a clear industry leader in terms of clinical outcomes and geographical reach, now providing care to patients in 48 states. While these are only a handful of examples, we are also proud to note that Questa was recently listed among the very top Digital Health investors in CB Insights’ Mosaic score, a ranking of median portfolio quality. This is a testament to the fantastic companies we have partnered with, and the depth and breadth of outstanding companies in our portfolio.

As we look ahead to Fund III, we plan to stick to the same broad approach that has guided us to this point:

• Our strategy will remain both focused and flexible. We will invest in 10-14 companies across the healthcare services, technology and medical device sectors. This portfolio construction provides strong alignment with the management teams at our companies and with our LPs, and allows us to concentrate our efforts and deeply engage with our portfolio companies.
• We will continue to invest primarily in companies that are in the early stages of commercial ramp. We believe that this is the stage where our team of healthcare specialists can best add value and guide our portfolio companies, while simultaneously generating attractive investment returns. The history of healthcare is full of promising companies creating innovative products that did not survive first contact with the complexity of the U.S. healthcare system. The healthcare industry is tough sledding – but also critically important, as healthcare companies directly affect the quality of peoples’ lives in a way unlike most other industries. Scaling these companies requires the experience and fortitude to run a gauntlet of challenges: navigating through multiple regulatory mazes; understanding industry cycles; establishing reimbursement and go-to-market strategies; building a team that can move beyond a first product and build sustainable momentum; and structuring and financing the business to support long-term success for all involved. At Questa we have a passion for identifying, investing in and then guiding the most elegant solutions and innovative products to market. We find success when our companies’ product and services are used by providers to deliver better care, and are used by patients to achieve enhanced access, better value and demonstrably improved outcomes.
• We will continue to blend elements of both venture capital and growth equity in our approach. We are fundamentals-driven and evaluate each company on the individual merits of their performance and plan, team and market. We are thematic and spend significant energy delving deep into our focus markets. At the same time, our investments typically do not look like investments made by more financially-focused growth investors. Our companies are often earlier in their path to profitability, and we are often underwriting the risk inherent in establishing a new business model. We seek out investments with an asymmetric return profile and the chance to be the number one company in its market.

We plan to invest Fund III around many of the same themes as our prior funds. With rapid advances in technology across all healthcare market segments, including the adoption and deployment of new care models and accelerating advances in personalized medicine, drug discovery and AI, healthcare continues to embrace astounding change, which will require focus and experience. We believe that we are well prepared to rise to the opportunity.

To capitalize on this opportunity we will need a committed and engaged team. We are delighted to announce that Brian Butler, who has been actively involved in our investments in Eko, Pocket Health, Socially Determined, Intrinsic, Eximis and Vynca, was promoted to Partner as part of Fund III.  In addition, Eric Thakor was promoted to Vice President.  We are proud to recognize the outstanding contributions of Brian and Eric and we are excited about all they will contribute to Fund III.  We also recently welcomed Sangha Kalimi and David Liu as Associates on our investment team, and both are off to a quick start making valuable contributions across the firm.

We are privileged to have the support and confidence of an amazing group of limited partners. As part of Fund III we are very pleased to add a small group of new LPs who share our vision and values.

What drives all of this are the tremendous entrepreneurs and management teams who lead our portfolio companies. Each day we are inspired by the deep thinking, dedication, bottomless reserves of energy and amazing grit which powers their quest to build the next generation of great healthcare companies. We are beyond grateful for the opportunity to partner with them to build these companies.

We are still in the second inning at Questa, with much more of our journey in front of us than behind us – we are eagerly looking forward to the next chapter as we deploy Fund III, and we thank you for your support along the way and look forward to future collaborations.

Best,

Ryan, Brad and Shawn

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