Am aware of 4 major not-for-profit hospital system in-house venture funds that have shut their doors in the last several months. Entirely not surprising. Here's my take on why:

1/ VC is a long-term capital commitment and risk activity. Hospital CFOs used to operating and capital budgeting have 1 to 3 year time horizons. So losses (even paper mark-downs) and follow-ons are kryptonite to those CFOs who invariably look to cut in down years

2/ The imperative for "innovation" in the last 5 years usually came from the Trustees to the CEO. Such CEOs like the idea of visiting silicon valley 1 to 2 times a year and the shiny object of having a fund to talk about; plus an answer to the Trustees when pressed on innovation.

3/ Top down mandate often means that there is no super-high level owner. Entire C-suite compensation wasn't aligned with VC fund (nor should it be) but no fiduciary owner who cared when annual budgeting cycles came along

4/ Earnest, smart and hard-working folks hired to run these funds often had no levers of control in actual decision making, often fought with internal physician leadership - many docs want their own ideas funded and not external companies. Lots of challenges for the VC teams.

5/ Compensation systems sucked. Usually no carried interest. Therefore no alignment of interests with investment team and worse, tough to attract the best GPs from non-hospital funds. Plus hiring associate or team usually hard if not budgeted for at outset.

6/ Teams usually made super early stage investments. No problem with that but see prior points. In a hospital with short term budgeting realities, showing "wins" in 1 to 3 years is impossible when funding Seed/Series A.

7/ Many of these funds insisted on investing in companies that the health system was a client of. Nothing wrong with that and can be powerful DD. But operating teams often had no economic incentive to help. Plus hospitals are brutally slow/bad at contracting with startups.

8/ Also, just because your hospital uses said widget doesn't mean that the company is a venture backable investment with venture returns.

9/ A good number of these funds had leadership mandates to "get paid" for investing in the company - usually in the form of additional warrants or equity being asked of the target company for the client system investors "involvement" - massive turn-off to institutional investors

10/ Often unclear to me if these funds were driven by financial returns or truly strategic in nature. Most said "both" and that is a death-knell. No way to answer to both masters well.

11/ Bigger philosophical question - should not-for-profits funded ~50% by taxpayer (Medicare/Medicaid) have venture funds? I can easily argue no. Let the outside ecosystem of stand-alone funds fund the target companies.

12/ This is not a rebuke of all corporate backed funds. Many do it really well: GV, Mckesson, Kaiser, Providence to name a few. Stellar teams, right incentive structures and team autonomy. But most don't get it right.

13/ My 2020 Fund opportunity - a secondary fund to go buy all of these interests at a deep discount. But sadly, hospitals also have FOMO and chronically can't make decisions so my guess is very few of these sales get done.

14/ The sad part of all of this is the cap table holes at many start-ups, negative signaling potential to other investors, and of course the job loss for good people who ran these funds.

15/ Finally, if you are in the C-suite of a hospital and like the idea of being a VC or having your own fund: just stop it. Please.