Using Venture Philanthropy To Fill Gaps and Advance Medical Breakthroughs - Exponent Philanthropy
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Using Venture Philanthropy To Fill Gaps and Advance Medical Breakthroughs

Photo by Chokniti Khongchum

My family and I are dedicated philanthropists. We work hard to maximize the impact of our philanthropic dollars across a wide range of social issues. My passion is children’s health. This area of medical research and care is often overlooked or underfunded, and yet the unmet needs are great. As a survivor of brain cancer as a young woman in my 20s, I benefited from excellent medical care, and I am grateful to have recovered successfully. However, many patients do not experience successful outcomes, not just in cancer but in other areas of health where there are significant unmet medical needs. My heart breaks for the many sick children who are suffering, in pain, and scared. We must do better.

Filling funding gaps

Philanthropically, I have supported many areas of research in children’s health. I have learned that research, although critically important and imperative to fund, does not magically translate into treatments. In fact, new technologies have a long and uncertain path to commercialization, and a large percentage of research never leaves the lab. We need to do more to get potential treatments out of the lab and to the patients who need it.

This is a precarious and expensive journey, transitioning the technology from a research center to a commercial company that will shepherd it along the regulatory pathway to FDA approval. The most challenging part of this journey is the early stage of commercialization, also known as the “Valley of Death”. At this stage, the company must raise money to continue development, but the technology might still be unproven and the risks are high. Funding can be difficult to attain. In children’s health, where the patient populations are smaller, this challenge is even greater as the potential return on investment may be lower.

Is there a role for philanthropy to support this stage of development? It seemed to me there should be.

Employing venture philanthropy

Five years ago, I learned of a non-profit organization dedicated to solving this problem. The Catalytic Impact Foundation (CIF) uses donated funds to make impact investments in early-stage life science and healthcare companies that are developing game changing, and often lifesaving, technologies. CIF believes philanthropic capital is the perfect funding source to help ferry urgently needed treatments through the Valley of Death. Highly experienced in early-stage healthcare investing, the CIF team makes equity investments in these companies, and then uses their network and expertise to help them catalytically along the journey to FDA approval.

My philanthropic donations have helped CIF fund 43 early-stage healthcare companies (to date), supporting the development of devices, therapeutics and diagnostics that will dramatically improve or save lives. These companies target pediatric cancers, rare diseases, mental health disorders, neurodegenerative diseases, and more, impacting both children and adults. CIF has already had exits, with profits going back into the fund to be reinvested in additional promising companies—in a cycle of “Regenerative Philanthropy” where the system fuels itself. As a donor, I can track the portfolio online to see what my philanthropic dollars are achieving, along with company-specific impact reports on each investment.

Accelerating impactful innovation

One can also make early-stage investments in private companies directly. For a private foundation, the investment needs to align with the foundation’s mission to qualify as a program related investment. Investing directly also requires substantial due diligence related to the company’s social impact, its valuation, the validity of the technology, and the experience of the team, among other things. One should also continue to manage the investment, including monitoring progress by requiring regular updates, and assessing follow-on investment opportunities to minimize dilution. While this requires time and expertise in the space where you’re investing, these investments can strategically support and accelerate impactful innovation.

Working with CIF to support the development of critically needed medical technologies has shown me what philanthropy can do when deployed in creative ways. We need more innovation in philanthropy, and more donor education, engagement and feedback, so we can leverage our philanthropic funds to greatest effect.

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About the Author

Sheri Sobrato, Co-Founder, Resonance Philanthropies.

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