Sponsored | August 24, 2022

Why J&J Impact Ventures invests in other funds

Dana Deardorff

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Guest Author

Dana Deardorff

Editor’s note: This article is sponsored by Johnson & Johnson Impact Ventures, which supports ImpactAlpha’s Investing in Health coverage. In partnership with J&J Impact Ventures, ImpactAlpha is exploring the market potential of impact investments in purpose-driven entrepreneurs working to improve health outcomes for underserved communities around the world.

Investing in purpose-driven entrepreneurs innovating at the front lines of care – that’s the core mission of Johnson & Johnson Impact Ventures (J&J Impact Ventures), an investment fund within the Johnson & Johnson Foundation. Although the primary focus of our work has been investing directly in healthcare companies, direct investment is only one of several ways that we are supporting innovation in the healthcare impact space. 

Another key component of our broader fund strategy is to invest in other impact funds. Why? We believe this is an important way to effectively pool resources, catalyze additional funding, support entrepreneurs and enterprises in the health impact space that may not meet J&J Impact Ventures’ criteria for direct investment, and, ultimately, reach the communities most in need. 

In the last six months, we’ve invested in two healthcare impact venture funds: HealthQuad and Cross-Border Impact Ventures (Cross-Border).

Mission alignment 

We selected these two funds because they share our vision for supporting impact entrepreneurs in healthcare areas that have great potential but also great need. HealthQuad is nurturing and scaling innovative models to transform healthcare in India, and Cross-Border is focused on disruptive new technologies for women’s and children’s health globally.

Our analysis of potential funds followed a rigorous diligence process similar to that used for direct investments. 

First and foremost, we wanted to ensure that there was alignment with our overall social impact approach, and that operational governance included the appropriate focus on impact outcomes, metrics and reporting. Another key consideration was the strength of the management teams, with the relevant backgrounds and expertise for successful impact investing in the healthcare space. Although we reviewed many high-quality impact funds with multi-sector portfolios, we ultimately selected investment firms exclusively dedicated to healthcare.     

This approach to landscaping and diligence was essential to ensure that the funds were a good fit for our portfolio strategy and overall investment criteria.

Expanding impact

With added capital from J&J Impact Ventures and other investors, these funds can continue to scale their impact and support even more entrepreneurs. At the same time, these investments allow us to expand our reach into new geographies and underserved patient populations. 

Rather than just increasing the size of our portfolio with the same types of investments and companies, we have intentionally partnered with funds in strategic areas that are complementary to our focus and resources. This is an approach we hope more impact investors will take, as they look to expand their reach into new areas of need in healthcare.

In the case of HealthQuad, for example, we wanted to support impact entrepreneurs in India, given the strong need and opportunities there to improve healthcare. But with limited bandwidth on our core team, HealthQuad provided a great vehicle to utilize the expertise and local market knowledge of an established investment team in India. We were also attracted to their focus on health tech platforms and business models designed to scale at a significant level

With Cross-Border, we saw a unique opportunity to invest in companies addressing underserved areas of healthcare for women and children in countries around the world, as well as to support a fund run by two women. Additionally, their investment focus includes the sub-sectors of medical devices and diagnostics, which is complementary to the healthcare services and delivery models of J&J Impact Ventures’ current portfolio.

In both cases, there is the potential of utilizing existing expertise and resources, rather than building them from the ground up. This is an effective way to balance our portfolio and maximize the impact of our investments in the short- and long-term. 

Collaboration opportunities

In addition to the financial support, investing in other funds also provides an opportunity to establish strategic relationships for mutual benefit. There are three main areas where we see this potential for collaboration with other funds:  

1) Sharing pipeline and co-investment opportunities: Tapping into unique networks and sources for deal flow. 

2) Learning best practices: Pushing the field of impact investing to improve impact methodologies and operational efficiencies.  

3) Supporting other portfolio companies: Leveraging resources and connections for fundraising and future growth.  

From the J&J Impact Ventures side, we are eager to provide our perspective and position among other LP investors in the funds. Our work contributes to Johnson & Johnson’s position as the largest and most broadly based healthcare company in the world. But impact investing in the healthcare space is still evolving, so we appreciate the opportunity to engage and learn from peer investors. To solve the world’s toughest health challenges, we must work collaboratively. 

We are excited about the future success of the portfolio companies for both HealthQuad and Cross-Border, and we are hopeful for their potential to achieve both strong social impact and financial returns. We will continue to consider new investment opportunities in similar impact funds, and we will also evaluate the longer-term strategic allocation for funds as our portfolio continues to grow. 

Dana Deardorff is investment lead at J&J Impact Ventures.