How Family Offices Are Reshaping the Future of the Healthcare Industry: Part 1

By Kristen Oliveri

The nature of a single-family office has always been somewhat of an enigma to the overall financial industry. Private capital run by the world’s largest families often flies under the radar in terms of how they invest and the causes they support.

But today’s family office, run by many next-generation family members, is taking a different, mission-driven approach. Family offices can be deliberate in their investment strategies, utilizing creative, out-of-the-box problem solving to further their individual family’s mission.

Markets Group’s Kristen Oliveri, Head of Private Wealth Content, sat down with three leading family offices to discuss the healthcare-related missions they are building out and what the overall impact may be.

Below is one family’s journey. 

John Parker, Principal and Founder, Springhood, and Vice President, Board of Trustees, Charles H. Hood Foundation  

John Parker grew up in the family office world. His great-grandfather, Charles H. Hood, set out to revolutionize the dairy industry in New England in the 1800s with the founding of H.P. Hood and Sons. The company’s original mission was to improve sanitary milk production to increase the survival rate for infants in their region.

This successful 140-year-old family-run business was founded in 1846 and sold in 1980. The family eventually created a family foundation in 1942 that was configured as an early-stage venture program to fund the family’s mission: supporting pediatric research.

While Parker went on to have his own successful investment career, he found his way back to the family foundation through the work he was doing with his father. He saw a great opportunity to invest in pharmaceutical drugs and digital health, and to fund important pediatric research. “It’s been an awesome journey,” Parker says. “I’m wearing a lot of hats with our family investments and within our family foundation.”

Today, the foundation has a true venture component to it—with a portfolio of 12 companies including drugs, devices and digital health solutions. The companies fund issues such as pediatric cancer, rare disease, autism, and the many complications children face in the newborn intensive care unit (NICU).

“We're very interested in health access, reaching low-resource settings and other overlooked markets,” Parker says. “There’s so much going on in healthcare, but what we’re looking for is a unique combination of an area that has been overlooked but presents opportunity because of changes in technology.”

When Parker joined the foundation, he was amid a new generation of trustees who went from viewing the foundation’s mission as personal philanthropy to instead being stewards of the organization. “We began with a review of operations, successes, and failures. We confirmed that we have a great track record of funding important pediatric research in New England. Our researchers went on to great career success, and the work we funded was frequently published in the top medical journals. But what we found was that successful research too often didn't reach actual children,” he says.

The foundation wanted to take its impact to the next level, changing the way it makes grants with a focus on medical technology to solve problems. “We are very deliberate around how we pursue our mission and solve a problem to further the goal of our family,” he notes.

Parker vets his investments through a wide variety of sources, including clinical research institutions, leading universities, accelerators and incubators, entrepreneurs, and other investors. “At a high level, our first question is: does this company have the potential to significantly improve outcomes for children? We view this broadly but are looking for solutions that change the paradigm of care,” he says.  

Once a thematic fit has been identified along with basic screening around size and stage, Parker’s vetting process focuses on four core pillars: robustness of science and/or technology, the business model and development plan through sales; management and other key people; and investment economics. “We spend a lot of time getting to know companies,” he says. “We're not the fastest investors. We also spend time tapping into our network of experts from clinicians, hospital administrators, industry execs, regulators and patients to better understand the strengths or weaknesses of each company.”

One particular example that Parker shared centered around an infant sleep device that helps babies rest and relax. A stochastic vibration stimulates pacemaker neurons in the brainstem to help with relaxed breathing and a lower heart rate. While the company had interesting potential as a consumer infant sleep device, the decision to invest was based on research showing that the technology could improve outcomes for opioid-exposed newborns who suffered from neonatal opioid withdrawal syndrome, explains Parker.

While the vetting process is thorough, risks are always involved, admits Parker. The specific risk factors the foundation has identified are product risk, capital risk and time. “We're early investors in medical and healthcare companies. Until trials have been completed or other evidence of improved outcomes has been generated, there is always a risk it doesn't work,” he says. He also makes sure that the foundation doesn’t run out of money before the next critical value inflection point for each investment and that it searches for situations where the pediatric focus can speed up a specific process.

“One of the things I love is when we develop something that solves an important, unmet need in a smaller market and use it as a launching point to get into much bigger markets. We’re able to start with pediatrics and take it to adults or start with medical and take it to consumer,” he says.

“While I’ve known my family’s foundation since I was a kid and was excited to join our board, I had no expectations that I would do anything more than show up for trustee meetings a couple of times a year. Instead, it took over my life—in the best of ways. Hopefully, the foundation can be helpful and solve real problems that real people are having in those early years of life.”

Stay tuned for our second installment on how family offices are reshaping the healthcare industry.