- Comcast Ventures was the independent venture arm of media giant Comcast.
- In November, Comcast wound down Comcast Ventures and rolled its team into its business development division.
- It was a kingmaker of healthcare benefits startups in the past but may not be as active going forward.
- Visit the Business section of Insider for more stories.
To understand the rise of Comcast Ventures, the venture arm of the media and telecommunications giant, it’s helpful to consider the story of a healthcare startup called Accolade.
In 2009, Accolade was trying to sign its first large client. The young company had caught the attention of Bill Strahan, then the head of global benefits at Comcast.
Strahan had a reputation for pursuing innovative experiments to improve benefits for Comcast’s thousands of workers, from technicians to executives. Landing Comcast as its first large client could make the young startup.
But Strahan didn’t want to unleash Accolade on his company’s workforce without vetting. So he turned to Michael Yang, an investor at Comcast Ventures who’d joined a few months earlier, for help evaluating Accolade, Yang recalled in a recent interview.
The two agreed to launch a pilot — which was successful. Then, Comcast Ventures agreed to invest in Accolade in 2010. In 2020, when Accolade went public, Comcast made about 21 times its initial investment, according to Insider’s calculations and information provided by Pitchbook.
The start of a new strategy for Comcast Ventures
The Accolade deal marked the start of Comcast Ventures‘ foray into the world of employee benefits. The corporate VC fund learned that combining its cash with its parent company’s workforce could prove powerful, forging a new model for corporate venture capital, a sometimes-maligned source of funding for startups.
“That birthed, for me, a nine-year run of working with the HR benefits organization on investigating and investing in interesting tech that could be used with our own employee population,” Yang said in an interview.
The fund, with $770 million in assets under management according to Pitchbook, went on to invest in other benefits and healthcare startups like Sidecar Health, Color Genomics, and K Health. It stretched well beyond Comcast’s core mission of telecommunications and digital media after Strahan hired Shawn Leavitt to oversee Comcast’s benefits network and took the partnership between the benefits division and Comcast Ventures “to new heights,” according to Yang.
Now, though, Comcast’s future as a healthcare investor is in doubt as its activity in the industry declines, Yang and another former Comcast Ventures employee told Insider.
Comcast folded the venture fund in November
In November, Comcast shuttered the independent venture fund. Comcast said the investing team will be absorbed by its corporate development arm. It will retain stakes in some portfolio companies, but will focus on growing the corporation’s position in media and telecommunications instead of placing bets outside Comcast’s core mission.
“Corporate will decide where healthcare fits into the Comcast world,” Yang told Insider over email.
He mentioned Quil Health, a joint venture between Comcast and health insurer Independence Blue Cross that aims to support patients virtually via an app and, in some cases, their televisions, as an example of how Comcast’s strategic development could work in the future.
The story of the rise and fall of Comcast Ventures highlights the precarity with which corporate venture funds operate. The funds’ dependence on a single investor, the parent corporation, leaves it unable to diversify investment theses or goals. Once the fund falls out of favor with that investor, the entire operation could be upended or, in the case of Comcast Ventures, shuttered entirely.
“Building value for the company, and not only looking out for the interest of the corporation, that takes time and a track record,” Mark Klopp, the corporate venture advisor to the National Venture Capital Association, said. “And that reputation will be what matters with the VC leads and with the CEOs of companies. It’s a small community. CEOs talk and refer investors to each other.”
Comcast will continue to work with healthcare companies through its business development department as it aligns with the company’s priorities, the company said in an emailed statement to Insider.
“Comcast Ventures has a strong track record of investing and partnering with innovative healthcare companies. As we look to our 2021 priorities, we’ll continue to work with healthcare innovators as well as those in connected services, technology, and enterprise solutions,” Sam Schwartz, chief business development officer at Comcast Cable, said.
Insider spoke with three former Comcast Ventures employees and three founders of Comcast Ventures’ portfolio companies for this story. Some people were granted anonymity to discuss sensitive information about the fund for fear of retribution from Comcast. Leavitt died of a heart attack in April at age 55.
Corporate venture’s less-than-rosy reputation
In the first dot-com boom, corporate venture was all the rage. It was an easy way for more established companies to get in on the rapidly growing technology sector in Silicon Valley. It was during that boom that Comcast Ventures emerged.
Comcast Ventures started in 1999 as Comcast Interactive Capital. It gained ground after it absorbed NBC Universal’s corporate venture arm, called Peacock Equity Fund, in 2011, as part of Comcast’s acquisition of NBC.
Like most of Comcast’s enterprise, the venture arm was located in Philadelphia. When Yang joined in 2009, he pushed to stay in California’s Bay Area to build a network within Silicon Valley and elevate Comcast’s reputation with the area’s startups.
In 2011, Comcast executive Amy Banse was sent to San Francisco to run the whole fund, and she told Insider at the time that it was a strategic decision to keep the fund separate from the company to build trust with entrepreneurs. She maintained that strategy up through at least 2019. In 2020, she announced that she was moving to an advisory role within Comcast and would leave the company by the end of 2021. Banse did not respond to Insider’s request for comment for this story.
“Because by making it clear to any given entrepreneur that your first priority is to make his company a success, you’re going to see better entrepreneurs, you’re going to have better deal flow. And in having the better deal flow, you’re going to be more strategic to your LP,” Banse told Insider in 2011.
Corporate venture capital is rarely a founder’s first choice for funding, because the industry is seen as an acquisition pipeline for major companies hoping to get ahead of younger and nimbler competition. Taking corporate venture funding could be the end of a startup’s journey.
In healthcare, however, the dynamics are different. Corporate venture can act as a foot-in-the-door of a notoriously difficult industry, where startups are often trying to sell their products or services to powerful incumbents, such as hospitals and major employers like Comcast.
Comcast isn’t the only firm to shutter its corporate venture fund in recent years. GE wound down its healthcare investing activity in June 2019 when its parent company started suffering financially, and ultimately sold off a portion of its portfolio of companies a month later.
As a Fortune 500 customer, Comcast could make or break small startups by agreeing to purchase their services. As a strategic investor, it had access to the company’s internal data showing successes and challenges that other investors could only dream of.
“The corporate venture firm is selling a value add to startups,” Klopp said. “That includes being able to help the smaller company accelerate its success, but there needs to be the ability to get traction internally.”
For a company like Accolade, which provides software that helps employees understand and navigate the healthcare system with a team of clinicians, partnering with Comcast was an enormous victory. Its network of roughly 168,000 employees would yield a hefty contract, but also provide a robust set of data that it could turn around and use to convince other companies to purchase its service.
Accolade’s pivotal trial run compared results from 25,000 Comcast employees who used the service against another 25,000 who didn’t, CEO Rajeev Singh told Insider. If the group using Accolade didn’t have fewer emergency room visits or other high-cost care, Accolade wouldn’t get paid, Singh said.
“It was a successful pilot,” Singh said.
After the trial, Comcast Ventures invested in Accolade and signed on as an official customer in early 2010. A decade later, Comcast is still using Accolade, and accounted for 35% of Accolade’s revenue as of 2019.
Yang said the investment in Accolade kickstarted a new conversation within Comcast Ventures about making more investments beyond fintech and media.
Yang hired a team of investors to lead the charge out in San Francisco, beginning in 2010 through his departure in 2018. They were supposed to find other companies that could provide healthcare benefits. In 2012 they found success in Body Media, a consumer wearables startup that seemed promising for Comcast’s technicians. It ultimately sold to Jawbone, another wearables company, a year later.
Leavitt also served on the board of K Health, a digital health startup that provides medical advice via its app using artificial intelligence, after investor Daniel Gulati brought the company to Leavitt’s attention. Comcast Ventures participated in K Health’s seed round in 2016, and subsequently led its 2018 funding round that roughly tripled its valuation in just two years, according to Pitchbook data.
The Comcast Ventures team also started Brightside, a financial wellness startup modeled after Accolade, in 2017. It was the first startup to be incubated within Comcast Ventures. Brightside cofounder and former Comcast Ventures principal Callum King declined to comment on the company’s current relationship with Comcast as a customer or investor.
Along the way, however, tensions emerged. Comcast shied away from publicizing the fund’s activity. In 2018, The New York Times wanted to cover Leavitt’s work, and his strategy in working with the Comcast Ventures team to build or invest in solutions that didn’t already exist, after hearing him speak at several industry conferences about investing in employee benefits.
Instead of making Leavitt or other executives available to the reporter, Comcast instead pointed back to Leavitt’s keynote speeches, which were ultimately included in the published story.
Reed Abelson, the Times reporter who wrote the story, confirmed to Insider that Leavitt and Comcast both declined to be interviewed for the story, and noted that in the published article. She said she relied on Leavitt’s public comments, since he is a frequent speaker at conferences, some of which she had attended.
Without cooperation from the corporate team, Comcast Ventures communications executive Tina McNulty sought out Yang to help tell the fund’s story.
“I had corporate telling me, we aren’t talking, so I set up the meeting for Michael and had him do all the stuff,” communications executive Tina McNulty told Business Insider. “We just couldn’t get true support, which is a shame.”
McNulty and Yang both left the fund in 2018, after Yang said they saw “the writing on the wall” that healthcare investing would no longer be a priority for the fund. The executive team in Philadelphia wasn’t providing the support Yang and his team needed, he said.
Yang joined OMERS Ventures, the venture arm of the Canadian pension giant, as managing director leading healthcare investing in early 2019.
Gulati, the investor who oversaw the fund’s investment in digital health startup K Health, left in 2020 to start his own early-stage firm, Forecast Fund. That leaves Fatima Husain, a principal at the fund, as its sole healthcare-focused investor. Comcast declined to make Husain available for this story.
McNulty is currently the chief communications and people officer at blockchain startup Figure. Comcast didn’t fill Leavitt’s role after he died. Strahan is now executive vice president for human resources and oversees HR.
The fund is still investing, but without a clear direction
After the departures of Yang, Leavitt, Gulati, and King, Comcast Ventures switched its strategy and started backing consumer healthcare startups like birth control pill delivery company Nurx and on-demand eldercare provider Papa.
Comcast Ventures led Papa’s $18 million Series B in September, and participated in Nurx’s Series C extension in August.
Papa founder and CEO Andrew Parker said he had started talking with Comcast around the time of Yang’s departure in 2018, roughly two years prior to his Series B. He declined to specify why the fund didn’t invest earlier, but said the two parties’ incentives aligned well leading up to the September funding round.
“Before I got involved with Comcast, that was about two years ago, I wasn’t aware myself that they invested in healthcare or had a venture arm at all,” Parker told Insider.
Parker and Nurx CEO Varsha Rao said little has changed in their relationships with Comcast since the transition in November. Both said they continue to lean on Comcast for advice, particularly in advertising and media, and Husain is still on Papa’s board of directors.
However, two former employees said the new investments seem to lack a direction, based on their observations and knowledge of the space. Instead, they said the investments feel like a haphazard attempt at cashing in on the current healthcare funding boom brought on by the coronavirus pandemic and spurred by a flood of private investor interest in the space.
A source close to the fund said Comcast’s decision to roll back the venture arm’s activity could ultimately come back to haunt it if founders see the move as a reflection of the company’s commitment instead of a straightforward business decision.
“If Comcast wasn’t committed to the venture arm, how can they be committed at the corporate level for these companies?” the person said. “I can’t imagine how they would do it.”