Taking Healthcare Innovations from Napkin to Reality

Cleveland Clinic Innovations has spawned 75 companies since 2000, and chief innovation officer Thomas Graham, M.D., says that private equity and venture capital had a hand in nearly all of them.

At Cleveland Clinic Innovations, it’s not uncommon for a future investment opportunity for private capital to get its start on a napkin.

Cleveland Clinic has a long history of contributing creative thought and advancing technologies around healthcare, says Thomas Graham, M.D., the chief innovation officer at Cleveland Clinic. “We take creative thought and gestate it, transact around it,” he says. “We do mission-driven innovations, and that’s unusual in a not-for-profit environment.”

Graham says that Cleveland Clinic Innovations (CCI) was formally launched in 2000 after coalescing in the mid-1990s. It partners with medical research centers and other institutions to innovate and test the best process methodology, and formed the only alliance of its type with other researchers, he says. “We created a platform to take what was once maybe an opportunistic, lightning-strike prospect that could be optimized and shared and scaled, and [could be] judged by hard metrics,” Graham adds.

Their partners in funding—and in bringing these healthcare innovations to fruition—run the gamut from family offices and angel investors to venture capital and private equity. So far, CCI has enabled the creation of 75 companies with its technology and expertise, and the ideas that are gestated within it need a range of funding amounts.

“We have a barrel full of things that need $50,000 for a proof of concept, a bucket that takes $100,000 to $250,000, and then we have a shot glass that needs a half a million [dollars] to $2M,” Graham says. “There are a lot that need $3M to $5M or $10M to get over the hump or valley of death. We like our partners to be knowledgeable at all of those stages.”

One of the most challenging parts of finding private funding partners for these innovations is that they are often at very early stages that may be risky and prone to failure. But Graham hopes that investors focusing only on more mature opportunities realize that they may be missing out and that their capital, coupled with the knowledge of the people at CCI, can help get these products and ideas across the finish line.

CCI aims to attract investors with sector focus or expertise in medical devices, in therapeutics like pharmaceuticals, in healthcare information technology, and in healthcare delivery solutions. “There’s plenty of room under the tent to excite and inspire the investor,” Graham says. “We’re a full-spectrum kind of place. We have ideas submitted that are literally on a napkin, and emerging companies worth hundreds of millions of dollars.”

While innovation is at the core of CCI’s purpose (and name), there is also an educational backbone, and Graham explains that any of Cleveland Clinic’s 43,000 caregivers can submit their ideas. “And then they have to go back to seeing patients or rendering care or doing breakthrough scientific discovery. We’re here to do the hard work, the engineering, etc. It’s a unique way to broaden our portfolio, the ways these bright people can be engaged.”

Nearly all of the 75 companies that came out of Cleveland Clinic had some level of investment from venture capital or private equity, says Graham, and CCI invites investors to watch the concepts and technologies produced there evolve from the organic stages through commercialization.

He notes that small, young companies—such as those that could come out of Cleveland Clinic Innovations—are providing most of the new jobs in the U.S. these days. “I feel we almost have a patriotic duty to keep doing this,” he says, “and we’re glad that private equity can partner with us for that.”