HealthQuest Capital collects $440 mln for Fund III

HealthQuest Capital, a Belmont, California-based growth capital firm that invests exclusively in healthcare, has closed its third fund at its $440 million hard cap.

Fund III was targeting $300 million, HealthQuest Founder and Managing Partner Garheng Kong said.

The firm’s second fund collected $225 million in March 2016. HealthQuest has raised more than $785 million across three funds since its 2013 inception.

Limited partners in Fund III include large financial institutions, pension plans, strategic healthcare organizations, foundations and family offices from across Europe, Asia and the U.S.

HealthQuest has not begun investing out of its latest fund, which will seek to back about 14 to 15 companies, Kong said.

Consistent with its approach in prior funds, Fund III will invest in growth- and commercial- stage companies that improve patient outcomes, enhance efficiency or reduce costs.

As long as investments meet that criteria, HealthQuest is agnostic from a sub-sector perspective, seeking opportunities within medical technologies, diagnostics, digital and consumer health, innovative services, among other segments, Kong said: “We’re happy to do the Nobel prizes or happy to do the paper clips.”

Thematically speaking, HealthQuest is interested in investing around the transition of care and intervention outside of the hospital, the most costly setting of care, Kong said. Other priority areas, Kong added, include behavioral health and precision medicine, or the concept of treatment and prevention tailored to individuals as opposed to broad populations.

HealthQuest will invest between $10 million and $40 million in companies over time, Kong said. The firm often leads syndicates in companies that may raise as much as $100 million in equity, he added.

Target companies don’t have a revenue requirement, although typically generate approximately $10 million to $20 million in top line, Kong said. Its companies typically are not Ebitda positive, however most are growing at a 50 percent growth rate year-over-year, Kong said.

A physician and engineer by training, Garheng Kong founded HealthQuest Capital in 2012.

Other partners of the firm include Randy Scott, Todd Creech and David Kabakoff.

HealthQuest’s Board of Advisors include current and former executives from Humana, LabCorp, Bon Secours Mercy Health, Johnson & Johnson, Procter & Gamble, Medtronic and Mayo Clinic.

Action Item: Check out HealthQuest’s Form ADV: