Early Medidata backer plans $150M digital-health fund

Milestone Venture Partners is readying a digital-health investment fund. The VC shop is aiming to raise $150 million from biopharma companies and others to invest in up to 20 early-stage digital health companies.

The new fund marks a slight shift in approach. New York, NY-based Milestone has a history of backing digital health companies--it has invested in 17 and exited eight--but the new fund will focus solely on the niche, VentureWire reports. The sector has proved profitable for Milestone, which invested in Medidata ($MDSO) when it was still a privately-held eClinical startup. When Milestone distributed Medidata shares for $7.65 each in 2009, it resulted in a 34 times return on its initial investment.

Medidata now trades at $44 a share and the overall digital health market has grown, too. Milestone thinks that by focusing on the hot niche--in which it has a proven track record--it can make a simpler pitch to investors. The VC shop is in the middle of raising $150 million for the digital-health fund--its fifth overall--and is approaching a broad range of potential backers. Strategic investors such as drug manufacturers are being targeted, as are the financiers that supported Milestone's other funds.

Milestone plans to allocate the $150 million to 15 to 20 early-stage digital health companies, specifically businesses that are just starting to introduce a product and generate sales. This stage can prove tricky for digital health companies. Multiple investment groups are interested in making fairly small seed investments in very early-stage startups, but fewer are willing to cough up the larger sums needed to help companies make the final leap toward being a financially-sustainable business.

- read VentureWire's article