The strategy behind Providence Ventures and where it's headed

Aaron Martin, executive vice president and chief digital officer of Renton, Wash.-based Providence and managing general partner of Providence Ventures, joined the Becker's Healthcare Podcast to talk about how the health system thinks about innovation and the strategy for its venture fund.

Below is an excerpt from the podcast. Listen to the full episode here.

Question: What's happened with the Providence Venture Fund?

Aaron Martin: It's going exceptionally well, given all the progress and traction in health technology these days, and health tech enabled services. We have 23 portfolio companies. I would say four of them are now valued at over a billion dollars, which is quite amazing. We have a couple more that we think will soon join that group. We've had several really great exits out of our first fund, which is starting to mature, and probably most importantly, those companies are adding significant strategic value to our health system. I sit on the board of four of them and we partner very closely with those companies to transform our organization to a digital-first health system.

Our innovation model is to first try to find digital opportunities where we think digital has a significant strategic value to a problem that we're trying to solve or an opportunity we're trying to go after as a health system. If we find those opportunities, we are almost certain that they are available at other systems. So we know it's probably a big total addressable market, and a good market opportunity. That is a good problem or opportunity to go after.

We then take it through the process of asking whether we already have a solution in our existing tech portfolio, and if not, we'll go out and look for a great company that's already been built and try to partner with them and then potentially make an investment. If we don't have it and can't find it, then we'll actually build a company. We've done this twice before. Xealth was the first company we incubated and then spun out. We actually partnered with a financial venture capital firm, but even more importantly, UPMC co-invested with us because they were an early customer.

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