Business leaders launch VC fund aimed at Mass. health IT firms

Scott Bailey of MassChallenge spoke to business and political leaders about a new digital health incubator at the Landmark Center in the Fenway. It has enough work stations to accommodate about 30 small startups, he said.Jonathan Wiggs/globe staff/Globe Staff

Massachusetts business leaders have a new tool to help the state compete for health IT entrepreneurs: a nearly $26 million venture capital fund dedicated solely to investing in local digital health startups.

The Massachusetts Competitive Partnership disclosed details of the Massachusetts Innovation Catalyst Fund on Wednesday in an announcement that coincided with the opening of a new innovation lab for digital health entrepreneurs in the Fenway.

Both projects are outgrowths of a two-year effort at the partnership, a nonprofit group consisting of big-company CEOs, to help boost the local digital health industry and solidify the state’s position as a major hub in that sector.

“We’re sending a clear message that Massachusetts is open for business for digital health entrepreneurs,” said Jeff Leiden, chief executive at Boston-based Vertex Pharmaceuticals, who leads the partnership’s digital health efforts.

The VC fund was created to meet a need that entrepreneurs had identified, Leiden said.

“Seed funding and funding for young companies in particular to start and grow was really one of the things that we were getting beaten on by New York, by Silicon Valley, and others,” Leiden said. “[This fund] is going to give us that edge in terms of being able to provide that funding that might not have been there before.”

The new venture capital fund will be managed by an affiliate of Leerink Partners, the Boston investment bank. Only digital health companies that are based in Massachusetts, have extensive operations here, or have plans to move here will be considered for investment. The size could vary, from newborn startups to relatively established companies.

The fund’s investors include a number of Partnership members, such as Leiden, Suffolk Construction chief John Fish, Liberty Mutual CEO David Long, Bank of America CEO Brian Moynihan, and Putnam Investments chief Bob Reynolds. Several local companies — including athenahealth, Vertex, and Kraft Group — also invested.

Leiden said investors will be looking for a return, but they’re also looking to have an impact: “People are investing because they believe in growing this part of the economy.”

Partnership members will also volunteer their time to startups, either through serving as a mentor or an adviser, or in a more formal capacity as a board member.

It’s possible some of the recipients could emerge from what’s being called Pulse@MassChallenge, the name for the incubator space opening this week in the Landmark Center in the Fenway, steps from the Longwood Medical Area. The nonprofit startup accelerator MassChallenge will run the 8,000-square-foot digital health hub, with funding from a $250,000 grant from the Massachusetts Technology Collaborative. Some of that money will also go to TechSpring, a Baystate Health-owned innovation center in Springfield involved in the project.

Scott Bailey, a managing director at MassChallenge, said state funds should cover much of Pulse’s operating costs for the next 12 months. The incubator is also being supported by corporate sponsors, such as Dell, Microsoft, and Analog Devices.

There are enough work stations to accommodate nearly 90 people, Bailey said, or about 30 small startups. He said MassChallenge is hiring someone to oversee Pulse.

MassChallenge is leasing the space from building owner Samuels & Associates. Later this year, MassChallenge will hold a competition to decide who can use the space, a vetting process similar to the one it uses for its main innovation lab in South Boston. Winners will have access to mentoring, workshops, and technology — just like at MassChallenge’s flagship location. Until that time, the space will be available to digital health startups on a short-term basis, he said.

Pulse opened in a portion of Hatch, a 100,000-square-foot startup space created a year ago by Samuels on a floor that previously was used by Blue Cross Blue Shield of Massachusetts. Fish’s Suffolk Construction donated the work to build out the Pulse space. Roughly 75 percent of the Hatch floor is now occupied, said Peter Sougarides, a principal at Samuels.

“Fenway over the past year, as a lot of these new buildings have opened, has really gone through a great renaissance,” Sougarides said.