Providence spun off its VC arm to partner with other health systems

Providence has proven to be one of the most technologically advanced health systems in the country over the past decade. The Renton, Washington-based health system has conducted hundreds of technology pilots, launched multiple digital health startups and poured millions into companies developing innovative health tools.

Over the past eight years, Providence’s venture capital division has been an important part of the health system’s technology and innovation strategy. This month, the health system announced that it had spun off Providence Ventures and renamed it Allumia Ventures.

Allumia – now an independent venture capital firm – also announced the closure of its third fund. Providence is investing $150 million in the third venture fund, just as the health system did for the previous two funds.

As Allumia (then Providence Ventures) reached the end of its second fund, leadership realized it was time to spin off the company because it would allow the company to build relationships with a broader range of health systems, said Allumia Managing Partner Jeff Stolt.

“Given our many years of experience in this space, numerous other health systems, in addition to Providence Ventures, have reached out to us to challenge the way we have done what we have done and, quite frankly, expressed interest whether they could do it together with us or invest in the fund. Because we spun out of Providence and maintained a traditional venture capital legal structure, we have now enabled this in a more formal way,” he explained.

Allumia wants to build on the $150 million that Providence committed to the third fund by inviting three to five other health systems into the fund as limited partners, Stolte added. He said the venture capital firm is aiming for its third fund to be in the $200 million to $250 million range.

The company is seeking “like-minded, mission-driven organizations that look and feel something like Providence” as new investors for the fund, he said. These organizations may not operate on the same scale as Providence – but Stolte noted that working with health systems of different sizes and structures will deepen Allumia’s understanding of the regional differentiation of market needs.

Allumia currently manages a portfolio of 28 investments and 10 successful exits. In addition to Stolte, Allumia consists of six other people: four investment experts, a CFO and a project manager.

As for the company’s investment strategy, Stotle said it will remain largely the same as before the rebrand. Allumia’s investors will continue to invest in solutions tailored to health systems, integrated delivery networks and sometimes payers, he noted.

“Our model really starts with our team’s close relationship with Providence – and then in the new fund with our new limited partners. “We will continue to spend significant time picking the minds of thought leaders and business leaders within these organizations to identify the areas of greatest need,” Stolte said. “We will begin by defining the issues that our limited partners care about most, and then we will scour the landscape to find the best solutions that appear to address those issues.”

He added that some of the key areas of interest for Allumia in recent months are behavioral health solutions, technology to address healthcare workforce shortages and AI to increase operational efficiency.

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