After we announced the launch of McKesson Ventures in December, I had the opportunity to speak with a number of people outside of our new venture capital fund – including several health care and business journalists – about why we’re doing what we’re doing.

Many seemed curious – if not slightly skeptical – about why we’re entering the seemingly crowded market of health care venture capital that is getting more crowded by the day. Several also questioned whether a company that’s perceived to be big and slow-moving can play well with others on a health care field with filled with nimble rookies.

Let me offer a few reasons why I think the timing is great for a well-established, veteran company like McKesson to join this ecosystem.

It’s Time to Thin the Herd.

There is no doubt that an unprecedented amount of venture capital has been pouring into health care, particularly in the area of digital health. Mercom Capital Group, for example, recently reported that the amount of venture capital funding in health care information technology more than doubled to $4.7 billion last year from $2.2 billion in 2013. Its great news for a industry that has long suffered from inertia and an incentive structure that optimized for consumption of high-cost services and treatments rather than for value and improving patient experience and provider accountability.

Health Care Venture Capital

These investors are drawn in by a number of compelling new dynamics. Among those are the HITECH Act, the ACA, the availability of new wireless and mobile technologies, the health care needs of an aging population, energetic evangelists like Rock Health, rising health care costs and the sobering realization that the system is broken and we have no choice but to change.

Although the money invested so far has funded critical foundation-laying work, for the most part we have yet to see the new ballparks and stadiums rise from those foundations. Most funding has sponsored initial product iteration, business model exploration and proof-point gathering. We’re now at an awkward but exciting stage where some “culling” is going to happen. That’s the reality, and the roster cuts are probably going to increase dramatically as these companies go out for large Series B and C rounds of financing. Many will be left in the dugout if they don’t have differentiated value propositions and paying customers to give references.

We’re going to see some maturing take place in this space. The leaders that emerge will be the ones who learn how to navigate the often brutal health care enterprise sales cycles or those that acquire the much-anticipated but rarely sighted “health care consumer.” For us and others like Cambia Health, now is the perfect time to enter the market and support some of those emerging leaders. We’re joining the game in the late early innings, if you will, with a well-rested and strong pitching arm.

Healthcare Expertise Is Needed.

Much of the money that’s been directed toward these early-stage companies has come from “outside” sources that understand technology and can recognize charismatic leaders going after large markets in dire need of disruption. It’s come from tech investors, life-science investors and passionate angels.

What has been in shorter supply and will be critical during these middle innings are investors that understand why the coefficient of friction is so high for driving innovation and behavior change in health care. I expect that participation and active investment from venture firms that really understand the health care industry and the health care market soon will be in greater demand.

Stakeholders like McKesson know the jobs to be done in health care. We can use that expertise and vantage point to shape the direction of the solutions that these emerging leaders are developing. We can smooth the infields and base paths that they’re trying to navigate.

Health care innovation is hard. A few, rare companies will achieve compelling liquidity without having to go deep into their bullpen, but most won’t be so lucky. The market needs more investors that have health care compasses, even if they may appear rusty and analog.

Tom Rodgers

About the author

Tom Rodgers leads McKesson Ventures. He spent more than a decade in health care venture capital, most recently leading strategic investing efforts for Cambia Health, and before that with Advanced Technology Ventures. Before his venture capital career, Rodgers had significant operating experience in the health care industry. He held various strategy and commercial roles at leading technology companies such as McKesson, Genentech, FitLinxx and The Wilkerson Group.