Grant Verstandig, CEO of Red Cell
Red blood cell partners
IIn October 2022, Peter Emigh, who had recently left his role as head of geriatric care for a home care provider, had dinner with people from venture capital firm Red Cell Partners where he spoke about the challenges in this area . Less than a year later, with her support, he had launched his current company, Savoy Life, a long-term care software company that he developed there as an entrepreneur in residence.
Grant Verstandig, CEO and co-founder of Red Cell, hopes this isn’t an unusual story for his company. He says Red Cell much prefers to support and incubate its own startup ideas, rather than looking for outside companies to fund. “We are going to create businesses,” he said Forbes. “If you are an amazing engineer, why not help yourself in finance, marketing and legal areas? Whatever you have, we want to surround you with things that can help you create value as you try to change the world.
On Thursday, Red Cell announced the raising of its “RCIF I” fund of $91.2 million, bringing the total amount raised to over $200 million. The new capital is intended for pre-seed investments of up to $5 million for the companies it incubates as well as follow-on investments in subsequent rounds. The company focuses its investments in two main areas: healthcare and defense technology, with an eye on opportunities in the areas of artificial intelligence and machine learning. Its ambitious goal is to bring these companies out of stealth in less than two years with contracts already in place to start generating revenue quickly.
Health is an area that Verstandig, 34, knows well. He founded Rally Health, a digital tool that helps users navigate their healthcare, in 2010. The company was later acquired by UnitedHealth in 2014, and Verstandig has since co-founded several healthcare companies, including his own of AI ZephyrAI. Despite the growth of digital health tools in recent years, he still sees plenty of opportunity for better software in the market. “We think we can contribute a lot in terms of democratizing data,” he said. “Let’s build that system infrastructure and start being more predictive for value-based outcomes.”
In military technology, one of the company’s partners is former Defense Secretary Mark Esper, 59, who has years of experience at the Pentagon and defense contractor Raytheon. In his view, there are significant opportunities for innovation in defense technology, as major defense contractors tend to focus on “incremental improvements and gains.” Its goal, on the other hand, is to incubate companies that “come up with completely new and off-the-beaten-track ideas.”
DefConAI is a company that Red Cell incubated in the defense space. It uses machine learning algorithms to optimize the logistics of military operations, including combat. Red Cell started the company and one of its partners, Yisroel Brumer, is the CEO; It recently won a new contract with the Air Force to advance the development of its models.
Red Cell’s investments are overseen by Chief Investment Officer Roger Ferguson, a former vice chairman of the Federal Reserve, a veteran of major financial institutions like Swiss Re and currently serves on the board of directors of Alphabet. The role marks the 72-year-old’s first foray into venture capital, but he said Forbes he’s enjoying the challenge so far. “It’s a difficult time to raise money,” he said. “So I thought it would be a great opportunity for me to contribute.”
For its part, Verstandig also recognizes the challenges of its business model and the sectors in which it focuses on investing. “But I think the one thing I would say in the end is that the mission matters,” Verstandig said. “And in both of those areas: health care and national security, if we don’t innovate, the consequences are really profound.”