Earlybird Health closes twice-larger second fund, will write bigger checks

Germany-based Earlybird Health announced the final closing of its second fund of €173 million (around $185 million). This is more than twice the size of Earlybird‘s first healthcare-focused fund, Health I, which reached €85 million at final closing.

While both funds are similar in investment thesis and stage, this will enable Earlybird Health to write larger checks. Since it plans to predominantly invest in Europe, including the U.K., this could be good news for healthtech startups in the region, many of which are running out of cash after the fall of telehealth company Babylon.

However, there’s a lot more to health and better patient outcomes than digitalization; Earlybird Health’s focus encompasses medical devices, diagnostics solutions, R&D tools and biopharma. The latter already resulted in an IPO for Earlybird Health’s first fund when eye care company Oculis went public on NASDAQ in March 2023.

Earlybird Health’s existing portfolio also comprises Priothera, whose co-founder Florent Gros joined the fund as a partner in 2022.

Another newcomer in Earlybird Health’s world is limited partner British Patient Capital, a subsidiary of state-owned British Business Bank. It joins a range of LPs that also includes BARMER, one of Germany’s largest public health insurance providers. According to Earlybird Health, it was the first of such insurers to invest in a VC fund when it backed Health I.

“Having health insurers as cornerstone investors enables us to understand and address key patient needs by supporting innovative healthcare,” said Thom Rasche, a partner at Earlybird Health.

For portfolio businesses, this type of LPs also opens the door to “insights into the most promising angles for commercialization and potential direct endorsement,” Rasche said, citing the collaboration between BARMER and portfolio businesses iSTAR Medical, Noscendo and Wellabe.

While Earlybird Health has its own team of 10 people, it also has access to Eagle Eye, an in-house AI tool shared across Earlybird and its other independently managed funds. From uncovering stealth mode businesses to other opportunities, Earlybird Health principal Christoph Massner expects it will help the fund’s deal sourcing and due diligence process be more efficient and more inclusive.

Inclusion is part of the ESG goals that Earlybird Health committed to, as detailed in its inaugural 2022 impact and ESG report. As an article 8 fund under the EU’s Sustainable Finance Disclosure Regulation (SFDR), it sees these efforts as a “core part” of its daily activities, “whether investing or general operations,” partner Lionel Carnot said. Ahead of the release of the fund’s 2023 report, he disclosed that two portfolio businesses also “developed and implemented an ESG strategy in 2023” as a result of its push.