Red Cell Partners, under the leadership of CEO Grant Verstandig, is taking a unique approach to venture capital. Instead of simply funding external startups, Red Cell Partners focuses on creating and incubating its own companies. This innovative model was highlighted in a recent story featuring Peter Emigh, who, after discussing challenges in geriatric care with Red Cell Partners in October 2022, launched Savoy Life within a year with their backing. Savoy Life, a software company for long-term care, exemplifies Red Cell Partners‘ strategy of nurturing internal entrepreneurship.
Verstandig articulated Red Cell Partners‘ philosophy to Forbes, stating their preference for building companies from the ground up. “We’re gonna build companies,” he emphasized. “If you’re an amazing engineer, why don’t we help you with finance, marketing, legal? Whatever it is that you have, we want to surround you with the things that can help build value as you try to change the world.” This hands-on approach distinguishes Red Cell Partners in the competitive venture capital landscape.
The firm’s commitment is further underscored by the recent announcement of their $91.2 million “RCIF I” fundraise. This injection of capital brings Red Cell Partners‘ total raised funds to over $200 million. The new fund is strategically aimed at pre-seed investments, allocating up to $5 million for incubated companies, alongside provisions for follow-on investments in subsequent funding rounds. Red Cell Partners is strategically concentrating its investments in two pivotal sectors: healthcare and defense technology, with a keen interest in leveraging the power of artificial intelligence and machine learning across these domains. Their ambitious timeline targets companies emerging from stealth mode within two years, equipped with contracts to ensure rapid revenue generation.
Healthcare Innovation at the Core of Red Cell Partners
Healthcare is a domain deeply familiar to Verstandig. At 34, his entrepreneurial journey includes founding Rally Health in 2010, a digital platform designed to simplify healthcare navigation for users. UnitedHealth Group acquired Rally Health in 2014, and Verstandig has since co-launched several healthcare ventures, including Zephyr AI, focused on artificial intelligence applications in health. Despite the proliferation of digital health tools, Verstandig perceives significant untapped potential for enhanced software solutions in the healthcare market. He believes Red Cell Partners can play a crucial role in “democratizing data” within healthcare. “Let’s create this system infrastructure and start to be more predictive for value-based outcomes,” Verstandig elaborated, highlighting the firm’s vision for data-driven healthcare advancements.
Defense Technology: A New Frontier for Red Cell Partners
Venturing into military technology, Red Cell Partners brings on board significant expertise with partner Mark Esper, former Defense Secretary. Esper, with extensive experience at both the Pentagon and defense contractor Raytheon, offers invaluable insights into the defense sector. He identifies substantial opportunities for groundbreaking innovation in defense technology, contrasting it with the incremental advancements typically pursued by major defense contractors. Esper’s objective at Red Cell Partners is to foster companies that “come up with completely new ideas that are outside the box,” driving disruptive innovation in the defense space.
Defcon AI stands as a prime example of Red Cell Partners‘ incubated defense technology companies. Utilizing machine learning algorithms, Defcon AI focuses on optimizing logistics for military operations, including combat scenarios. Launched by Red Cell Partners, with partner Yisroel Brumer as CEO, Defcon AI recently secured a contract with the Air Force to further develop its advanced models, demonstrating the firm’s ability to rapidly translate innovative ideas into tangible partnerships and contracts.
Financial Leadership and Vision
Overseeing Red Cell Partners‘ investments is Chief Investment Officer Roger Ferguson, a distinguished figure with a rich background as former Vice-Chairman of the Federal Reserve and veteran of financial giants like Swiss Re. Currently serving on the board of Alphabet, Ferguson’s foray into venture capital with Red Cell Partners at 72 years old marks a new chapter in his career. He shared with Forbes his enthusiasm for the challenge, particularly in the current fundraising climate. “This is a time when it’s a challenging time to raise money,” Ferguson noted. “So I thought it would be a great chance for me to contribute.”
Verstandig acknowledges the inherent challenges in Red Cell Partners‘ unique company-building model and the complexities of the healthcare and defense sectors. However, he concludes with a resolute focus on the firm’s overarching mission: “But I think the only thing I’d say at the end is that the mission matters,” Verstandig stated. “And in these two spaces: healthcare and national security, if we don’t innovate, the consequences are really profound.” This mission-driven approach underlines Red Cell Partners‘ commitment to creating impactful companies that address critical needs in vital sectors.
