Ours is an extremely competitive business. In addition to providing capital, venture capitalists assist with recruiting, connecting portfolio companies to potential customers, and engaging in strategic discussions. Great entrepreneurs have no shortage of investors with whom to partner. Therefore, the privileged position for investors is to flex on thought leadership and be able to draw on relevant prior experiences. As such, we could not be more excited to welcome Dr. Graham Gardner and Dr. Rochelle Walensky as Executive Partners to the firm.
Graham founded and scaled one of the most meaningful companies in the healthcare technology sector, Kyruus Health, which he sold very successfully at the end of 2025 to RevSpring. After getting two degrees from Brown University (BA, MD), Graham practiced medicine for several years before getting his MBA at Harvard Business School. He then became a venture capitalist, but not for long as he quickly started his first company while serving as a Venture Executive at Highland Capital Partners.
Graham has been well known to us for many years. In fact, one of our other Executive Partners (Gary Gottlieb) served on the Kyruus Health board for over a decade. In addition to offering thoughtful strategic advice to our portfolio companies, Graham has an extraordinary network among provider and payer executives which will be a tremendous commercial resource as well. The path to building a significant company is nonlinear as companies search for product / market fit and Graham will be a great asset along that journey.
Rochelle was also known to all of us, if nothing else from seeing her on television every day during the height of Covid in her capacity as the Director of the Centers for Disease Control and Prevention from 2021 – 2023, providing thoughtful, competent, and reassuring assessments as to how the pandemic was unfolding. As a recognized infectious disease expert, Rochelle is deeply articulate about issues confronting the healthcare system at large. Much of her academic work now as a Senior Fellow at Harvard University (where she also received her MPH, in addition to having an MD from Johns Hopkins University and a BA from Washington University) is focused on the clinical and economic outcomes of medical decisions, with a specific emphasis on access to public health.
Many of our founders are focused on technologies that utilize AI to affect systemic transformations of the healthcare delivery system. Rochelle will be an extraordinary resource for those portfolio companies that look to address the system’s shortcomings and failures with an emphasis on lowering costs and improving access. She, too, is incredibly well networked in the public policy arena, and obviously, the role of government officials and regulators is critical as the healthcare industry is being re-architected.
Please join us in welcoming these two healthcare industry leaders to the Flare Capital team.
An update on another important component of our extended team, which is our Flare Scholars program and Flare Scholar Ventures (FSV), our pre-seed investment initiative for Flare Scholar-sponsored projects. With 509 current and former Flare Scholars, who are young brilliant passionate emerging healthcare technology entrepreneurs, we now have 38 FSV portfolio companies, meaningfully exceeding our initial goal. Four of those companies are now significant core investments while 16 have raised meaningful follow-on rounds of capital. In total, our FSV companies have raised more than $400 million, most notably and recently is Qualified Health. The progress of the FSV program is inspirational as we continue to on-board the next generation of great healthcare technology entrepreneurs.
We hope you will join us for our next quarterly Expert Roundtable Series on June 9, 2026 at 12:00pm ET (register here). To stay connected, subscribe here for the latest updates, news, and insights from Flare Capital Partners.
We could not be more excited to announce that Alyssa Tsenter has joined the firm as a Senior Associate. Venture capital firms add to their investment teams infrequently, so each hire is important and deliberate with an extended interview process to assess capabilities, commitment, and all-around compatibility. While we will make a few hundred investment decisions together over the course of a fund, we might only make a handful of hiring decisions. Notwithstanding that, this one was easy as we continue to build our core investment team.
Alyssa earned her MBA from Harvard Business School this past spring, where she focused her course work on the healthcare industry. Prior to HBS, she spent nearly five years at ZS, a leading life sciences management consulting and technology firm. While there she worked on projects that would shorten R&D development timelines, elevate promising pharma assets, and rearchitect innovation processes. Her understanding and fluency of the life sciences sector underscores our increased focus on partnering with entrepreneurs to increase operating efficiencies across the entirety of the life sciences landscape. Alyssa also received an undergraduate degree in Chemistry with an emphasis in Chemical Biology from the University of Southern California.
After our first meeting with Alyssa, her passion and deep understanding of this sector’s many complexities and nuances were abundantly clear. Additionally, while in business school, Alyssa interned for a few venture capital firms and venture studios which sparked her interest in investing in technologies that will transform the healthcare and life sciences industry.
And what an endorsement to get an unsolicited note from a senior HBS faculty member when he learned of Alyssa’s joining the firm – “she was an absolutely terrific student…” Further confirmation of what we all thought.
Alyssa also has an adventurous side. Her parents emigrated as teenagers from the Soviet Union, which left an indelible impression on her. She graduated early from USC to travel the world teaching yoga in places like Thailand, Israel, Peru, and Panama.
Please welcome her to the Flare Capital team…
A quick update on our Flare Scholars program and our pre-seed investment activities with Flare Scholar Ventures (FSV). Since inception, we now have 446 current or former Flare Scholars, who are passionate young professionals from many of our strategic limited partners and leading academic centers around the country. At the end of 2019, we announced the formation of FSV, whereby we earmarked up to 1.0% of our funds to support Flare Scholar-sponsored opportunities. To date, we have made 34 FSV investments, which collectively have raised a total of $147.0 million as compared to our initial investment of $3.6 million. Subsequent to our initial pre-seed investment, we have invested an additional $12.1 million in three of the FSV companies (Cascala Health, Ounce, Visana Health) as they continue to quickly scale.
Importantly, we will kick off our recruiting efforts for the Class of 2026 Flare Scholars on September 8th and remain excited about the FSV program. Capital will always follow great talent and in this market, it will be great talent that wins.
And please join us for our next quarterly Expert Roundtable Series webinar on September 23, 2025, at noon ET. And subscribe here to follow other news and insights from Flare Capital Partners.
Notwithstanding that deal activity in 2Q24 was at an eight quarter high with $55.6 billion invested in 4,226 companies (Pitchbook data, including estimated unannounced deals), $34.1 billion of that was invested in just 84 companies (2.0% of the total), skewed dramatically by the handful of massive AI financings. Or are we seeing an actual shift in investor sentiment to be more risk-on? Since the tempered consumer price inflation reading in early June, the Russell 2000 index has increased 6.5% while the S&P 500 index has declined 2.3%. The betting markets now price in a 100% chance of interest rate cuts in September.
Venture Capital Investment Activity
Source: Pitchbook, National Venture Capital Association
Given that $459.6 billion was raised by venture firms between 2020 – 2022, it is not surprising that much of this capital is shaking loose now as firms start to bump up against the 5-year new investment window, particularly in light of stabilizing economic conditions. Obscured by the few very large financings in 2Q24 are signs of genuine recovery in sentiment and that venture capitalists are being less parsimonious. Almost 10% ($5.1 billion) of 2Q24 investments were in companies raising capital for the first time, which tends to be a few percentage points lower. Additionally, 2Q24 saw the greatest number of early-stage financings since 1Q22 ($18.0 billion in 1,658 companies; average round size $10.9 million), suggesting an elevated level of innovation coming to market.
It is becoming clearer that round sizes are increasing substantially, pointing to both greater investor conviction but also in an attempt to reduce future financing risks; that is, build larger deeper syndicates early to provide additional runway. Approximately $39.7 billion (71% of 2Q24 investment) was invested in financings greater than $50 million in size, one of the highest levels ever; these rounds typically account for 50-60% of quarterly activity. Conversely, round sizes less than $1.0 million represented 0.3% of all financings in 2Q24, a low-water mark, pointing to real weakness in the pre-seed market, acknowledging that value-creating milestones are hard to reach on such limited amounts of capital.
This increased venture investment activity has put upward pressure on valuations under the adage that “you cannot overpay for good companies,” most notably in the venture growth segment where the median pre-money valuation is $238 million in 1H24 as compared to $140.0 million in 2023. There were 213 venture growth rounds in 2Q24 (5.0% of deals) that accounted for $10.7 billion (19.2% of dollars). Continued strengthening of these valuations will give early-stage investors further confidence, particularly given the relatively modest increases in valuations at the earlier stages. Notwithstanding that, down rounds in 1Q24 represented 17% of all venture capital financings – the greatest level in ten years. If one were to include flat rounds (extensions), that jumps to more than 27%, according to Pitchbook data.
Median Pre-Money Valuation
Source: Pitchbook, National Venture Capital Association
Ultimately, it is liquidity that drives the venture capital industry, and exit activity remains inconsistent and somewhat muted, certainly in light of how much capital has been raised and deployed over the last five years. Pitchbook estimates that for venture funds between five and ten years old, distributions to paid-in capital is approximately 5.1%, and that as of the end of 2023, there was $296.2 billion of “dry powder” at venture capital firms. In spite of that, the maturity of the secondary market and liquidity for both private company stakes and limited partner interests in mature venture funds is notable. Discounts for private company stakes have tightened from 46% in December 2023 to 31% in June 2024.
In 2Q24, there was $23.6 billion of exit activity across 326 transactions, well below the high-water mark of $203.0 billion and 504 transactions in 3Q21 but well ahead of $6.9 billion and 277 transactions just four quarters ago in 2Q23.
Somewhat more troublesome is that the average exit transaction value was $72.4 million, well below the valuation of venture growth rounds and largely equivalent to late-stage venture rounds of $68.6 million in 1H24. It is estimated that nearly 90% of M&A transactions in 2Q24 had terms that were undisclosed (likely poor outcomes) and that those companies accounted for $3.0 billion of invested capital or $34 million per company. This churlish behavior exhibited by acquirers will need to improve before liquidity is once again predictable and robust.
While public equity indices were hitting record highs consistently in 2Q24, the benchmark of venture-backed IPO Index has yet to meaningfully recover anywhere close to its highs between 2020 – 2021.
Venture-Backed IPO Index (Market Cap/Sales Multiple)
Source: Pitchbook, National Venture Capital Association
Complicating all of this is the phenomenon that is Artificial Intelligence (AI). It is estimated that the category accounted for $27.1 billion of 2Q24 investment or nearly half. In 1H24, 40% of all newly minted “unicorns” were AI companies (13 of 34 companies) and Pitchbook estimates that 60% of the increase in venture-backed companies was captured by AI companies. Valuations of AI companies consistently and materially outpace valuations of other sectors. Importantly, though, most companies regardless of sector, now claim some degree of AI provenance.
Pre-Money Valuations, by Stage (1Q24)
Source: Pitchbook, Axios
An important driver of the increased early-stage investment activity in 2Q24 was clearly the investor euphoria over AI; early-stage AI deals was the single most prevalent category this past quarter, representing nearly 37% of total activity. Particularly exciting about this phenomenon is that it underscores how robust this segment of the economy is, as many technologists step away from larger established companies and research centers to raise capital.
AI Venture Capital Transactions, by Stage
Source: Pitchbook, Axios
This is not just a U.S. phenomenon, although America is a clear and dominant leader in the AI arms race. Over the last decade, more than $335 billion has been invested by the private sector in the AI industry. According to S&P Global, there have been 5,509 AI companies funded during that period (~$60 million on average), which promises a robust national AI ecosystem for decades to come. Innovation economies benefit from strong local clusters, complimented by a supportive regulatory environment. This national success story will be a central driver for venture capital activity for at least several more quarters.
Cumulative Private Sector Investment in AI (2013 – 2023)
Source: S&P Global, Axios
A recent J.P. Morgan survey of 166 leading Chief Information Officers, who manage a total of $123 billion in annual technology investments, concluded that AI spending will increase by 40% over the next three years. A similar CIO survey by Piper Sandler concluded that nearly half of all companies moved from an AI testing phase to an AI implementation phase in 2023. Nvidia reported that 1Q24 revenues increased 262% over 1Q23, with earnings powering up by 461% over the same period.
While there is an emerging debate as to the true (near-term) customer ROI for AI deployment, there is an interesting early signal that AI tools are starting to show impact on the enterprise. Just over the last two years, the unemployment rate has moved up 200 basis points for IT professionals (147k unemployed in June 2024), admittedly with some volatility, perhaps suggesting that low-end administrative tasks are starting to be replaced by AI applications. Clearly, overall demand for skilled IT professionals will remain strong but this is certainly a metric to track as AI is more broadly deployed across the enterprise. For venture capitalists, these data also point to other activities poised to be disrupted.
Unemployment Rate for IT Professionals
Source: Janco Associates, Bureau of Labor Statistics
In spite of this, certain sophisticated investors and industry analysts, most recently at Goldman Sachs, Barclays, Sequoia Capital to name a few, have offered words of caution on the ability to drive material revenue growth solely due to AI. Clearly, the companies which are building the AI infrastructure (both hardware and “software enablers”) are seeing dramatic revenue acceleration (see below) but will Corporate America overall. Goldman Sachs estimates that the AI “build-out” will total $1.0 trillion; Bridgewater Associates estimated that over $100 billion was invested by U.S. companies in 2023 alone. But with widespread deployment, any competitive (or comparative) advantages may quickly dissipate, and on its own, AI does not (yet) make workers smarter, just more efficient.
Revenues by AI-Exposed Sector
Source: Goldman Sachs, FactSet
One other note of caution: public equity’s infatuation with AI has led to dramatic concentration of market value in just a handful of stocks. Notably, according to a recent Barron’s analysis, when public AI companies miss on quarterly earnings, those stocks have dropped 5.3% versus just 2.5% for all other public companies, suggesting the potential for greater market volatility should emerging AI vendors disappoint. For the last ten years, the Top 10 stocks accounted for 19% of total market value and 47% of total profits; in 2023, those amounts were 27% and 69%, respectively. Interestingly, the S&P 500 Index tends to outperform when the public markets are concentrating.
Stock Market Concentration
Source: FactSet, Compustat, SEC
Obviously, the healthcare sector is in the crosshairs of AI deployment, particularly around clinical and administrative workflows. PricewaterhouseCoopers’ Health Research Institute projects that commercial healthcare costs will 8.0% in 2025, while preliminary estimates from the Centers for Medicare and Medicaid Services show that U.S. healthcare spending increased by 7.5% in 2023 to $4.8 trillion. Now with extraordinary pressure on managed care organizations, the need to drive operating efficiencies has never been greater.
Those needs are reflected in the funding data for the healthcare technology sector. Overall, approximately $75 billion has been invested in the digital health sector over the past five years. Rock Health data suggest that $3.0 billion was invested in 133 companies 2Q24, bring 1H24 to $5.7 billion invested. As a point of comparison, HSBC tallies $7.0 billion in 471 companies in 1H24. The investment activity this year suggests that 2024 may well be the third most active year in this sector, and absent the “Covid Bubble” of investor enthusiasm of 2021-2022, puts the sector back on trend of $8 – $12 billion of investment in 400 – 500 companies each year.
Most of the activity in 1H24 was in early-stage companies with Seed/Series A/Series B rounds representing 84% of all financings. AI-enabled Series A companies represented 38% of all Series A financings. Clinical and Non-Clinial Workflow companies captured $1.5 billion (26% of total) of the capital invested in 1H24, according to Rock Health. It is estimated that 34% of 1H24 activity was directed at companies that leverage AI.
At the end of 2Q24, the Leerink Partners composite Healthtech index was valued at nearly $137 billion and was trading at 2.6x 2024 revenues. Year-to-date stock performance was (11.7)%, which has continued to pressure exit activity in this sector. Leerink Partners estimates that there has been $12.6 billion across 76 M&A transactions, on pace to match 2023 levels. Rock Health identified three digital health IPOs in 2Q24, after a period from 2022 – 2023 when there was literally just one IPO. While an improvement, this level of exit activity must improve in order to sustain private capital’s longer-term interest in the sector.
As complicated as healthcare is, it is staggering to think that the standard 3×3 Rubik’s Cube, which celebrated its 50th anniversary this quarter, has 43 quintillion possible combinations. That is 43,252,003,274,489,856,000…and the world record to solve the puzzle is 3.134 seconds. And that was accomplished by a 22-year-old from California. Given that, one is hopeful that AI might be able to address many of healthcare’s challenges, maybe not as fast though.
On the Flying Bridge 