Powerlist2014: Paul Brown, Sandbox

Paul Brown, managing director, originally conceived the idea for corporate venturing-backed venture firm Sandbox Industries when he was deputy general counsel at the Blue Cross Blue Shield Association, an organisation for US health insurance schemes.

Brown said: “While serving as the deputy general counsel, I had this idea we could do a strategic corporate venture fund, with the individual Blue Cross and Blue Shield health plans as investors.

“We could go out and not only pursue a good return for them financially, but also provide significant strategic value by helping the Blues be more innovative and get more exposure into what healthcare entrepreneurs were doing, ultimately allowing the Blues to bring lower-cost solutions and better outcomes to their customers.

“We closed the first Blue Venture Fund in July 2008. We selected Sandbox Industries as manager. For a couple of years I continued as deputy general counsel at Blue Cross and Blue Shield Association, also working very closely with Sandbox running the Blue Venture Fund. After two years doing both jobs, I transitioned to a hybrid role, joining Sandbox as a managing director and shifting to vice-president of venturing at the association.”

Brown is pleased with how the fund is progressing. He said: “I think it has proven to be a wonderful model. We raised our first fund in July 2008 and had 11 separate Blue Cross and Blue Shield health plans with a fund of $116m. That fund is fully invested and reserved. It has 12 companies in the portfolio and two really nice exits have returned nearly 40% of the fund.”

The corporate venturing unit expanded its funding base for a second fund in 2012. Brown said: “In March 2011, for our second fund we went up to $179m in capital commitments. So far this second fund has five portfolio companies and we are actively investing it. We will probably end up with 15 to 20 companies in the portfolio. We have had no write downs or write-offs in either fund, which is pretty good.”

The unit represents 25 Blue Cross and Blue Shield units. The firm also co-manages the Sandbox Cultivian Food & Agriculture Fund for a number of food and agriculture-related corporations.

Brown was a lawyer for 10 years at US-based law firm Kirkland & Ellis, before leaving in 2002 to join the Blue Cross and Blue Shield Association, which had been one of his clients at Kirkland & Ellis. He is a graduate of University of Utah and the Northwestern University School of Law.

The unit’s “very popular” Healthbox accelerator has run seven programmes in the US and London. Brown added: “We also connect corporates with innovative emerging companies via a budding matchmaking and consulting practice.”