Why Red Cell, Why Now

Today’s macroeconomic environment can be summed up in one word: uncertainty.

From tariffs, interest rates, and inflation to deregulation, budget cuts, and deficits, economists, pundits, and others are watching closely to discern how current events will affect the market in the near and long term. As an investment and incubation firm, Red Cell Partners is, of course, facing the same external market forces as everyone else. But it does so at a distinct advantage.

When I joined Red Cell more than two years ago as Chief Investment Officer, several things factored into my decision. Having known Red Cell’s Founder Grant Verstandig for more than a decade, I was already aware that the company was helmed by a visionary leader with a proven track record of success. But I also understood the company has a winning strategy centered on its differentiated investment-incubation model and world-class team of domain experts.

Back then – and, perhaps, even more so now – there was a supply-demand imbalance with a massive amount of startup capital looking to go to work in healthcare and national security, but not enough distinctive, scalable, and fresh ideas to fund. What I found fascinating about Red Cell was its inherent ability to circumvent this supply-demand issue and drive real alpha generation by building a concentrated portfolio of high conviction, best-idea companies as opposed to the increasingly commoditized return profile representative of the broader venture ecosystem. As a firm that builds and invests in high-growth technology-led companies across healthcare, national security, and cyber, Red Cell is not a typical early-stage venture capital investment firm or incubator. It is a hybrid of the two; an asset class onto itself, if you will. This model uniquely positions Red Cell to not just invest in startups but to also play an active, hands-on role in generating early-stage concepts; shaping them to the needs of the market – in many cases, a dual-use customer, further de-risking the business model – and securing, over time, initial and follow-on funding through its extensive network of external partners. What I also found intriguing was that, beyond funding and building its own companies, Red Cell sets its companies up for long-term success by surrounding founders with invaluable support, linking them with domain experts who can help them pinpoint demand signals, establish commercial traction, expedite time to market, and quickly scale. 

As an economic matter, Red Cell’s approach represents a compelling and bold model where the firm, more so than most, controls its own destiny.  Rather than spreading our investments across a large number of companies in the hope that a select few will have outsized success over a 10-year-plus period – a practice that, in recent years, has led to an index-like, thematic return profile – Red Cell methodically identifies, builds, and funds a smaller number of companies, ensuring that each one is properly capitalized and equipped to meet product-development and customer-acquisition milestones, thereby priming them to thrive in their respective markets. Because we build our companies from the first dollar up, we know our startups intimately and understand what it takes to help them realize real revenue early on so they can mature and scale quickly and merit higher valuations, thus avoiding the cascading down-round trend playing out in the larger venture universe. It also means that Red Cell employees often fill the early strategic C-suite positions for our incubations, roles that typical startups frequently forgo due to lack of funding or access to talent – like dedicated growth, marketing, and finance leaders. Just as important, because we provide both Day-One capital and participate meaningfully in the early financing rounds of our companies, we maintain a significant holding, at an extremely low cost basis, and influence over our companies as they grow.   

In just four years, Red Cell’s accomplishments – including the formation of a purpose-built portfolio of 19 companies, 13 of which we have built from the ground up – have proven this model to be tremendously successful.¹ In 2021, Red Cell launched Zephyr AI, a healthcare technology company committed to radically reshaping precision medicine in oncology and cardiometabolic disease. Through strategic partnerships, the company – where I serve as a Director – houses one of the world’s most comprehensive healthcare datasets in digital health and is marrying it with cutting-edge AI algorithms to expedite the launch of new drugs into the market, uncover additional applications for existing therapies, and improve outcomes for patients. In 2024, Zephyr closed a $111 million Series A funding round. 

A year after standing up Zephyr, we launched defense-tech business DEFCON AI, a software company that delivers next-generation modeling, simulation, and analysis technology tailored for the resilient optimization of complex systems. In 2024, DEFCON raised $44 million in a Seed round and delivered its decision-support tool ARTIV™ – on budget – to the U.S. Air Force. In 2023, Red Cell raised our first fund of $91 million to deploy more technology-led companies in healthcare, defense, and cyber. Today, the businesses we have built are poised to bring real value to not only investors and customers but to society at large, helping to fulfill our ultimate mission of making the world healthier, safer, and more secure.  

While we have developed a necessary tolerance for the chaos that can come with venture investing, I believe our team is more disciplined than your average startup. We take our cues from prevailing market conditions and adhere to strategy-guided processes – processes that mandate we work collaboratively as we move quickly, yet deliberately in our pursuit to build best-in-class businesses; processes that require our practice presidents take a firm position on a market trend or development, avoiding play-it-safe, low-multiple opportunities; processes that call on us to thoroughly research and pressure-test new concepts to establish market viability before putting them in front of our Investment Committee; processes that ensure we generate and maintain a robust backlog of ideas prepared to meet current and future market needs; processes that guarantee throughout the lifecycle of a business it is given every opportunity to thrive and scale in the marketplace; and processes that demand we cut bait when a concept is no longer deemed viable or meeting required milestones. 

Our process-driven approach informs our investment approach. No company is launched by Red Cell unless we have established that 1) its solutions are aligned with a clear market need; 2) our go-to-market offering is differentiated and we are able to sufficiently protect our competitive moat; 3) the enabling technologies are built – or are able to be built – in short order to meet that need; and 4) we’re hiring the right people for the job at hand. If a company fails to make progress on those four criteria, on an extremely expedited timeline, we’ll evaluate why something isn’t working and determine how to fix the problem or if it’s time to move on. 

Of course, our processes have evolved over time. For instance, while we initially envisioned building companies and preparing them for independence within 12 months, we found that some businesses need more time, and more funding, to gain their footing in the marketplace. Consequently, we now stay with companies longer to allow them more runway to develop their products, gain market traction, and scale. Our willingness to constantly evaluate our actions, extrapolate lessons, and capitalize on them has allowed Red Cell to thrive even amid difficult market conditions and a challenging fundraising environment.  

As committed as we are to our processes, they would mean nothing without a world-class team to execute on them in support of our incubations. Our executive leadership team represents a diverse, intergenerational coalition of subject matter experts who, combined, bring to Red Cell more than two centuries of experience working at the highest levels of the federal government as well as the healthcare, insurance, defense, and cybersecurity industries. These individuals include George Barnes, the President of our Cyber Practice; Hon. Veronica Daigle, the President of our National Security Practice; and Dr. Timothy Ferris, President of our Healthcare Practice. 

Beyond our executive leadership, there’s our platform team. Overseen by President David Silverman, the former Navy Seal who literally wrote the book on high-performing teams, this top-notch group carries out the day-to-day responsibilities of running not just Red Cell, but our stable of incubations, providing wraparound services – legal; finance; brand, marketing, and communications; talent acquisition and human resources; product and engineering; fundraising; growth; and ops support – that allow our entrepreneurs to remain laser focused on what they do best: building their MVP and establishing a clear edge over their competitors. By operating with a talented but concentrated core team, we avoid creating bureaucracy that could slow us down. We have built mechanisms into our operating framework that not only enable but prioritize the observation, identification, and mobilization against trends that appear across our portfolio companies, allowing us to synthesize and operationalize the demand signals we are getting – times 13 – from the market. The value of this rapid feedback loop drives not only continuous improvement across the portfolio, but is how Red Cell has established and maintained a competitive edge, enabling our companies across practice areas to function better, faster, and more cost effectively as they scale.

In a world of great uncertainty, I think that what founders and investors want is what we’ve got: a proven model and a proven team with the know-how to execute and come out ahead. These are the elements that compelled me to join Red Cell. They’re the reasons why Red Cell has been successful thus far and why it will continue to succeed, and why I remain steadfast in my belief in the company’s ability to make a real difference in the world. 

¹As evidenced by our track record of company building to date. 

Disclaimer: The opinions, beliefs, and views expressed in this blog are solely those of the author.