Big Moves for Nashville Venture Firm Clayton Associates

Nashville Business Journal Big moves for Nashville venture firm Clayton Associates

Friday, December 16, 2011, 6:30am CST

Chris Silva

A prominent venture capital firm is shuffling top leadership amid a $50+ million fundraising round focused on health care services and technology.

Former HCA TriStar executive Larry Kloess will join Clayton Associates  as part of a realignment that will see Clayton McWhorter step down as chairman of the company and hand over control to his son, Stuart McWhorter, who remains as president.

In the wake of federal health care reform and a swift uptick in the use of electronic medical records, the stakes for finding the “next big idea” is even more important for firms like Clayton Associates associated with Nashville’s health care industry, which generates upwards of $60 billion a year worldwide.



Kloess, who served as president of HCA’s TriStar Health System for the past six years, will serve as a senior adviser for the firm and its venture capital arm, FCA Venture Partners. Kloess announced his retirement from TriStar in September.

Clayton executives feel Kloess’ experience in health care will help them identify which business plans are promising and which should be passed up.

“I’m looking forward to this opportunity to think creatively, outside of the hospital or company setting ... about opportunities and ideas that make sense,” said Kloess, who will sit on FCA Venture Partners’ board and could assume board positions with portfolio companies.

Founded by Clayton McWhorter in 1996, the firm typically invests $1 million to $6 million in companies with experienced management teams who are implementing proven business models. Clayton Associates has invested over $125 million in more than 72 venture deals, which it estimates has created more than 20,000 jobs and companies representing greater than $7 billion in annualized revenue.

Clayton McWhorter said adding Kloess, his friend of more than 30 years, to the company was a no-brainer.

“To be able to say, ‘Hey Larry, does a hospital really need what these guys are trying to sell? Will it make the hospital more efficient?’ I think this is really going to be a valuable thing that he’s going to bring to the table, because he’s been there,” Clayton McWhorter said. “He’s been in the bushes for a long time.”

Joe Scarlett, founder of the Scarlett Leadership Institute, said companies adding a high-level executive is usually growing and “looking to beef up its breadth.” He added it’s important for the new addition to bring a skills set that complements the executives in place.

Matt King, managing partner of FCA Venture Partners, said Kloess’ addition is timely, as the fund has seen an increase of 30 percent to 40 percent in companies seeking funding over the past 18 months.

Altogether, Kloess has more than 30 years of health care leadership experience, including COO of American Pathology Resources, CEO of Centennial Medical Center and CEO of Conroe Regional Medical Center in Texas. He is also the immediate past president of the Tennessee Hospital Association.

Stuart McWhorter said Kloess’ presence will allow him to spend more time with Brentwood-based Medical Reimbursements of America, of which he is co-founder, chairman and CEO.

“It’s not minimizing what I have at Clayton Associates, but they won’t need me there every day. One of the nice things about Larry joining Clayton is it does give me the ability to spend time (at MRA) if I need to. Having somebody with Larry’s experience come right in is going to be very valuable for us.”

Clayton’s next move?

Clayton McWhorter served as president and COO of HCA from 1985 until fall 1987, and also is a founding member of the Nashville Healthcare Council. Renowned for his entrepreneurship, McWhorter participated in the formation of HealthTrust in 1987, and founded PharmMD in 2008.

McWhorter, now chairman emeritus with Clayton Associates, was mum on his plans for the near future, although he did hint about continuing to work with new companies.

“I still get excited about some of these young entrepreneurs,” he said. “I don’t see myself going fishing or playing golf. I’ll be involved, but I won’t be hanging around every day, either.”