Name: Brainstorm Health 2024: Building Resilient Healthcare Companies
Uploaded: 2024-05-21
Duration: 17 min 12 s
Description: Cathy Friedman, Executive Venture Partner, GV (Google Ventures) Alyssa Jaffee, Partner, 7wireVentures Anarghya Vardhana, General Partner, Maveron Moderator: Andrew Nusca, Editorial Director, Fortune

Cathy Friedman, Executive Venture Partner, GV (Google Ventures)  Alyssa Jaffee, Partner, 7wireVentures  Anarghya Vardhana, General Partner, Maveron  Moderator: Andrew Nusca, Editorial Director, Fortune

Brainstorm Health 2024: Building Resilient Healthcare Companies

Conferences

Cathy Friedman, Executive Venture Partner, GV (Google Ventures)  Alyssa Jaffee, Partner, 7wireVentures  Anarghya Vardhana, General Partner, Maveron, Andrew Nusca, Editorial Director, Fortune

Hey, everybody. How are we doing? All right, we've got a great, a great session in store here. Um I want to start off by reading something that I was reading in a report uh from last year, so much has changed since last year, but it was a report last year about kind of the market conditions. It was, it's hard not to have a glass half empty view of the health tech market. Uh The reasons were that the public market markets were underwhelming. Uh that venture capital funding uh had been down since about 2021. Um It is however way up from a decade ago, I want to just say that um now we have lots of macroeconomic anxiety, soft landing versus hard interest rate cuts. A few, many, nobody knows what's going on. So I want to ask, are you feeling optimistic or are you feeling cautious? I am feeling optimistic. Uh And the reason I'm feeling optimistic is that there are a ton of great technologies and companies out there that need to be financed because they're meeting unmet needs for patients. Um And at our fund, we have a really long term view and I think if you have a long term view, these needs need to be met. There's money to be made and patience to be served here. So I am optimistic. I'm so sad to hear that people are feeling that the glass is half empty because while the heyday of the pandemic is over, what came out of Pandora's box was the consumer empowerment that we've all been craving in health care. So we're all looking to become better stewards of our health, right? Patients are people that have things done to them and consumers are active stewards of their health. More companies are getting funded today. The bar to start a company is lower. And so we're seeing innovation come in health care that we've never seen before. So while the funding markets may tell one story, the actual um capabilities of these businesses, the commercial traction they're getting from health plans, from health systems, from Pharma orgs Employers is beyond. I think what any of us thought could happen five years ago and please, I'll, I'll start with the hard part which I think if you're an entrepreneur right now, it can feel like fundraising is really, really hard, it can feel like the bar is higher than ever, which it is, it can feel like there's a lot of pressure from your board to hit certain unit. Economics hit certain goals. So the glass can feel kind of hot half empty as an entrepreneur. But I think the positive side of it is that now is the time to build an incredible company, the resilience, the grittiness, the forced constraints are allowing for companies to discover new business models, innovative ways of reaching customers in non expensive previously, Facebook and Google and also creating environments where companies and payers and providers who are purchasing the products are also demanding really, really high quality. So I think the clinical outcomes that will come out of this batch of companies is going to be better than ever before. Let me stay with you for a second. So you can invest in lots of different kinds of companies. Health as a category has different considerations. Share your perspective. What is great about a health uh uh uh company from an investment standpoint. What is a difficulty, a challenge? Yeah. So for context, I'm a consumer investor. So I invest in companies who think of the end patient as the consumer. So a lot of the business models are B to B to C, some are B to C and in health care. Unlike many other companies, there's so many considerations including ethical clinical clinical ones. Are you doing? What's right for the patient at end of the day? Are you driving better results? I think in the heyday of a lot of funding, we saw companies that were trying to deliver growth at all costs. That wasn't always the best thing for the patient. And I think we could all name a number of companies that were driving for that growth without always having the necessary guard rails around the company to protect the patient at the end of the day. Yeah, we um so our thesis is called the informed Connected health consumer. So how to all of us here in this room today? How do we get access to information, connecting into the system? The system connects back to us to improve our own health outcomes. But the thing is health care companies are not consumer companies and there became a very blurred line early on about in the pandemic of what those companies were and how companies were marketed or where the bulk of the dollars lie in health care, the bulk of the dollar dollars still lie with the incumbents and a lot of companies believe that if you build it, they will come and in health care, they will not come. That's and so creating business for they might come and stay for five minutes or they'll do a pilot and and not pay nothing, ask you to actually pay for that pilot. So I think ultimately, um what wasn't working? What doesn't work is people that don't have that understanding, people that don't have founder market fit, right? We talk a lot about product market fit. But why are you your team the right people to build this to do this? There's way easier ways to make money than to do this in health care. You've got to be here for something else. And that's what's most important, you know, you said founder Market Fit, is that right? So, so I was, I was, that was gonna be my next question, which is in this moment. Yes, thank you. I appreciate it. Well, no, in this moment, it's clearly a kind of a moment of reckoning. So what's working and what's not, are founders sufficiently resilient is capital, sufficiently patient, you know, are are the cost structures sustainable. This market environment is really tough to fundraise the bar is higher. What investors are looking for is different than what investors used to look for in the past and it's causing friction and frustration. But I think it also creates resilience in companies. I have not heard so many conversations about profitability in all my years of being a venture capitalist than I have in the last 18 to 24 months that we are actually building the right kind of companies, the appropriate level companies. And I think an argue says as well of clinical outcomes, like we are in this business to actually drive value in health care, to improve outcomes and to reduce costs. And that's not a buzzword on a slide, although we see it often on those slides, that is really the mission and the goal of what we're trying to do and many people miss that. So if you're building a company that actually shows how you can do that often, those companies will become the most successful. Yeah. And you have to have a clinical out comes, but you also have to have financial outcomes. So the best companies create dashboards that they say they set up uh goals that they want to reach and they, if they reach them great, if they exceed them even better. But if they don't reach them, they rejigger themselves and figure out how they can reach them because not setting goals. And just assuming some great story is going to take place because you have some great patient, something to deliver doesn't work in this market at all. I think that we're seeing uh a batch of founder who are incredibly mission and purpose oriented and financially oriented and want to build a business versus perhaps in the previous set of companies, there was a lot of mission, a lot of purpose and there was a hesitancy to even say, hey, we're building a business that can actually sustain itself with revenue and it feels like the two are finally coming together, maybe, maybe also the naivete around. Um I, I built this thing in tech or I built this thing in consumer. But gosh, being a health consumer is so hard and so frustrating and creates so much friction. I gotta go do that thing now. And it's an amazing passion and mission. But welcome to this world that all of us know is extremely complex and convoluted. And so if you aren't able to understand how to unlock it, many companies have found themselves really stuck in that process. Yeah. And I think you need to decide if you're gonna play inside the current system, meaning the payers and the providers, the employers, how it is right now, or if you're gonna do something completely different and play outside and we've done some investing on outside as well, which is also interesting. So folks, I'm gonna come to the audience in a few minutes with questions. So think about it. All right, I, I wanted to ask you. So where are we seeing in? What subcategories are we seeing success versus not that BioPharma comes to mind. Uh uh V BC comes to mind where in your particular portfolios, where are we seeing good and not so good? We tend to be vertical investors. So we really focus on companies that solve problems. Um We're less of a horizontal investor. Technology is great. A I is incredibly transformative, but it is not a one stop shop. And so where we focus on is how can A I be an application or component for care delivery? Um But it's not the thing. And so what is the thing that drives value? All of us are actually on a board of an amazing women's health company called Caraway that focuses on Gen Z women. So how do we help young women gain independence and agency in their health care? Journey. We're seeing a lot of these types of solutions start to really materialize because of their focus on the communities that they serve. I have a slightly different angle um which is a lot of the companies I'm seeing now have a different focus on the actual clinician than I've seen previously. I think that pre pandemic, a lot of clinicians, which I think a lot of you here in the audience are clinical practicing folks. Um We're almost seen as just a part of the business you use them, you move on, you get new ones, whatever. And for the first time, I'm seeing a focus on hiring great clinicians, retaining them, keeping them happy, developing them. And actually thinking of your clinicians as your big best and biggest asset, which is a big shift. I think in the start up world where that can sometimes feel slower and more cumbersome than let's just grow users by any means. Yeah, I think also really focusing on access because there are a lot of um areas within medical care where there just isn't uh a big enough supply. And the examples I can think of in our portfolio in menopause. We have midi, we have ULA, we have a Lara where you just don't have doctors that cover those specialties. So by providing that on in a telehealth way with the ability to go somewhere else for four wall treatment, you can make access so much better. So you don't have as many care deserts around the US. You know, I was actually that, that, that leads into, uh another question I was gonna ask is, you know, COVID and the pandemic just exposed a lot of gaps in the system and then there was a big rush. So, in your opinions, do you feel that those gaps persist? You know, are we starting to solve for any of them? You know, I think the gaps still persist, but the one that's been the most heartening for me is the focus on behavioral health. I think the pandemic showed America and, and the larger world, how lonely people are, how much connection they need and how important mental health is equally, if not more important than our physical health. And that acceleration, you know, we see tons of companies and behavioral health where investors and things like two chairs and bend and really being able to see companies focused on folks with mental well being I think is heartening and just continuing. I would, I would add to her comment, which is the physical and the mental are very connected. And in our prior prior to COVID world, it was sort of you had a mental health problem and you had a physical problem. And I think through COVID, it's become much more of common knowledge that those are very related. So you can't just have a mental health solution, you can't just have a physical health solution. They have to be integrated. The thing is Andrew. We are um I think we, we're at this time today where we're going to spend our entire lifetime and multiple lifetimes over trying to solve these problems in health care. And that's scary, but also um enticing of how big this thing can be. And we talk about access to care and the Medicaid population and companies, the number of who are here today Summer House, who does uh Tebas pediatric care, a company called Ground Game that does uh works with CB OS and a number of kind of scoh opportunities to really close gaps in care. There's so we can name a million more companies that are starting on this journey and even just getting initial penetration, we heard from Sarah London and the CEO of Centene. There's just so much that we have to do. Um And I think that should hopefully be an encouraging message to those in the fans today who are actually working to do this on the front lines because we are making progress. It just, it does take time and a brief follow up before we go to the audience. Um So many lifetimes, you know, investing does require a return. Have you heard this longevity thing? We're gonna live for many lifetimes. Keep investing. I see. OK. OK. Got it. Got it. All right. Let's go to the audience. They will live on forever. All right, let's, let's right over here. We'll wait for the mic for and please uh introduce yourself. Just name and, and organization, please. Hi there. I'm uh Doctor Natalie Davis from prevent Scripts. Alyssa, I can remember on a start up health call. Probably this was pre pandemic. I think you talking about series A metrics. Um Could you give us an update on series A metrics for 2024 and how that goal post may have tweaked on the Yeah, on the record, I don't actually think my answer personally has changed much. My answer is again, um We invest mostly B to B to C 50% of our capital comes from strategic organizations, health plans, health systems, pharma, employers. And so what I look for is if you know, Cigna is an amazing partner to us, for example. And if Cigna says, wow, your business is so amazing. I wanna do this. I wanna roll you out to all my national accounts. Are you gonna thrive or are you gonna be crushed? That is how we look, get a series A it's uh we don't have a definitive metric around revenue. I'm sure that, you know, my, my amazing panelists can give some more guidance, but at the end of the day, the core of what we think about is is your business in a place where we can take you to these large incumbents and you are able to carry whatever comes of that. Hopefully very, very large and long lasting contracts. Yeah, I would just add on to that. We don't have any specific tailored revenue tax, whatever, but we're very focused on the number one thing, which is the team, the number two thing, which is the product market fit and the number three thing, which is the ability to scale and that usually involves having some tech that's very good and deep. Um, so those things have not changed in this market at all. Well said, all right, let's find one more another, another audience question. Forgive me. It's very bright. Yes, way back here. Hello everyone. My name is Elena, the co founder and CEO of generation lab and we actually work in longevity. So that word is becoming bigger and bigger in the space right now. What we are doing is starting out from 19 different organ health and build a personalized plan from lifestyle, nutrition, medicines and also workout. So I want to hear a perspective of health care because it's becoming a new world from sick care that we used to be. How do you guys think about the new healthcare world is changing? Especially longevity is becoming a real trend right now. So, um I believe that the most important thing in health care is early detection right now before I joined Google Ventures, I was the chair of Grail. And to me, we can detect things early and that was cancer. But there are many other things and some people earlier today were talking about Children and detecting things early. So you have to be able to detect them early and that requires diagnostics and other things there. And then once you detect them early, you have to have personal medicine to deal with them. I'm less concerned with living to be 100 and 50 than I am living to be some age where I can be active and healthy and whether that's 80 or 90 or 65 doesn't really matter. Um But I don't want to be into the business of longevity investing just for the sake of living longer. I I think that a lot of the longevity conversations, content products are really tailored to certain like niches of society. And as a consumer investor, I think a lot about how does this get mainstream, how do regular people in the world use this access this and that feels like a lot of the missing gap. Of course, stuff has to launch first and they are early adopters and such. But, you know, my vision is with the power of A I, there is a possibility where people can know what is exactly the personalized tailored thing for them because right now the question is like, what test do I use? What protocols do I follow? Should I listen to this podcast or that one? And the more that can be personalized and accessible, the better also payers have to pay for it. So, you know, I think you you even in V BC and the, the journey to value based care is much more complex and not as straightforward as we thought. And we longevity fits. I'd say there's probably still a, you know, a knock on the fee for service door of how you can think about the entry way to build that relationship with the health plan in order to get to a real bundle or a real risk based contract, given the value of longevity. All right. Well, um, 2025 then is it gonna be the year of Pretenders or the year of contenders contenders? Absolutely. I think a lot of companies that are building right now are gonna be of a strength and girth and revenues w um, that it's gonna be a great market and you, you know, they're 30 companies right now that could break out to be phenomenal companies in 2025. 1 2nd. I'm gonna say contenders because great companies get funded. All right. All right. Ok. And Contenders. Ok. But please, that, that, that's our time. Give them a round of applause. Thank you so much. Yeah, that's correct.