Scott Barclay, Managing Director, Insight Partners
Emily Melton, Founder and Managing Partner, Threshold Ventures
Deena Shakir, Partner, Lux Capital


Brainstorm Health 2022 - The VC’s View: Investigating In Health Care

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Brainstorm Health 2022 - Investigating In Health Care


Brainstorm Health 2022 - The VC’s View: Investigating In Health Care


as you all know with crisis comes innovation and opportunity in the past few years we've seen plenty of both when innovation and opportunity meet at the right time and under the right circumstances. That's an investor's dream Investments in digital health startups almost doubled to $57 billion 2021 according to CB insights With a number of healthcare unicorns topping 90. That's quadruple the number of just five years ago but there are headwinds this year. All signs point to the I. P. O. Window narrowing if not closing and an end to the bull market at least for now. So joining me to talk about the prospects and the best strategies for investing in the health space are Emily melton founder and managing partner of threshold ventures, Deena Shakir partner at lux capital and scott Barkley Managing director at insight partners. Please welcome them to brainstorm health. Have these guys All right, um thank you all for being here. So my first question and it's really for all of you is I want you to tell us whether from your perspective this has been uh an era for transformation and deep innovation in the health space or is it more of an era of adoption of massive adoption of technologies and applications that existed pre pandemic. I'm going to go to you because you're farthest. All right, well thank you again for having us. It's a it's a great question. I I have to respond by saying both because it is the more widespread adoption that has enabled the next generation of innovation and in particular the widespread adoption of infrastructure layers like data lakes and interoperability tools from systems to payers providers to patients. I think it's actually the multi stakeholder engagement that has enabled more innovation that we're seeing now at the earliest stages. Um, and hopefully much more to come Emily I've said this before, I'm thrilled to be here. Thank you so much. I'm thrilled to share this. Amazing investors and friends. Um, I've said this before, but uh, you know, healthcare has moved slowly and don't kill people. And so it's not an industry that has historically been particularly good at adoption. And I think what happened during covid is instead of it being nice to have things became must have, you know, you never waste a good crisis and you went to the crisis in syria. So what was possible, how different kinds of interactions with patients where possible. And once we've opened that genie's out of that bottle, we're not going back. That's not to say we still don't have a lot of challenges ahead of us. But I do think it forced an innovation cycle that maybe it would take seven years or 10 years over two years and now we have the opportunity, but also the challenges of what? But what about you? Well, I'll start with just the starting point of the majority of this market is sclerotic with these overlapping oligarchy. And so those are two words that I would have totally anyone who's ever been on my team before? They're already playing buzzword bingo out in the seat but it's really locked up and it's locked up in a way that's actually not very capitalist. So we're pretty firm believers that you can go to where the system exists today and software can kind of radically accelerate a better way of doing business in the way that business is done today. And then there are other problems where you kind of walk away from it either with some scars and with a sense of jaded sense and you start over and you build it more from the outside. So we've seen things in computational biology reaching pharma discovery like from the last, you know, things that have happened with Pfizer which is you know, game changing transformations based on data. We're also seeing things inside the hospital that are about operational efficiency and it's just continuous software improvement on what historically were kind of slow human processes. So I think it's both, I think it's for the founder it's gonna depend on the problem you're trying to Okay, um I mentioned earlier in the introduction the kind of, you know near past um status of I. P. O. S. And what we're seeing currently. Um there was quite a boom in the last couple of years but things have changed public markets are starting to be more volatile and health checks. There was a 96% drop in I. P. O. S from Q. Four of last year, two Q one of this year. Pretty significant. What what do you see on the horizon. Um, and I'd love to hear your perspective on early stage new founders, new startups and late stage companies that you've already funded and are a little bit further along whoever wants to jump in first. The markets are down very old. Look what you did. Oh wow. Um, literally that is like a question, right? I'm not going to tell you what stock is almost. Um, I was an early investor in Lubango. And when Lubango went public said it was the Netscape moment for digital. Health and analogies are always inherently flawed. There's always differences in every single market cycle, but I'm going to lean into that one even further here. And if those of that are God and I share scars together. But those of us are a little bit older wreck. And I remember when Netscape went public and then was ultimately acquired by A. O. L. And then you look at what happened in the next two decades of innovation around the internet. They were the promise of the internet, but they didn't actually execute on the reality. And I think we're at that phase where particularly in digital health people got ahead, there was enormous promise, but we got ahead of the reality and if you look at what happened in those two decades, it wasn't just that those companies didn't capture it, but they did lay the foundations they helped with talent, they help with, know how they help with experience that set up the next generation of companies. And so while scott is very eloquently explained why healthcare is very different and there's a lot more complexity, I think you're finding that there are those investors and those operators that had that experience from the first wave and are ready to execute, actually capture on the opportunity. So I don't think it's going to bounce back right away, but I'm very bullish over the long. Yeah, I would just add to that. I mean, human health is universal, it's timeless, it's not going anywhere. And what we saw with the last couple of years is more of a widespread adoption across the board and a lot of these digital transformations of some of the executives and leaders in this room. They're not just as you said, nice to have, there, not just pr tidbits they are there to stay. And a lot of the realization of some of these major stakeholders has been that it's through partnerships. And so a lot of the early stage companies that we're starting to find now are seeing that in those early days, lucky for us, we're not stock pickers. So we're not, you know, making investments based on where the stock market is today, but ideally we're investing in markets before their obvious. So it's actually a really good time to be an early stage healthcare investor got anything to add and and can you also touch on which kind of business models do you think will prevail through potential downturn? Um and and in any specific areas that you think you're you know are particularly, it sounds like we've all been from the same songbook of long term first principles work Seven trillion global market, four trillion US markets so broken like it's worth doing. Ah Public markets have a way of teaching lessons quickly and I think all of us are seeing that cascades down into private markets at different speeds. Um So to answer your question about business model, I would say regardless of stage, if you can articulate to a great investor, why you have defensible margin and you're the type of executive that executes with the team. So you always understand your burn much less. You have pretty intentional view of your business model and where you burn capital, um you're already winning compared to the majority of the market. Like where I have the most fear for people that I care about are people who have raised a fair amount of funding but they may not have internalized or quite even found what defensible margin or defensible business model At the same time, I'm 100% with Emily and Gina, there's nothing that has changed about the ambition of shots we should be taking. So for things that are very early stage that are with a reasonable attitude but an exponential upside. I don't I don't see that changing. I just see some funding slowing down and that's probably better for those of us who take that long view For some of the stuff that growth. I think it's a really tough next 6-9 months for many. And it's one of those there were the the tide going out probably it's an apt analogy. Okay. Um I want to go to you guys for any questions for the panel in just a minute here will come to you. Um but I want to make sure that that we address a big, big, big topic here and a difficult topic. Um I know you all have thoughts about how innovation can address inequality in our health care system. Um and I want to hear from you your thoughts on how digital startups. Healthtech startups are or can respond to what it looks like will soon be a post roe world. What do you expect to see? What are you seeing currently? This doesn't need to be political obviously. But these are just facts. Um what happens? How can innovation address a world where women don't necessarily have the right to abortion to reproductive rights and Dina? You want to? Yeah, absolutely. And I want to acknowledge one of our ceo who's actually a leader in this space and has been for some time Kate Ryder who is in the room somewhere, may have stepped out for a moment. The founder and ceo of maven, you know, we're among leaders in healthcare. So this is no surprise to any of us, but women's health is human health is population health. And this is an affront to all of our health. And so without going into uh, you know, the politics and the and the legislative predictions here. Uh there's a big role for private sector company leaders to take uh for early stage digital health companies to help enable access to financing to uh to streamline information, to address misinformation, to work with employers who are already trying to mitigate the the the the impact of the great resignation on women. Uh and so I'm really heartened by what I've seen some of these leaders do um and are starting to do and I'm hopeful that we'll see more of that as well at the corporate level. This is not a time to be silent. Uh it's a time for um for action. So last monday. So last monday evening I was with the founders of which is a women's health clinic where I'm on the board and we were celebrating the opening of our flagship clinic in san Francisco with London Mayor breed and UCSF has a partnership with UCSF. So amy Murphy who's the professor um of O. B. G. Y. N. Um gynecology and reproductive health at UCSF was there representing while we were all celebrating this moment, the news leaked of the opinion. And so that was a very prescient and difficult moment for all of us as we were thinking through it. Um, this is something we have been talking about as a board and as a company for months. Not a surprise that this is a possibility. And so the next day he announced that we would be offering telehealth uh medication, abortion services in the states we operate where it's illegal that is California and new york and then helping our other members in Arizona be able to access resources. But it is not legal there. I think there's there's a there's a policy discussion where the threshold of a policy moment and that is going to play out the way it's going to play out. But as Deena alluded to, there's also a healthcare issue and an economic issue that I think we need to address right. And I think that as consumers, we're going to have to start to think about where we're accessing health care, what that, You know, not only the laws of the state, but what that system and others the decisions they're going to be making about our family's health. Our wives are, you know, spouses, our children's health based off of their belief system that's gonna suddenly come into play and then there's an economic component to this. Women are 51% of the population for 80% of the health care. And in 19 seventies roe v wade, we were very different participants in the workforce and if you look at Mckinsey study, they believe that up to 25% of the GDP growth that we've seen over the past couple of decades since the seventies are a result of women's um women participating in the health care. That's where Janet Yellen mentioned it today during her hearings. And so I agree wholeheartedly with you know that this is, it's a policy issue, but it's a healthcare issue and it's also an economic issue where employers and others are going to have to have positions because we were going to be looking for them to be standing. And it's not just about press releases anymore. I think it's going to be action driven, got anything to add and I promise, we'll get to your question in just a minute here. Just you know, um, it's like a time of cacophony like this. I think investors have to ask themselves, what are the first principles they believe in? And can you rest on those and can you meet and find founders in that place and deploy capital and be helpful and do what you say you're going to do. Um, I'll answer from first principles in a couple of very simple ways. One is uh, similar to Dina, but in a different company. We have a really deep belief around the, the overall life of women's health and why do we not have a better science and data driven approach to women's experience in healthcare beginning to end. So we kind of run a process where we look at multiple stages from IVF through uh middle age and aging, where we see just a lack of the right science at the right place and definitely a lack of the right experience which leads me to the second point, which I'm happy to have is a clarion call, which is I will meet with any founder globally who brings something technical, but also some empathy to the use case they're working on so on the like, well what can you do about it? One thing I can do is back founders, even if they don't look like what other people think founders should look like, who have some wedge and some chip on their shoulder to help solve the problem. Uh in the The 3rd broader point is, I think we're really talking about health equity, I think you've alluded to this, we have a massive health equity problem that's even larger than people realize. And if I had one simple takeaway to, it would be why does not every person in this country deserve the same experience that we could get out of UCSF? Um, and my short answer to that is founders need to build better data driven, but empathetic experiences that also hit price points that should be totally profitable in Medicaid. You have a founder eren bali over the next day or two on the stage and that's a perfect example. Urgent care is not new during urgent care. That is that pleasant. And that's great of an experience that could be in any community in this country that is actually new versus the broken. Okay, thank you all. Um, for sharing a question over here. If you could introduce yourself. Hi, I'm Silvana Sina, I'm the founder of brava help in Bangladesh. Um, scott and Deena good to see you both. I have a question about just a concern that I have based on my experience. Um, there's so much money that has gone into venture capital and healthcare in the United States. It hasn't happened globally. So my company for example is the fastest-growing consumer healthcare brand in Bangladesh. We've served more than 350,000 patients in four years and we achieved profitability last year. We did that with $12 million dollars of equity primarily from angels. Not because we didn't want institutional capital because it doesn't exist. So what are we going to do about this problem? There's a lot we hear about the integrated world that we've all learned we lived in because of Covid, but it feels a little bit like lip service when funding allocations aren't lining up. Great, Great question, do you want to take that I'll take, I'll take first and foremost responsibility to say like without anything confidential, like we're a firm that's met with the founder and she's fantastic. Mm hmm. What she's doing is real. What needs to happen in the Bangladeshi economy in the market of particularly how various populations get served. It's all real. So for us, because we invest at every single stage, we have a rubric of where we take risk in certain ways. And I uh, I think the general comment we had was tell us how we can help put you in front of the right investor because we probably want to write larger checks on the next stage. Now. That can also sound, you know, flip it to a founder if you're not writing at that moment. But to be clear, if anyone here, I'm happy to share my notes. This one works. No, I didn't, no, I didn't take it. I didn't take it that way. I just feel like it's a global problem. My next venture is going to be that fund that would fund businesses like mine because we need them all over the world. It's not just my company that faces this challenge. Yeah. I mean, I can just add, I do think it's starting to change a little bit. We've seen perhaps Fintech maybe is the one that uh, is getting the most funding globally in particular in africa and latin. Um, I think we're starting to see more intersection points there and perhaps with the way the markets are in the US. There'll be some more interesting interesting appetite in emerging markets, but I couldn't agree more. I think it's critical, um, and particularly to what scott was talking about on the data side and kind of you know making sure that the data sets that are helping to create the clinical protocol that we're using in the U. S. Is actually representative of the world that we live in which especially in women's health it really is not. Um And so I'm hopeful and excited to catch up with you Silvana and if anybody wants Scott's notes master um Thank you so much Dina Emily and Scott. Um We do need to wrap up but I really appreciate you all being here. It's such a critical moment for so many things. Um So appreciate you coming and sharing your knowledge and insights with us. Thank you. Yeah.