Cathy Friedman, Executive Venture Partner, GV (Google Ventures) Alyssa Jaffee, Partner, 7wireVentures Anarghya Vardhana, General Partner, Maveron Moderator: Andrew Nusca, Editorial Director, Fortune
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TechTranscript
00:00 Hey, everybody.
00:01 How we doing?
00:02 All right, we've got a great session in store here.
00:06 I want to start off by reading you something that I was reading in a report
00:10 from last year.
00:10 So much has changed since last year, but
00:12 there was a report last year about kind of the market conditions.
00:15 It was, it's hard not to have a glass half empty view of the health tech market.
00:21 The reasons were that the public market, markets were underwhelming,
00:25 that venture capital funding had been down since about 2021.
00:30 It is, however, way up from a decade ago, I want to just say that.
00:33 Now we have lots of macroeconomic anxiety, soft landing versus hard.
00:40 Interest rate cuts, a few, many, nobody knows what's going on.
00:45 So I want to ask, are you feeling optimistic or are you feeling cautious?
00:50 Kat?
00:50 >> I am feeling optimistic.
00:53 And the reason I'm feeling optimistic is that there are a ton of great technologies
00:58 and companies out there that need to be financed because they're meeting
01:02 unmet needs for patients.
01:04 And at our fund, we have a really long term view.
01:07 And I think if you have a long term view, these needs need to be met.
01:10 There's money to be made and patients to be served here.
01:14 So I am optimistic.
01:16 >> All right, how about you?
01:17 >> I'm so sad to hear that people are feeling that the glass is half empty.
01:21 Because while the heyday of the pandemic is over, what came out of Pandora's box
01:25 was the consumer empowerment that we've all been craving in healthcare.
01:28 So we're all looking to become better stewards of our health, right?
01:32 Patients are people that have things done to them, and
01:34 consumers are active stewards of their health.
01:37 More companies are getting funded today.
01:39 The bar to start a company is lower.
01:41 And so we're seeing innovation come in healthcare that we've never seen before.
01:44 So while the funding markets may tell one story,
01:48 the actual capabilities of these businesses, the commercial traction they're
01:52 getting from health plans, from health systems, from pharma orgs, employers,
01:56 is beyond I think what any of us thought could happen five years ago.
02:00 >> Yeah, and please.
02:01 >> I'll start with the hard part, which I think if you're an entrepreneur right now,
02:05 it can feel like fundraising is really, really hard.
02:08 It can feel like the bar is higher than ever, which it is.
02:12 It can feel like there's a lot of pressure from your board to hit certain
02:14 unit economics, to hit certain goals.
02:17 So the glass can feel kind of half empty as an entrepreneur.
02:21 But I think the positive side of it is that now is the time to build an incredible
02:26 company, the resilience, the grittiness, the forced constraints are allowing for
02:31 companies to discover new business models, innovative ways of reaching customers in
02:35 non-expensive ways, previously Facebook and Google.
02:38 And also creating environments where companies and payers and
02:43 providers who are purchasing the products are also demanding really,
02:46 really high quality.
02:46 So I think the clinical outcomes that will come out of this batch of companies is
02:50 going to be better than ever before.
02:51 >> Let me stay with you for a second.
02:54 So you can invest in lots of different kind of companies.
02:57 Health as a category has different considerations.
03:01 Share your perspective.
03:03 What is great about a health company from an investment standpoint?
03:08 What is a difficulty, a challenge?
03:10 >> Yeah, so for context, I'm a consumer investor.
03:12 So I invest in companies who think of the end patient as the consumer.
03:16 So a lot of the business models are B to B to C, some are B to C.
03:20 And in healthcare, unlike many other companies,
03:22 there's so many considerations including ethical, clinical ones.
03:26 Are you doing what's right for the patient at the end of the day?
03:28 Are you driving better results?
03:30 I think in the heyday of a lot of funding,
03:32 we saw companies that were trying to deliver growth at all costs.
03:36 That wasn't always the best thing for the patient.
03:38 And I think we could all name a number of companies that were driving for
03:41 that growth without always having the necessary guardrails around the company
03:45 to protect the patient at the end of the day.
03:47 >> Yeah.
03:48 >> Yeah, so our thesis is called the informed connected health consumer.
03:52 So how to all of us here in this room today, how do we get access to
03:55 information, connect into the system,
03:57 the system connects back to us to improve our own health outcomes.
04:01 But the thing is, healthcare companies are not consumer companies.
04:04 And there became a very blurred line early on about in the pandemic of what
04:09 those companies were and how companies were marketed or
04:12 where the bulk of the dollars lie in healthcare.
04:14 The bulk of the dollars still lie with the incumbents.
04:17 And a lot of companies believe that if you build it, they will come.
04:22 And in healthcare, they will not come.
04:23 >> [LAUGH] >> And so creating businesses-
04:27 >> Or they might come and
04:27 stay for five minutes.
04:28 >> Yes, yeah, or they'll do a pilot and ask you to pay nothing.
04:31 >> And not pay.
04:32 >> Ask you to actually pay for that pilot.
04:33 So I think ultimately, what wasn't working,
04:36 what doesn't work is people that don't have that understanding.
04:39 People that don't have founder market fit, right?
04:41 We talk a lot about product market fit, but why are you, your team,
04:44 the right people to build this, to do this?
04:45 There's way easier ways to make money than to do this in healthcare.
04:49 You've gotta be here for something else, and that's what's most important.
04:51 >> You said founder market fit, is that right?
04:56 So that was gonna be my next question, which is, in this moment-
04:59 >> I'm just helping out here.
05:00 >> Yes, thank you, I appreciate it.
05:02 Well, no, in this moment, it's clearly a kind of a moment of reckoning.
05:05 So what's working and what's not?
05:07 Are founders sufficiently resilient?
05:09 Is capital sufficiently patient?
05:12 Are the cost structures sustainable?
05:15 >> This market environment is really tough to fundraise.
05:19 The bar is higher.
05:20 What investors are looking for is different than what investors used to look for
05:23 in the past.
05:24 And it's causing friction and frustration.
05:26 But I think it also creates resilience in companies.
05:29 I have not heard so many conversations about profitability in all my years
05:34 of being a venture capitalist than I have in the last 18 to 24 months.
05:38 That we are actually building the right kind of companies,
05:40 the appropriate level companies.
05:42 And I think Anargy said this well, of clinical outcomes.
05:45 We are in this business to actually drive value in healthcare,
05:49 to improve outcomes and to reduce costs.
05:51 And that's not a buzzword on a slide, although we see it often on those slides.
05:54 That is really the mission and the goal of what we're trying to do.
05:57 And many people miss that.
05:58 So if you're building a company that actually shows how you can do that,
06:02 often those companies will become the most successful.
06:04 >> Yeah, and you have to have clinical outcomes, but
06:06 you also have to have financial outcomes.
06:08 So the best companies create dashboards that they say,
06:11 they set up goals that they want to reach.
06:14 And if they reach them, great, if they exceed them, even better.
06:17 But if they don't reach them, they rejigger themselves and
06:20 figure out how they can reach them.
06:21 Because not setting goals and just assuming some great story is gonna take
06:25 place because you have some great patient something to deliver
06:29 doesn't work in this market at all.
06:31 >> I think that we're seeing a batch of founder who are incredibly mission and
06:36 purpose oriented and financially oriented and want to build a business.
06:39 Versus perhaps in the previous set of companies,
06:42 there was a lot of mission, a lot of purpose.
06:45 And there was a hesitancy to even say, hey, we're building a business that can
06:49 actually sustain itself with revenue, and
06:50 it feels like the two are finally coming together.
06:53 >> Maybe also the naivete around, I built this thing in tech,
06:58 or I built this thing in consumer.
07:00 But gosh, being a health consumer is so hard and so frustrating and
07:05 creates so much friction.
07:06 I gotta go do that thing next.
07:08 And it's an amazing passion and mission.
07:11 But welcome to this world that all of us know is extremely complex and convoluted.
07:16 And so if you aren't able to understand how to unlock it,
07:20 many companies have found themselves really stuck in that process.
07:24 >> Yeah, and I think you need to decide if you're gonna play inside the current
07:27 system, meaning the payers and the providers, the employers,
07:32 how it is right now, or if you're gonna do something completely different and
07:35 play outside.
07:36 And we've done some investing on outside as well, which is also interesting.
07:40 >> So folks, I'm gonna come to the audience in a few minutes with questions,
07:44 so think about it, all right?
07:45 I wanted to ask you, so where are we seeing and what subcategories are we seeing,
07:50 success versus not, that biopharma comes to mind, VBC comes to mind.
07:56 Where in your particular portfolios, where are we seeing good and not so good?
08:01 >> We tend to be verticalized investors, so
08:03 we really focus on companies that solve problems.
08:06 We're less of a horizontal investor.
08:07 Technology is great, AI is incredibly transformative, but
08:10 it is not a one-stop shop.
08:12 And so where we focus on is how can AI be an application or
08:16 component for care delivery, but it's not the thing.
08:19 And so what is the thing that drives value?
08:22 All of us are actually on a board of an amazing women's health company called
08:25 CareAway that focuses on Gen Z women.
08:27 So how do we help young women gain independence and
08:30 agency in their healthcare journey?
08:32 We're seeing a lot of these types of solutions start to really materialize
08:35 because of their focus on the communities that they service.
08:39 >> I have a slightly different angle, which is a lot of the companies I'm seeing now
08:43 have a different focus on the actual clinician than I've seen previously.
08:48 I think that pre-pandemic, a lot of clinicians,
08:50 which I think a lot of you here in the audience are clinical practicing folks,
08:54 were almost seen as just a part of the business.
08:57 You use them, you move on, you get new ones, whatever.
09:00 And for the first time, I'm seeing a focus on hiring great clinicians,
09:03 retaining them, keeping them happy, developing them, and
09:07 actually thinking of your clinicians as your big, best, and biggest asset.
09:10 Which is a big shift, I think, in the startup world where that can sometimes
09:13 feel slower and more cumbersome than let's just grow users by any means.
09:18 >> Yeah, I think also really focusing on access, because there are a lot of
09:22 areas within medical care where there just isn't a big enough supply.
09:26 And the examples I can think of in our portfolio in menopause, we have MIDI,
09:29 we have ULA, we have ALARA,
09:31 where you just don't have doctors that cover those specialties.
09:34 So by providing that in a telehealth way with the ability to go somewhere else for
09:39 four wall treatment, you can make access so
09:42 much better so you don't have as many care deserts around the US.
09:45 >> I was actually, that leads into another question I was gonna ask.
09:48 It's COVID and the pandemic just exposed a lot of gaps in the system and
09:52 there was a big rush.
09:53 So in your opinions, do you feel that those gaps persist?
09:58 Are we starting to solve for any of them?
10:01 >> I think the gaps still persist, but
10:02 the one that's been the most heartening for me is the focus on behavioral health.
10:06 I think the pandemic showed America and the larger world how lonely people are,
10:11 how much connection they need, and how important mental health is.
10:14 Equally, if not more important than our physical health.
10:17 And that acceleration, we see tons of companies in behavioral health who are
10:20 investors in things like Two Chairs and Bend.
10:22 And really being able to see companies focused on folks' mental well-being,
10:27 I think is heartening and just continuing.
10:29 >> I would add to her comment, which is the physical and
10:32 the mental are very connected.
10:34 And in our prior to COVID world, it was sort of you had a mental health problem and
10:39 you had a physical problem.
10:40 And I think through COVID,
10:42 it's become much more of common knowledge that those are very related.
10:46 So you can't just have a mental health solution,
10:47 you can't just have a physical health solution, they have to be integrated.
10:51 >> The thing is, Andrew, I think we're at this time today where we're going to
10:56 spend our entire lifetime and
10:58 multiple lifetimes over trying to solve these problems in healthcare.
11:02 And that's scary, but also enticing of how big this thing can be.
11:07 And we talk about access to care and the Medicaid population and companies.
11:11 A number of who are here today, Summer Health,
11:13 who does text-based pediatric care.
11:15 A company called Ground Game that works with CBOs and
11:19 a number of kind of SDOH opportunities to really close gaps in care.
11:23 There's so, we can name a million more companies that are starting on this
11:27 journey, and even just getting initial penetration.
11:31 We heard from Sarah London, the CEO of Centeen.
11:33 There's just so much that we have to do.
11:36 And I think that should hopefully be an encouraging message to those in
11:39 the audience today who are actually working to do this on the front lines.
11:42 Because we are making progress, it just, it does take time.
11:46 >> And a brief follow up before we go to the audience.
11:48 So many lifetimes, investing does require a return.
11:53 >> Have you heard this longevity thing everyone's talking about?
11:55 >> We're gonna live for many lifetimes, keep investing.
11:57 >> I see, I see, okay, okay, got it, got it.
11:59 All right, let's go to the audience.
12:00 >> The companies will live.
12:01 >> [LAUGH] They will live on forever.
12:03 >> Yes, forever.
12:04 >> All right, let's, yes, right over here, we'll wait for the mic.
12:07 And please introduce yourself, just name and organization, please.
12:10 >> Hi there, I'm Dr. Natalie Davis from PreventScripps.
12:15 Alyssa, I can remember on a startup health call, probably,
12:18 this was pre-pandemic, I think, you talking about Series A metrics.
12:23 Could you give us an update on Series A metrics for
12:27 2024 and how that goalpost may have tweaked?
12:31 >> On the record.
12:32 >> Yeah, on the record.
12:33 I don't actually think my answer personally has changed much.
12:36 My answer is, again, we invest mostly B2B2C.
12:40 50% of our capital comes from strategic organizations, health plans,
12:44 health systems, pharma, employers.
12:46 And so what I look for is, if Cigna's an amazing partner to us, for example.
12:50 And if Cigna says, wow, your business is so amazing, I wanna do this,
12:54 I wanna roll you out to all my national accounts.
12:57 Are you gonna thrive or are you gonna be crushed?
12:59 That is how we look at a Series A.
13:01 We don't have a definitive metric around revenue.
13:05 I'm sure that my amazing panelists can give some more guidance.
13:09 But at the end of the day, the core of what we think about is,
13:12 is your business in a place where we can take you to these large incumbents and
13:17 you are able to carry whatever comes of that,
13:21 hopefully very, very large and long-lasting contracts?
13:26 >> Yeah, I would just add on to that.
13:27 We don't have any specific tailored revenue, tax, whatever.
13:32 But we're very focused on the number one thing, which is the team.
13:36 The number two thing, which is the product market fit.
13:39 And the number three thing, which is the ability to scale.
13:42 And that usually involves having some tech that's very good and deep.
13:46 So those things have not changed in this market at all.
13:48 >> Well said.
13:50 All right, let's find one more.
13:51 Another audience question.
13:53 Forgive me, it's very bright.
13:55 Yes, way back here.
13:56 >> Yes, hello everyone.
13:57 My name is Alina, the co-founder and CEO of GenerationLab.
14:00 And we actually work in longevity.
14:02 So that word is becoming bigger and bigger in the space right now.
14:05 What we are doing is starting out from 19 different organ health and
14:09 build a personalized plan from lifestyle, nutrition, medicines, and also workout.
14:15 So I want to hear your perspective of healthcare,
14:17 because it's becoming a new world from sick care that we used to be.
14:22 How do you guys think about the new healthcare world is changing,
14:25 especially longevity is becoming a real trend right now?
14:28 >> So I believe that the most important thing in healthcare is
14:35 early detection right now.
14:36 Before I joined Google Ventures, I was the chair of Grail.
14:40 And to me, we can detect things early, and that was cancer, but
14:43 there are many other things.
14:45 And some people earlier today were talking about children and
14:48 detecting things early.
14:48 So you have to be able to detect them early, and
14:51 that requires diagnostics and other things there.
14:55 And then once you detect them early,
14:56 you have to have personalized medicine to deal with them.
14:58 I'm less concerned with living to be 150 than I am living to be some age where I
15:03 can be active and healthy, whether that's 80 or 90 or 65, doesn't really matter.
15:09 But I don't want to be into the business of longevity investing just for
15:13 the sake of living longer.
15:15 >> I think that a lot of the longevity conversations, content,
15:18 products are really tailored to certain niches of society.
15:22 And as a consumer investor, I think a lot about how does this get mainstream?
15:26 How do regular people in the world use this, access this?
15:29 And that feels like a lot of the missing gap.
15:31 Of course, stuff has to launch first, and there are early adopters and such.
15:35 But my vision is with the power of AI, there is a possibility where people can
15:40 know what is exactly the personalized, tailored thing for them.
15:43 Because right now, the question is, what test do I use?
15:46 What protocols do I follow?
15:47 Should I listen to this podcast or that one?
15:49 And the more that can be personalized and accessible, the better.
15:53 >> Also, payers have to pay for it.
15:55 So I think you've mentioned VBC, and
15:58 the journey to value-based care is much more complex and
16:02 not as straightforward as we thought.
16:04 And where longevity fits, I'd say there's probably still a knock on the fee for
16:09 service door of how you can think about the entryway to build that relationship
16:14 with a health plan in order to get to a real bundle or
16:17 real risk-based contract, given the value of longevity.
16:20 >> All right, well, 2025 then,
16:26 is it going to be the year of pretenders or the year of contenders?
16:30 >> Contenders, absolutely.
16:32 I think a lot of companies that are building right now are going to be of
16:37 strength and girth and revenues, woo-hoo, that it's going to be a great market.
16:42 And there are 30 companies right now that could break out to be
16:48 phenomenal companies in 2025.
16:49 >> All right, one second, I'm going to say contenders,
16:51 because great companies get funded.
16:54 >> Yeah, all right, all right, okay, and?
16:56 >> Contenders.
16:57 >> Okay. >> Yeah.
16:59 >> Well, please, that's our time.
17:00 Give them a round of applause.
17:01 Thank you so much.
17:02 >> [LAUGH] >> Thank you.
17:04 >> And now it's time to eat.
17:04 >> Yeah, that's right.
17:06 [BLANK_AUDIO]