Expanding our bio/healthcare thesis

Our first investment in healthcare was five years ago in Figure 1, a platform for viewing
and discussing real-world medical cases with healthcare professionals. This investment shaped our original thesis in the category.

Figure 1 plays outside the healthcare care system; it’s permissionless innovation, like Yammer or Slack in the enterprise. As we wrote in our Digital Healthcare blog series, “Even more complex than the enterprise, the healthcare market is muddled by byzantine incumbency, legacy, and regulation. We are excited to have invested in one network, Figure 1, which appears to have found the rare seam where a network can flourish with minimal permission and no system-level integrations.”

Over the years though, our thesis has moved closer “inside” the system. We have realized that in most cases, bottoms-up distribution or the “consumerization” of software in healthcare has its limits. For example, a digital health app can offer consumers greater access to certain services at a more affordable price, enabling it to collect valuable health data directly. However, while D2C is good for rapid adoption into the market, the “patient information layer” is ultimately a thin wedge and not powerful enough to disrupt how services are delivered by the system itself.

How does our healthcare thesis look today?

Last December, I shared that genomics and biosciences would be an important theme for us in 2018. At that time, our bio/healthcare thesis focused on startups taking a “full stack” / vertically-integrated approach with the belief that data is the key creator of value. That is, we
were excited by companies that:

  • Make the collection of high fidelity health data easy, accessible and affordable for patients and medical professionals;      
  • Empower consumers with control and understanding of their own personal health data (i.e. take a bottoms-up approach outside of the regulated healthcare system);
  • Have the potential to be a “biobank” with data that can be shared safely across networks;
  • Can provide personalized recommendations and/or enable others to build applications on top of their open platform.

Nine months later, the “full stack” thesis still holds true with one big change: we are now more open to investing in opportunities that require FDA clearance or approval. In the past, we had shied away from this for the obvious reasons of speeding up time to market.

But now, we believe that in order to make a full stack D2C product more powerful, it needs to be cleared/approved by the FDA in order to gain a higher probability of becoming a new gold standard for diagnosis and/or treatment, which then has the potential to transform the delivery of healthcare as it can change the cost structure altogether.

In other words, we like:

D2C (for rapid adoption) –> FDA clearance, approval –> gold standard –> cost structure change

We understand the risks and greater capital requirements of seeking FDA approval, but our big takeaway over the past few months is that clinical-grade devices or diagnostics that touch the end user to collect health/bio data (which can be leveraged for network effects) are the kinds of innovation we need to transform healthcare.

If you’re looking to reinvent how healthcare is delivered and share this same view, please reach out to us. We’re also looking forward to sharing two investments that we made which follow this expanded thesis soon.

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