Digital Health Investor Larry Leisure’s Picks for the Next Hot Areas for Healthcare VC Investment

By JESSICA DaMASSA, WTF HEALTH

Digital health continues to gain a lot of attention from investors, so we’ve checked in with one to get some perspective on what’s hot (and what’s not) midway through the sector’s largest funding year yet. Larry Leisure, of Chicago Pacific Founders (whose enterprise health benefits company, Jiff, was acquired by Castlight Health) weighs in on the exuberance investors are showing for the health innovation space and whether or not it will last.

Are valuations and funding rounds a little overblown? Are investors concerned about some of the recent complaints of ‘digital health fatigue’ that employers and health plans are starting to vocalize as they wade through an expanding portfolio of point solutions? Larry brings us in on some of the closed-door conversations he’s had with payers and employers about the health tech startup scene, and how their thinking is starting to shift his own ideas about where to place his bets next. Healthcare navigators…care-plus-behavior-change platforms…underserved markets…the digital front door…the end of the per-member-per-month business model and SO MUCH MORE. Love getting a high-level look at the field of play!

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THCB Spotlights: Marta Zanchi, Founder & Managing Partner at Nina Capital

Today on THCB Spotlight, Matthew sits down with Marta Zanchi, who is the founder and Managing Partner at Nina Capital. Nina Capital is a micro venture capital firm in Barcelona, and in this interview, Matthew asks Marta about her decision to move from Silicon Valley to Barcelona and start this fund. Marta talks us through some of the investments they’ve made in the past couple of years so tune in to find out more.

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#Healthin2Point00, Episode 225 | Amwell acquires SilverCloud & Conversa – plus more deals

Today on Health in 2 Point 00, we have a deal so big it’s brought me out of vacation just for this episode! Amwell acquires not one, but TWO companies – DTx mental health company SilverCloud Health and chatbot company Conversa Health for a combined $320 million. In other news, mental health company Sondermind raises $150 million, bringing their total to $188 million, and femtech company Elvie raises $80 million, bringing their total to $133.9 million. —Matthew Holt

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THCB Spotlights: CJ Wilson, CEO of MyHealth.US

Today on THCB Spotlights, Matthew Holt interviews CJ Wilson, the CEO of MyHealth.US. MyHealth.US provides wearable QR codes for instant access to emergency health information, as well as a digital platform to track your health data and house medical records. CJ shows us some of their offerings and explains how they’re working with unions and schools in NYC along with the company’s future plans for funding and growth.

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Mental Health Startup SonderMind Lands $150M to Tackle ‘THE’ Health Issue of Our Generation

By JESSICA DaMASSA, WTF HEALTH

SonderMind closes a $150M Series C funding round co-led by Drive Capital and Premji Invest, and we get CEO Mark Frank’s take on what sets THIS digital mental health startup apart from a pack of very well-funded competitors. SonderMind has its own behavioral health therapists, built its own tech stack, delivers care virtually AND in-person, is covered by some of the biggest health plans in the country — Aetna, Anthem, Bright Health, Cigna, Kaiser, Optum, and United Healthcare. (They can also namedrop health-tech-infamous Board member, Jonathan Bush, in an interview, but that’s beside the point!)

What’s most remarkable – and what Mark says most impressed investors this time around – is not only the health of SonderMind’s business model, but also its balance sheet. This raise marks the bulk of the total $183M the startup has raised to-date, and Mark reveals that they’ve only deployed about half of the $27M Series B funding they received in April 2020 in a round led by General Catalyst. How will such a “capital efficient” business begin to deploy these new funds? We hear Mark’s plans for nationwide expansion and improvements to that tech stack, particularly when it comes to better matching therapists and patients based on expertise and need, and more appropriately measuring process and outcomes. Two areas ripe for more tech integration as the mental health provider tackles what Mark calls THE defining health issue of our generation.

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The Most Important Thing

By KIM BELLARD

Jack Dorsey has some big hopes for bitcoin.  In a webinar last week, he said: “My hope is that it creates world peace or helps create world peace.”  The previous week Mr. Dorsey announced Square was starting a decentralized financial services (DeFi) business based on bitcoin, joining the previously announced Square bitcoin wallet.  

None of this should be a surprise.  At the Bitcoin 2021 conference in June, Mr. Dorsey said: “Bitcoin changes absolutely everything.  I don’t think there is anything more important in my lifetime to work on.”

I’m impressed that someone with as many accomplishments as Jack Dorsey picks something not obviously related to those accomplishments and decides it is the most important thing he could work on.  So, of course, I had to wonder: what might accomplished people in healthcare say was the most important thing they wanted to be working on?

For many these days, of course, it is the COVID-19 pandemic.  Not much has had a higher priority.  Highly effective vaccines have been developed, COVID-19 treatments have greatly improved, supply chains have been adjusted and readjusted, and countless public health measures have been tried.  Healthcare professionals have worked themselves to extremes.

For others, perhaps, it would be to address the extreme financial hardships the U.S. healthcare system can cause.  A new study in JAMA confirmed what is hiding in plain sight – hundreds of billions of medical debt.   Debt continued to rise despite ACA, especially in states that perversely chose not to expand Medicaid.  Efforts such as requiring hospital “price transparency” have largely failed.  Many large hospital systems continue to sue patients who can’t pay.  These hardships are unfair, immoral, and unique to the U.S.; addressing them should be important.

However, both the pandemic and financial obstacles contributed to, but did not cause, the big health inequities in the U.S. healthcare system.  People of color, people in lower socioeconomic classes, even women all face numerous inequities in the health care they receive and in the health they achieve.   These may reflect broader social inequities, but no one in healthcare should look at these without wanting to address them. 

Digital health has never been hotter. The pandemic reminded people how valuable telehealth can be, and investors are pouring money into digital health at astounding levels – some $19b in the first half of 2021 alone.  We may be in bit of a manic phase right now, but few doubt that digital health is going to be a big part of healthcare’s future. 

Then there’s artificial intelligence (A.I.).  No industry in 2021 can be ignoring it. Some well-publicized mishaps with IBM’s Watson or Babylon Health notwithstanding, A.I. in healthcare has already made impressive strides, such as DeepMind’s recent protein predictions or its successes in imaging.  A.I. is going to be built into our health care in the future, either in a supporting role or directly, and working on it has to be on many people’s wish list.  

These, and other initiatives, are all important and I sure hope people are working on them.  However, I think about some other things that Mr. Dorsey discussed in the webinar.

We have all these monopolies off balance and the individual doesn’t have power and the amount of cost and distraction that comes from our monetary system today is real and it takes away attention from the bigger problems…You fix that foundational level and everything above it improves in such a dramatic way.

Mr. Dorsey said he’s inspired by the bitcoin community: “It’s deeply principled, it’s weird as hell, it’s always evolving,” reminding him of the early days of the internet.  I always, always, think about Steven’s Johnson’s great quote from his book Wonderland: “You will find the future where people are having the most fun,” and that certainly has to be part of what Mr. Dorsey sees about cryptocurrency.

So, for me, the most interesting future for healthcare has to be synthetic biology, including biohacking. 

Synthetic biology, in case, you didn’t know, is “redesigning organisms for useful purposes by engineering them to have new abilities,” and biohacking is doing that to your own body, usually to optimize or improve its functioning. 

Observers seem to think that synthetic biology seems to draw an edgy, counter-cultural crowd.  It’s on the cutting edge, and it, too, is getting record funding.  Former Google CEO Eric Schmidt said, at a 2019 synthetic biology conference: “What is changing the fastest right now? Because whatever that is determining the history of next year. There’s lot of evidence that biology is in that golden period right now.” 

Biohacking caught my attention a couple years ago because it seemed like “hacking” in the early days of PCs and the internet – not cybercriminals but amateurs just having fun exploring the medium; in this case, the medium is us.  Sure, biohacker have pulled some crazy stunts, but the #WeAreNotWaiting movement , among others, has done amazing, impressive, and important work.

When we start talking about “programming biology,” well, if that isn’t “weird as hell,” I don’t know what is.  That’s fun, and that’s the future.

The theme for me is to solve health issues at the source code level.  Not to take a pill that may or may not address my condition but probably will have side effects, or to have a surgery that will assault my body along the way, but to fix the errant cells/genes/structures at the root level.  Fix things, as Mr. Dorsey said about bitcoin, “at the foundational level.”

Mike Brock, who will head up Square’s DeFi business, tweeted: “Technology has always been a story of decentralization. From the printing press, to the internet to bitcoin – technology has the power to distribute power to the masses and unleash human potential for good, and I’m convinced this is the next step.” 

I want the same for our health – use technology to decentralize, and to distribute power to the masses.  That offers the promise of taking control from the traditional healthcare structures – not relying on hospitals, health insurance companies, or even medical professionals. 

As Mr. Dorsey thinks about bitcoin, “I don’t think there is anything more enabling for people around the world.”

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor.

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Health Care Needs A Hero

By MIKE MAGEE

Health care needs its heroes.

I came to that conclusion this week through a roundabout route.

First I read Maureen Dowd’s interview entitled “Dara Khosrowshahi, Dad of Silicon Valley”, in which she, with some affection, gives the reader a look behind the scenes at the personal life of the current Uber CEO. At one point, Dowd shares her conversation with Dara’s 20-year-old daughter, Chloe, a Brown student, who wants us to know her father was a seriously good dad. In support of this belief, she reports that “When she was little, her father – a fan of Joseph Campbell…would concoct children’s stories set in faraway kingdoms…”

This, of course, forced me to acknowledge that I didn’t know who Joseph Campbell was. Bill Moyers came to the rescue. His June 21, 1988 interview titled “Joseph Campbell and the Power of Myth — ‘The Hero’s Adventure’”, begins with a clip from Star Wars where Darth Vader says to Luke, “Join me, and I will complete your training.” And Luke replies, “I’ll never join you!” Darth Vader then laments, “If you only knew the power of the dark side.” Moyers asked Campbell to comment.

JOSEPH CAMPBELL: He (Darth Vader) isn’t thinking, or living in terms of humanity, he’s living in terms of a system. And this is the threat to our lives; we all face it, we all operate in our society in relation to a system. Now, is the system going to eat you up and relieve you of your humanity, or are you going to be able to use the system to human purposes.

BILL MOYERS: So perhaps the hero lurks in each one of us, when we don’t know it.

By then, I was aware that Joseph Campbell, who died in 1987 at the age 83, was a professor of literature and comparative mythology at Sarah Lawrence College. His famous 1949 book,  “The Hero With a Thousand Faces” made the case that, despite varying cultures and religions, the hero’s story of departure, initiation, and return, is remarkably consistent and defines “the hero’s quest.” His knowledge of this quest gained him a large following that included George Lucas who was a close friend and has said that Star Wars was largely influenced by Campbell’s scholarship.

Whether health care or technology, unfettered capitalism is more than adept at breeding predatory systems that beg for redemption.  Author Emily Chang spoke to this predilection in her 2018 book, “Brotopia”, describing Silicon Valley types as “secretive, orgiastic, and dark.” Dara Kharowshaki’s  CEO predecessor at Uber, Travis Kalanick, was labeled one of the worst. When Dara took over, New York Times technology expert, Mike Issac asked in 2019, “Can this rational, charming chief without the edge, ego, or cult following of wacky founders succeed in today’s insane economy?”

But Dara’s journey across and within Uber seems to be guided by his inner “Joseph Campbell.” Departure, Initiation, Return. He appears to be mid-stream in challenging his own system. Not naming Mark Zuckerberg, he mused, “I think, just like Uber, some of them grew up too fast and some of them didn’t take responsibility for their power and I think now they’re being called to reckon… I think the age of ‘I built a platform, I’m not responsible,’ that time is over. And now the question is, what does the responsibility look like? Defining it and putting guard rails around it, I think that’s a healthy thing.”

Health care if anything is more complex than Silicon Valley. Deeply segmented but fundamentally opaque and collusive, the Medical Industrial Complex controls 1/5 of the economy with power literally over life and death decision-making. With its share of heroes – from everyday doctors and nurses to unassuming scientists birthing “just-in-time” cures – the system also has bred some first-class villains of the likes of Arthur Sackler, Martin Shkreli, and Elizabeth Holmes.

Health care, for all its pure and idealized mythology, has descended into the belly of the capitalist beast. Its vaulted training institutions have captured and bred many of our nation’s finest, only to trap them in a compromised and conflicted “Initiation” phase, from which they never “Return.” As Dara told Dowd, “sometimes the system ‘works too well’: I think capitalism has its claws in our democratic societies in ways that has allowed it to overly optimize for its benefit.” 

Health Care needs to be certain that its young and developing heroes, who depart from their civilian lives, to be initiated into a life of service and sacrifice, are not captured by “the dark side.”

Those who train doctors and nurses and health professionals, who lead research and discovery, who administer health care institutions, need to understand the fundamental challenge in “the hero’s quest.” As Joseph Campbell stated, “Is the system going to eat you up and relieve you of your humanity, or are you going to be able to use the system to human purposes?”

Mike Magee, MD is a Medical Historian and Health Economist and author of “Code Blue: Inside the Medical Industrial Complex.“

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Matthew’s health care tidbits

Each week I’ve been adding a brief tidbits section to the THCB Reader, our weekly newsletter that summarizes the best of THCB that week (Sign up here!). Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! –Matthew Holt

In this week’s health care tidbits, we are talking about medical debt. Oh, not all medical debt. No, not that debt being garnished from the wages of health care workers by their own employers. Today we are just discussing the debt that has already gone to collections. Yes, the debt sold off by doctors and hospitals for pennies on the dollars so that debt collectors can hound people until they pay or despair.

This week a Harvard/Stanford team reported that the total in collections is $140 Billion! Way more than anyone thought, Nearly ONE in SIX Americans currently has a medical bill in collections. No prizes for guessing that those most likely to be being pursued are living in the poorest zip codes in the country and even more likely to be in a southern state that never expanded Medicaid.

Glad we are all proud to be American.

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#Healthin2Point00, Episode 224 | b.well, Quit Genius, Doktor.se, Sweetch, Kno 2, and Healthify.Me

Today on Health in 2 Point 00, Jess and I chat about the staggering medical debt in this country before diving into some more health tech deals. First up on Episode 224, personal health record company b.well Connected Health raises $32 million, bringing their total to $57 million. Next, Quit Genius raises $64 million in a Series C, bringing the digital addiction clinic’s total to $78.6 million, and Swedish telehealth company Doktor.se raises €29.5 million – there are some interesting investors in this one. Sweetch, a Bayer G4A company, raises $20 million for its behavior change app and Kno 2 raises $15 million in a Series A in yet another interoperability play. Finally, Healthify.Me raises $75 million, bringing its total to $100 million – this is like Noom plus exercise in India. —Matthew Holt

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Money and Values: For Healthcare Workers, It’s Time They Align

By WYNNE ARMAND and CHRISTIAN MEWALDT

It shouldn’t be controversial to say that promoting the well-being of patients and our community should be at the core of our decisions in health care — even when competing factors exist. Yet we have grown increasingly uncomfortable to realize that we’ve been investing in companies whose products — including fossil fuels — are at the crux of diseases we treat.

In 2018 alone, fossil fuel combustion-produced particulate matter was responsible for an estimated 9 million deaths worldwide, according to a recent publication by researchers from Harvard University and the Universities of Birmingham and Leicester in the United Kingdom. Other health effects are extensive, including increased cardiovascular disease and respiratory illnesses, especially in small children. Fossil fuels are also widely considered a primary driver of climate change, and their combustion contributes to the increased numbers of record heat waves and heat-related deaths, as many US communities are facing this summer.

Our hospitals, as tax-exempt nonprofits, provide us retirement plans in the form of 403(b)s, financial accounts similar to 401(k)s that are offered by for-profit companies. As employees who are eligible for benefits, we are typically automatically enrolled in the retirement savings plan, with contribution limits determined by the Internal Revenue Service (IRS). Recently, we learned that by the end of 2020, of the $35 trillion in US retirement assets, $1.2 trillion were invested in these 403(b) plans, according to Investment Company Institute, the trade association for investment companies.

With healthcare representing the largest sector of employers in the US, with nearly 7 million employees at hospitals alone, our employers should provide us with options for retirement funds that do not contain fossil fuel investments that ultimately undermine our duty to patients.  While retirement finances aren’t our focus during our workdays, the effects of our collective $1.2 trillion investment do appear in clinical settings.

The default choice at our institution, like many, is a target-date fund composed of “passive investments”, i.e. indexed stocks and bonds that rebalance as the employee’s retirement date nears. Most also offer pre-screened mutual funds chosen by the employer’s investment committee, or allow participants to transition retirement funds into a brokerage account to self-manage investments. To choose an alternative investment strategy requires financial know-how and effort, so, unsurprisingly, most of us invest in the default. The largest, most-used are the Vanguard Target Retirement Index Funds, which have an estimated $292 billion invested in fossil fuel companies.

With the links between fossil fuels and the acceleration of global warming increasingly apparent, a growing number of institutional funds, including dozens of university endowments and large pensions, have divested from fossil fuel companies. Surprisingly, hospitals trail in this effort, representing just 1% of these institutions, according to 350.org, an organization devoted to accelerating clean energy.

The efficacy of divestment in promoting change is often debated. One example advocates frequently cite is American disinvestment in Apartheid-era South Africa, though the true financial impact of divestment is uncertain. Regardless, as more institutions participate, the campaign becomes an unignorable social movement that may further drive cultural shift, policy change, and industry action.  

There will always be people who believe fiduciary responsibility means pursuing the highest returns, social impact be damned. However, Moody’s Investor Services, the credit-rating firm, recently warned that industries that produce significant amounts of carbon could be hurt financially as governments, banks and money managers try to lower the carbon intensity of their investments.

Coal-derived electricity production has declined by roughly 50 percent in the last 5 years and a recent report from investment company BlackRock found that portfolios divested of fossil fuels “experienced no negative financial impacts from divesting from fossil fuels. In fact, they found evidence of modest improvement in fund return.” Financial considerations seemed to be at the forefront of University of California’s (UC) 2019 decision to make both its $13.4 billion endowment and its $70 billion pension “fossil free”: “We [UC] have been looking…ahead as we place our bets that clean energy will fuel the world’s future… We have chosen to invest for a better planet, and reap the financial rewards.”

Creating socially-conscious funds is complex; understanding their implications, even more so. Some may argue that a more effective strategy is to continue fossil fuel investing, thereby maintaining a voice in those companies. As a recent example, activist investors elected climate-concerned directors to Exxon’s board who may alter the direction of the company. But, what made this announcement so groundbreaking was its rarity. Until this practice becomes the norm, disinvestment remains a reasonable alternative.

Healthcare institutions and we, as their employees, have a mission to heal. To further this goal, we deserve to be offered investments that align with our interests, including fossil fuel-free retirement investment options. We also deserve to be educated when default retirement funds include investments in companies that contribute to disease and death.

The Mass General Brigham (MGB), the hospital system in which we work, is the largest employer in our state with 80,000 employees. After three years of strong advocacy by our colleagues, MGB’s Pension Management Committee has approved two employee retirement fund options that follow environmental, social, and governance (ESG) criteria, which will become available in January. It’s far from perfect, but it’s a start.

During open enrollment this November, we hope our colleagues will join us in taking this small first step to better align our investments with our human health priorities by affirmatively selecting an ESG fund option (or opting to self-manage a brokerage account), and that other hospitals will meet or exceed MGB’s actions.

Wynne Armand, MD (@wynnearmand) is a primary care physician at Massachusetts General Hospital and Harvard Medical School, and a Public Voices Fellow of The OpEd Project.

Christian Mewaldt, MD is a hospital medicine physician at Massachusetts General Hospital and Harvard Medical School, and a Public Voices Fellow of The OpEd Project.

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