How COVID-19 is Transforming Digital Health with Kristin Baker Spohn and Deena Shakir

Hey everybody, it's Erik Thornberg, co-founder, partner of Village Global, a network-driven venture firm. And this is Venture Stories, a podcast covering topics relating to tech and business with world-leading experts. Hey everybody, we're now accepting applications for our Network Catalyst Accelerator program. Founders in our program have gone on to raise money from Lux, Spark, A16z, Slow, First Round, Sousa, Homebrew, Maveron, Obvious, NFX, Signifier, and many more. Learn more and apply at villageglobal.vc/networkcatalyst. Hey everybody, welcome to another episode of Venture Stories by Village Global. I'm here today with two very special guests, Kristen Baker-Spone, a partner at CRV, and Deena Shakir, partner at Lux. Deena, Kristin, welcome back to the podcast.

Thanks, Eric. Thanks.

Thanks. Great to be here.

So we're here to talk about digital health. Kristin, you came about a year ago, year and a half ago. You were at Social Capital at the time. Now you're at CRV. I'm curious, what are some of the biggest changes you've seen and how— before even getting to digital health and COVID world— in the last couple of years, how this space has evolved or what you've been most excited as you've switched from operator to investor in the broader space?

Yeah, thanks for the question. Yeah, moving from operator to investor has been really great. I mean, one of the benefits you get as an investor is you really get to see the whole forest instead of building each individual tree that you're building in the forest. And so that's been a wonderful shift to be able to see. And then frankly, it's just evolving so quickly. I think that for many years, we were right around the corner of an explosion in digital health. And I think that what we're seeing, not only this year, but in the last several years, has been really exciting just to see how the landscape has evolved so quickly. Specifically on that, I think one of the things that we're seeing now versus some of the, you know, the earlier iterations in digital health has been companies and startups really figuring out the business model. I think that a lot of people and a lot of entrepreneurs get into healthcare because it's such a great mission to work on, right? It's something that impacts us and our families. But one of the challenges that you can see is, you know, how you build a scalable company in order to have that massive impact. And I think that's what we're seeing in the last several years has been companies that have really figured out those business models to enable breakout companies in order to have that broader impact, not just starting from kind of, I want to have a really strong mission.

Yeah. Malay Gandhi wrote a blog post a few years ago, and I think his basic critique is basically saying, hey, digital health is such a huge— everyone says trillion-dollar space, and yet we're not seeing these sort of decacorns or enormous businesses in the space. Diagnosis there was that companies are not thinking big enough, they're not thinking about owning the outcomes, they're unbundling the middlemen, they're partnering with the existing system instead of building outside of the system. What do you say to that critique? Has that changed? What's your thought there?

Yeah, I think it's part of the story. I think that the thinking big enough, I think, is true. I think the challenge that you see with building outside of the system is healthcare is a team sport. And so if you're not really understanding why the world is the way it is, and then interacting and building partnerships where helpful and ignoring dynamics where unhelpful, I think that's one piece. I think the second piece of why we haven't seen as many decacorns as we would have hoped has been, in order to be a decacorn in this space, you need to be both a great startup a great company and a great healthcare company. And doing one of those is hard. And to do them both really well at the same time is, you know, it's a steeper mountain to climb. So I think that we will see them. I think that it just takes those really strong interdisciplinary teams that both understand how the landscape is, but also can bust through new walls in order to bring those about.

Deena, why don't you help us make sense of the landscape a little bit? How do you sort of define digital health, virtual health, telemedicine? Why don't you give us a little bit of an overview of the landscape here?

Yeah, absolutely. You know, I think digital health is certainly not a new term, but it is very broad and all-encompassing. And I think when we think about virtual or digital health or, you know, a component of that, telemedicine, many people are often just thinking about the virtual visit, right, which has been around for quite some time. In fact, there are companies who were doing, you know, phone visits for decades now, and that is telemedicine. That's where the tele comes from. But as the sort of sector has evolved over time, as technologies have become more mainstream on the— and frankly better adopted on the provider side and the consumer side, the notion of sort of virtual medicine, I think, has really broadened. And certainly we can dive into this a bit more later, but certainly what's happening today with the COVID-19 pandemic is really just forcing the types of tailwinds and trends that were already happening and just compressing adoption and behavior change into a really shorter period of time and remarkably shorter, right? So I'm talking about what might have taken months or maybe decades in some cases into a matter of days and weeks. The key here, I think, is multifold. One, you know, if we talk about— we're talking about patient provider here. There's a whole nother level of provider tech, but for patient provider, there are two users to consider if you're actually just thinking about the patient and the provider. And adoption change with physicians and with healthcare workers in general has never been easy. That is obviously changing now because there is no other choice. What was once thought of as maybe a nice-to-have or complementary technology or an add-on is critical. And so there was really high activation energy previously for these types of technologies. And frankly, there's no other choice now. And I don't think this is going to be a short-term change. I think the type of change that we're seeing here is going to impel permanent behavior change on both sides. In a similar vein, the regulatory constraints that existed have just been bulldozed over. Right. So we're seeing everything from rules and regulations around HIPAA compliance with special situations put for that to licensing requirements. In terms of where providers can see patients, to FDA granting approvals in a very streamlined and faster way. So these are all tailwinds that are pushing this kind of change. And so to go back to your original question, virtual medicine is much more than just telemedicine. We're seeing remote monitoring technology. There's, of course, asynchronous patient-provider There is sensors, there's aging in place, the sort of whole home medicine diagnostics, clinical trials, etc. There's really quite a bit that you can bundle into that category, and I think it's all changing.

My question for both of you is— well, I guess the sort of initial question is sort of when we were just talking about telemedicine, virtual medicine, are there any sort of— what are the biggest companies that have come out that have leveraged sort of, you know, really changed the experience for consumers in sort of a disruptive way rather than sort of a state-sustaining way? And I guess the broader question I'm actually not sure if there are any— the broader question is what the iPhone moment in healthcare looks like. Maybe that's a false analogy, but what's sort of the game-changing thing that— maybe it's COVID, I don't know— the game-changing thing that has to happen that sort of just creates new opportunities for many startups to build on top of that, that can achieve scale that we haven't seen before?

Yeah, I'm happy to dive in. I'd love to hear Deena Shakir's thoughts as well. So what I was seeing happen in telemedicine or virtual care more broadly was really Finally, kind of the identification of the use case that consumers were pulling in. So I think that, you know, as Deena mentioned, televisits have been around and just underwhelmingly adopted by consumers and by physicians alike. But what we've seen over the last several years with these direct-to-consumer prescription companies, so Hims, Ro, 30 Madison, you know, there's, there's a number of them out there. We were starting to see companies really tap into consumer demand. You're starting to feel the consumer demand pull in the market. And so that was kind of the wave that I was seeing in terms of a newer use case that was driving this change. I still thought that that was a wave, not a tsunami. I think what we're seeing with COVID is a tsunami of adoption. And Deena talked about activation energy. I think that's the exact right word to think about, or the phrase to think about there. And that activation energy was first coming from consumers for these more transactional, I just want a nice, easy experience to my house. To all of a sudden everyone not just solving that last mile problem, but that last foot problem and bringing a visit and full care into that iPhone experience. And so what I had always seen as one of those challenges to how do you really enable digital health or virtual care to reach its full potential has not been that last mile, it's that last foot. It's get that person to actually pick up their phone and do something. And right now we're seeing that happen. And it was starting to happen with those direct-to-consumer prescription companies but it's happening in droves now because of COVID-19 and virtual triage. And so one of the companies that I invested in out of that thesis was this company Wheel. That's essentially a platform aggregating supply, aggregating clinician supply, so nurses and doctors, and bringing them onto platform so that they can handle a video visit over here, prescription visit over here, digital triage over here, and training and credentialing and paying them. For all of that care that they're providing. I love that.

I think I'm going to continue with your water analogies now. So you talked about tsunami and waves. I mean, this really is a watershed moment in many ways. And just to put some numbers to that, if you think about— look at Stanford Health Care. Stanford Health Care prior to this crisis was at best conducting— let's look at Stanford Children's Health. They were doing 35 telehealth visits a day. That was the all-time daily high. So it was actually likely much less than that. Recently they reported that the entire Stanford healthcare system is now doing 3,000 telehealth visits per day. And that is not because anything has changed on the technology side. It's not because it's a better user experience. Again, a lot of these technologies have been around for a while. It's because there is absolutely no other choice right now for these patients to be seeking care. And I think once you can get past that activation, that initial activation energy, It just changes the way people do things or will do things moving on in the same way everyone is talking about, you know, what all these Zoom calls that we're doing now on a daily basis may change the way we think about in person. Your earlier question, though, in terms of what are the big companies— I think you asked, what are the big companies, the 3 companies here? You know, I, before joining Luxus, previously at GV, the artist formerly known as Google Ventures, and they were early investors in One Medical. And when I was actually at Google prior to GV and helped build Google's first HIPAA-compliant product, which was actually a telemedicine product, we partnered early on with One Medical. And so I saw, you know, One Medical took a long time to get to where it is today. And it was in many ways, you know, not your typical up and to the right in terms of growth. But a few things changed there, I think, macro, that enabled it to get to the scale that it's at today. Part of that was changing demands on the consumer side as to what they expect from a healthcare experience. And that partially has to do with an aging generation of, you know, call them millennials, Gen Z, etc. But as they are evolving into the regular users of healthcare, the ones who are giving birth and are having families and are taking care of children, the old way of doing things just doesn't work anymore. They demand more and they demand better. And I think that's also contributed to the rise of a lot of these D2C companies, some of which Kristin mentioned, because we're used to doing that. We're used to being able to interact in a way that makes sense. That is continuing to happen on the provider side. It's not the— everybody talks ad nauseam about the challenges and burnout as a result of documentation and EMR. That's absolutely still there, and there's absolutely a lot more that needs to happen and already is happening. But the same thing can be said for the tools that physicians are demanding on their side.

So what are examples of startups that y'all are more interested in investing in post-COVID than pre-COVID world, either startups specifically or subsectors or specific business models that you think are more opportune now?

Yeah, one area. So I was already, and Deena was as well, already investing in virtual care. I think one area in particular that, you know, it's really stars aligning in terms of timing that I think has become more interesting is remote patient monitoring. So what's happening with COVID is leading physicians in particular to change their workflow around how do I monitor and provide care when I actually can't see people in person. But that's also corresponding with reimbursement and regulation changes that happened to have happened at the exact same time. So now all of a sudden we're seeing, we're seeing Medicare reimbursement for remote patient monitoring, something that you hadn't seen before because What was happening in a fee-for-service world is you were paying for that face-to-face interaction, despite the fact that you could have even better access to care if you just didn't make that person leave their home and if you could monitor them remotely and track their data in a passive way, whether they're diabetic, whether they have other chronic conditions. So I think remote patient monitoring is an area where, not necessarily because of COVID but COVID combined— the change in behavior because of COVID combined with the reimbursement and changes in regulations is an area that I'm more interested in than I'd been in previously.

Absolutely agree. I think that's a tremendously exciting area. And I think if you take a step back, for me, technologies that are able to scale the efforts of our healthcare workers are very interesting, have been interesting, but especially now when the health system is just absolutely stretched to its limit, those are the types of technologies that excite me. Remote care monitoring, absolutely falls into that. The technologies that are enabling virtual clinical trials. So for example, in the Luxx portfolio, Science 37, Electrolabs, those are good examples. Technologies that are changing the way procedures happen in the operating room. So another example of that, and we just actually, this company just came out of stealth recently, is a company called Avail, which is working to minimize the number of people that actually physically need to be present in an operating room. So those are all really exciting to me. And I think similarly, outside of the patient-provider experience, tools that will help reduce burnout on the clinician side are also very interesting as well. And there are a slew of those. Many of them have been around for a while. Some have seen better adoption than others. But if you look not only at what's happening with COVID but some of the changes as well on the interoperability side in recent, I think that there's a lot more to be done there.

Kristin, you were talking earlier about business model evolution over the years. In terms of who pays for it, how do you guys think about your D2C versus your payers, health systems versus ACOs, or how should stars be thinking about that or how that's evolving?

Yeah, it's an area that I've spent a lot of time thinking about and why can some companies get an adoption curve and get to scale and other companies have really struggled. And the mental framework that has helped me really understand not only products but also go-to-markets for digital health companies has been really understanding all of the key stakeholders and what their incentives and their workflow are. And I break down the stakeholders into 4 buckets. Those buckets are who decides, who uses, who pays for, and who benefits from a particular product or service. And the reason why that I think you're seeing those D2C companies have adoption curves that look much steeper than other companies in this space has been because In a consumer business model, those are all the same person. The same person gets to decide that they, you know, what they need to go through and get a prescription, make sure it's relevant for them, but they're deciding, they're using it, they're then going to benefit from, and they're the ones that are paying for it in the cash pay environment. Now, as you move deeper and deeper into complexity, those get broken apart. So it's not just not only the same person, it's oftentimes different entities involved in the healthcare system. And oftentimes, sometimes, sometimes not, they have misaligned incentives. And so I think that's why you've seen adoption curves take longer and be more fraught with complexity, because you don't have necessarily that alignment of stakeholders and incentives. And that's not to say that there aren't other industries where that happens. You know, if you think about large enterprise software sales, you oftentimes need to navigate an organization where you'll have different people, with different stakeholders, with exactly the same 4 buckets. But oftentimes in healthcare, that who pays for and who decides can be separate and distinct from the patient, who's the one who might be using and/or benefiting from it.

How do you think about this framework? One, in terms of if it's accurate, and two, how startups should think about it in terms of which one to pursue. So it'd be basically, you can either build inside the system or outside the system. You either have to be full stack, you know, take the entire vertical of pharmacy, clinical trials, insurance, or barely touching the existing healthcare system. So if you want to simplify the pharmacy, you have to be delivery system, distributor, PBM all in one. If you want to do insurance, you have to get into care itself. If you want to be in clinical trial space, you have to be someone that runs a clinical trial itself, or you operate tangentially next to healthcare space, either in primary care like One Medical or Nurix, which doesn't have to touch the existing system unless it absolutely needs to, which means it can build its own system in-house. So I guess another way of phrasing it is, either you commit to going through heavy amounts of proof building, clinical trials, pilots, published in peer-reviewed journals, or you go direct to consumer and gather millions of users like any other consumer app. How do you think about what I said and what do we recommend to startups?

Yeah, I'm going to be annoying and disagree with the paradigm and say the way I think about it and the companies that I've seen have a good deal of success, I think, listen, I think there are some companies that can get the capital and the talent and build in a silo. And get there and come out kind of fully formed. I think that's usually the exception, not the rule. And then the companies that start, whether it's inside of a health system or inside of a particular use case, end up building something that's too narrow or too specific for that one particular area. And so what I look for are companies and entrepreneurs that are thinking about a wedge and thinking about a wedge into the system that has a sustainable business model, and has enough product development and go-to-market there that you earn the right to then get to the second act. And that second act might be scale. So, you know, let's take an example of a business model that doesn't work in the very early stages, like a PBM, right? A PBM only has this massively scalable and amazing business model at scale. Well, in order to get there, that might be, you know, act 2 or act 3. You got to start somewhere. And so that's what I look for, companies that think about what's that act 1 wedge where it's going to enable me to build a product that's going to be widely applicable, so not one that's just going to be useful for a particular use case or a particular health system, but also one that has a business model that's going to earn me revenue and earn me traction and earn me credibility so that I can fund whether it's clinical trials or data collection as I'm continuing to build towards scale. So I think of it as a long-winded way of saying I look for companies that are building that wedge in and thinking about how do I build the right act one so such that I earn act 2 and act 3 to get to scale.

Totally. How do you advise startups when they're sort of going back and forth on whether they should go D2C or sell to providers or payers or some other mechanism, when they're sort of in between of who they're thinking? I mean, earlier you were saying how sometimes the payer and the user are misaligned. Are there any other frameworks for thinking about where to best make that wedge?

I think it comes back to where are you going to add value and are you going to capture that value? And so, you know, a lot of companies that we saw in digital health started in consumer and then tried to move into enterprise when either they realized the consumer model wasn't going to get them to scale or wasn't getting them to a sustainable business. I think consumer companies, a consumer business model can be a great one. You just need to have really strong unit economics. And so just like another great consumer company, where you need to have a sustainable and exciting CAC to LTV, the same thing is true here. And your, you know, your customer acquisition costs may be different or, you know, or more challenging given the space, and then your LTV may be different or more challenging given the space. So I wouldn't say that one is better than the other. The one thing I will say is, you know, especially right now, but in general, selling to providers is very challenging. It is a long sales cycle. And what you used to be able to do was you could go and start at the SMB part of the space. You would start with independent practitioners or independent practice groups and you work your way up to the middle market, you know, very similar to enterprise SaaS, right? You'd work your way up to the middle market, which might be an independent hospital, and then you get into enterprise and then jumbo, which would be a health system. Well, there's been so much consolidation in the last 10 years that the SMB space and that middle market space has become so constrained that it's hard to build a big business there by addressing those what tended to be faster sales cycles. And so all of a sudden you need to be able to come out fully formed and addressing those jumbo enterprise, the health systems. And that can be just a really, really hard place for an early-stage startup to be. So the reason that's not to say don't go there. I think it's, it's fantastic if you can. But one thing that you need to remember there is that getting into and getting the attention of the C-suite in a large health system requires both credibility and access. And so being able to build, whether it's an advisory board or early pilots and early credibility or early customers with people that can give you that credibility and that can help you break into those systems. I think that's key. And so, you know, we talk about founder-market fit being important for lots of companies, lots of startups. I think it's particularly important in healthcare where you bring in not only phenomenal tech talent, but also people that really understand and have lived and breathed and have credibility in the healthcare space.

One thing I would just add, and I think that's all absolutely spot on, is sort of the third silent player in many cases, but the third piece of the triangle here is the payer space. And so in addition to needing to drive consumer adoption and needing to get buy-in from these health systems, you know, and selling into them is an absolute slog, you need to get reimbursements figured out. You need to get the relationships there on the payer side in some cases. And Kristin knows this well, given her time as an operator, is also the employer side of things. And so those are all interesting and interesting challenges, but also potential wedges on the employer side in particular, that a lot of these companies are, you know, think of the Livongos and the Omadas can just go directly to that, to that wedge versus going direct to consumers, but not necessarily going to the health system. It's another opportunity.

I'm hearing some people say that the employer sort of go-to-market is too crowded and they're excited about different different paths. Are you sympathetic to that? Do you disagree with that? Or how do you sort of think about that go-to-market?

It's interesting. I mean, I think people have realized this dimension. That's certainly not a novel observation. And as a result, it has become a bit of a crowded space. I wouldn't necessarily say that it's too crowded because there are so many different unsolved challenges that can still be better adopted there. And I also think, to use Kristen's term, that it is a wedge into the certainly into the health systems. So I'm not averse to looking at opportunities that are taking on the employer market. On the contrary, I think it still is an interesting wedge in.

Yeah, I agree with Deena. I think the nuance I'd add is just, you know, the employer space, it really comes down to are you getting— are you acquiring customers in an efficient way? I think the challenge that you've seen with it being more crowded is you've seen a lot of point solutions and and companies trying to address the employer space without necessarily understanding what that employer buyer is looking for. So, whether what that HR benefits leader, what that total rewards leader is really looking for in terms of a solution for his or her employee population. And then the second piece there is, you know, it's expensive to sell into a large organization like an employer staffing up a field sales team, having a marketing team. All of that is expensive. And so if you think about it, if you see that, you know, selling an employer with 100 employees and then you need to do a two-step sell where it's, you've really just gotten the hunting license and now you need to go market to those employees for them to sign up for your service. Well, I think asking yourself and asking and looking at the data to see, is that actually more capital efficient than going directly to consumer or going through a health plan where, you know, you sign up one health plan, you can have access to millions of lives. Versus you sign up with an employer and you have access to maybe 10,000 for a very large employer.

I'm curious what you think of the paradigm that says that the future is specialized healthcare and you'll see separate stacks for primary care like Forward and One Medical, chronic pain, reproductive health. And so that's one paradigm. And the other sort of is that there are different business models that might make sense for each. So I see things like One Medical for X, you know, segmented across disease or specialized, but then also things like PIMMS for X or something, or even Omada for X, these digital therapeutics. How do you think about, one, the initial paradigm, and then two, different business models, delivery models that could make sense for each one?

Just to clarify the paradigm, are you saying being kind of everything for everyone versus trying to address a particular population or a particular disease? State? Am I capturing that? Okay. Yeah, I mean, I think there's a couple things that your question makes me think about. The first one is really around, you know, one area that I think about with healthcare outside of digital health is healthcare and healthcare marketplaces, kind of like politics, are inherently local. And so you see very different dynamics from the healthcare system that we have here in the Bay Area versus what you'll find in a rural area where there's only one particular provider that you could go see, or even in certain states where a certain health plan might dominate market share. And so I think that it just gets me thinking about what are some of those geographic differences that you can have between being a broad provider versus being a specialist. And so if you go into and you're kind of owning a particular marketplace or really addressing a particular geography, there might be an opportunity to be more broad. I think that when you think about what happens when you remove that, that constraint and you go into a digital world, that's where I think that trying to be everything to everyone all at once is— can be a really hard place to be, both from a messaging and a marketing as well as from a, you know, solution providing. So I think that that's why you're seeing folks at least pick a place to start You know, if I think about it as almost a consumer company, like pick a persona, whether that is a particular disease state or a particular type of person, and then start there. And from there, you can then build out what you're offering your solution, either by following that particular person through their healthcare journey, or by thinking about, okay, now that I've acquired this person and I'm serving them and delighting them, how do I think about the other things that he or she might need? And so I think that's what we're seeing, at least on the direct-to-consumer Rx side, are people starting with a particular persona and really acquiring that one well and then saying, okay, well, I've built either this infrastructure, let me see how I can leverage this infrastructure more broadly, or I've acquired this persona, let me go further and further with her down her healthcare journey. So it's probably a winding way of answering what may have been your question, but I think of specialty as you need to solve pain. For someone or solve a problem that he or she has in order to add value and to capture some of that value.

I think I would add to that if you're broad. Yeah, that's all definitely true. The other thing to consider, of course, is that healthcare is different than other sectors in so many ways, one of which is being the sheer scale and size of it. And, you know, a specialty, even solving one particular pain point within one specialty can still be a massive, massive opportunity for your company. And so this whole notion of land and expand or moving from one, even one indication to another, it doesn't really hold as much water here. And sometimes it makes more sense to just go after that particular use case. Again, whether it's, you know, Auris, right, surgical robotics for GI, or whether it's a company that's looking at using AI to analyze and help provide diagnoses on particular use cases specific to certain indications. So I don't necessarily think it needs to go broader than that. And that's one of the reasons why I think specialties make a lot of sense. But I may also reject that sort of dichotomization because I think they both exist and they're not necessarily two different options. They're just They're totally different ways of thinking about solutions.

Totally. I want to ask about some, you know, sub-specific business models. So for example, the one medical for X, do you think that there will be, you know, a couple or multiple unicorns of one medical, you know, segmented across specific disease, whether it's musculoskeletal or, I don't know, like, you know, women's health or some— or something else? Or how do you think about that space specifically?

I, I think that's a tougher one because when you think about, um, there's so many other kind of trends happening within healthcare outside of technology. I Kristin talked a bit earlier about increasing centralization, consolidation of health systems. That's not just for these large health systems. That's also happening even for these other players, which is partially why in many cases you're seeing them try to take on other specialties, whether it's mental health or dermatology, pediatrics, family planning. So I don't know that if you're thinking about the One Medical example, whether the One Medical of XYZ makes a lot of sense. In terms of growing a very largeness because of the consolidation that you see happening.

What about the Hims, for X? Is Hims sort of a unicorn in the sense of— my understanding is it doesn't really have a product innovation, maybe they would say differently, but it has a distribution innovation or delivery innovation. If you put that across different diseases, could that work or is there something about erectile dysfunction or hair loss, whatever Hims is focused on right now, that is unique to that?

Using that example, and there are others, right? So there already are the Hims of this and the Hims of that. There's a plethora of these companies out there. And I think oftentimes what you're seeing, to your point, is not necessarily, certainly not a medical innovation and likely not even a technological innovation, but really just marketing power. And that's a different way of thinking about delivery of healthcare. You can certainly reach some scale, you can improve a lot of lives, whether it's what Hims does or maybe something that's more essential there. But I think that's really the— when we're looking at these companies, that's the kind of talent you need to see because that's what's going to make these companies successful.

How about Omada specifically? Is that a product model that can be applied to a bunch of different diseases, or is there something unique about diabetes?

I mean, if you're looking at chronic disease management in general, you know, there are potentially other chronic diseases to which that can be applied. I think diabetes is an interesting one because there are, you know, comorbidities, there are behavioral changes that can be really effective that would lend themselves more to that type of model vis-à-vis other chronic diseases or, you know, autoimmune and so on, in which case there's there are little interventions that can be done with that type of model that can be effective. I'd be curious to hear Kristen's thoughts on that as well.

A way of thinking about it is probably, again, not too dissimilar from the way that VCs broadly think about startups, where it's vitamin versus painkiller. You want to be a painkiller and not a vitamin. And I think it's a bit more nuanced in healthcare, where I think about the breakdown between prevention, diagnostic, and treatment, and you think about the business models, the products that you build in those, and the way that you monetize and capture value, what I've seen is, rule of thumb, just from what I've seen and how I've seen it play out, but at least in our country, we tend to pay, you've heard the saying, an ounce of prevention is worth a pound of treatment, right? Well, in our country, unfortunately, we pay very different differently for prevention versus diagnostic versus treatment. We pay, if we're going to roughly break it down, we probably pay $0.10 for prevention, $1 for diagnostic, and $10 for treatment, which is why I think that when you're looking for venture-scale outcomes, you either need to have a really efficient and broad distribution model with a massive market if you're going to do something preventive, and you need to be able to capture that value. Because in this current model, in our current system, we just don't pay for it. And so I think that that's why you've seen venture outcomes more on the therapeutic side. If you look at biotech outcomes, if you look at anyone that's addressing that space, it's because you can capture value from a much smaller end in terms of users or relevant population. So that's the breakdown that I think about when you're looking at what's going to be the omada for X or the hymns for Y. It's really thinking about how are you changing that experience, how are you innovating on that experience, and then how are you capturing value for it.

Totally. One thing people often say is that behavior change is hard in healthcare. Deena, what's your comment on that?

Behavior change is hard. You could have ended right there.

Yes, totally.

People say specifically in healthcare sometimes. How do you think about it as it relates to patients, as it relates to physicians? Maybe Deena, you could take the first answer.

Yeah. So, you know, let's start with providers. One of the reasons I think a lot of these patient-provider technologies have struggled in the past is that, first of all, talked about already at length, it's difficult enough to sell into the system. But let's say you can overcome that challenge. You've got an incredible go-to-market team. You get in there. How can you actually incent cooperation adoption within the health system from the providers. There are, you know, burnout is at an all-time high. There are so many different systems already that physicians need to be interacting with on a daily basis. There is such little time to be spent working with patients, which is why physicians decided to do what they're doing. So to add something else in there is quite challenging. That being said, I think there have been some innovations or at least some tailwinds that can contribute to further innovations that can help to streamline the workflow in a way that actually does help. And that hasn't really quite— nobody's quite kind of cracked the nut on that yet. Whether it's technologies that can reduce the amount of time it takes to triage or to do documentation or to actually help with the diagnosis, AI-assisted technology technologies that can make that piece of it easier. I think the more innovation that we see there that is actually intuitive for a provider, that can contribute to that seamless workflow, and very importantly, that can integrate with the system that they're already using, the more adoption we'll see. And I'll say again, I do think that we're going to see some long-term changes in terms of adoption because of what's happening now, not just because of this whole notion of everybody doing remote care, but also because it is just so obvious how important it is to scale the efforts of our healthcare workers. We should have known this before, many people did, but it is now actually an existential threat to our health systems as we know it. So that's on the provider side. Again, on the patient side, I think it goes down to this question of activation energy. I mean, this has been an issue with a lot of these D2C companies on the diagnostic side. Required. What is it going to take for someone to actually prick their finger and use one of these blood collection kits? What is it going to take for someone to download an app and use it? Why is it that you've seen this sort of slower incremental growth among some of these companies that have been doing that? Many reasons, lots of headwinds in that space, but just the basic activation energy that was required there was really challenging. And so again, I think that that But that changes now. It changes not only because of what's happening with this pandemic, but also because of the changing nature of the generational changes. And we've talked a lot about the sort of younger patients, but aging in place is another area that I think is really interesting. As that generation ages and as our generation as caretakers of that generation also seeks solutions that are much less cumbersome and analog than what currently exists today, I think we're going to see, you know, it's not even going to be adoption per se. It's just going to be the norm of how we expect to be taking care of our loved ones, as well as the type of care that they're getting from providers.

Oh, I was just going to say, I agree with Deena, particularly on the workflow with providers. I think that, you know, it's not just changing an individual's behavior. They're often part of a broader system and a broader set of processes that have been adapted and adopted over years. And so my guidance to startups that are addressing that provider workflow is best case scenario, change nothing. Second best case scenario, change it and make it 10 times better. And that's a weird thing to think about, that making something 10 times better would be the second best, but that just means that there's going to be somebody in that workflow that thinks they have veto power. Over any sort of change, and change in some of these systems can be hard and require a lot of stakeholder buy-in. And then the third, and your company's just not getting adopted or off the ground, is change it and only make it slightly better. So I think that we need to be thinking about things not only just how do you get the buy-in from everyone in that stakeholder, but how do you take that workflow and, to Deena Shakir's point, just integrate with whatever they're already doing today. Try and make it as easy as possible. And then second best, change it and make it amazing. But even that can lead to some more challenges on the adoption side. On the consumer side, I think the thing that I find really interesting is, you know, we have so much data and there's so many great, great, whether it's technology or providers out there that know what the right thing for people to do is. Problem with our system isn't that people don't necessarily know what the right thing to do, it's that we don't make it easy for them to do it. To do it. And so what I try and think about is just how do we meet people where they are and remove barriers? You know, Deena, I think rightfully highlighted activation energy. Let's just make it easy, right? There's a reason why I can click and order prescription online that's been targeting through Instagram ads, but it's really hard to go and order something online, which is actually free for me through my insurance company, even though it's the exact same functionality, but I had to go through 18 different steps and remember 2 different logins in order to know how to do it. And so the things are the same. The drugs are still arriving at my doorstep. My medications are still arriving at my doorstep. One was easy. One was incredibly hard.

I think that's such a great point. And a good example of that is if you look at the sort of adoption of the typical video virtual visit vis-à-vis some of the asynchronous technologies that are out there. This was something that I found to be fascinating when I was working on the video platform at Google. And, you know, you would think it's way easier, and it is in many ways, just jump on a video call with a provider rather than getting dressed, getting in the car, driving, parking. But shockingly, there is something about that encounter that people just did not want to do. And so some of the technologies that have been developed where it's just a matter of, you know, filling out a few questions on a form, whether it's a bot-based and so on. Are examples of, you know, really designing for what the patient actually— the user, the patient, the persona, whatever you want to call it— is solving for. And I think that's another interesting way of trying to reduce that activation energy.

One critique of healthcare space broadly is that it's too focused on being reactive instead of preventive. And so I'm curious how you think about— I guess preventive spaces to me look more like things focused on sleep, or nutrition, or I don't know, fitness. I'm curious how you think about opportunities in preventive healthcare, if you've made any investments in that space, or what you might expect to looking forward.

I think unfortunately, a lot of it comes down to what we've been talking about around incentives. And it's wonderful to talk about preventative healthcare. We all want it, right? Who's paying for it? That is the unfortunate reality of the system that we're living in today. And I think, luckily, on the payer side, there have been some changes that allow for reimbursement for certain preventative types of experiences. And so whether it's around obesity and preventing diabetes, prediabetes, etc., that's where we're seeing some of these larger companies emerge. But if it's just sort of this notion of like, be healthy, and hopefully that will contribute to lower costs down the line, you can't align the incentives there as much as you want to. And so that's one of the big challenges there. I think the exception to that, I'll just add, is going to be on the purely D2C side, where there might be enough demand on the consumer side, agnostic of healthcare integrations, to make it an interesting business. And sleep was an interesting one that you just brought up. And I think we can all point to some examples of some companies that are doing quite well purely on the consumer side. Kind of has to be purely on the consumer side. It sort of takes away this pressure to integrate with the health system because it's more of a consumer-type problem, even though there's tons of scientific evidence showing that this should very well be something that health systems take, or providers take into account medically. We're just not there yet on the reimbursement side. So that's where I think there could be something interesting. And the same goes for consumer weight loss. Look at some of the solutions that are out there. Now, you'll see that even some of those down the line to get to scale are finding it important to integrate or have partnerships at least with payers and employers, but they can do very well even without that.

Yeah. When are we going to see a D2C company that genetically tests you when you're born, focuses on optimizing your well-being, mental cognition, and physical abilities for the rest of your life? I know it sounds like kind of a ridiculous question, but—

Test you when you're born or even test you before you're born or even before you get born.

I was going to say, who's the C here? Is this even the infant or the mom? Because we are doing some of that. We're just not necessarily following through with the optimization. Yeah, I think that, you know, it's interesting. Very much twist your question into something else, which is just how do you think about, you know, the overall health of a person and their journey throughout their life? And, you know, we talk a lot about health insurance. It's actually kind of a misnomer. It's not insurance in the way that you think about life insurance, where you're really looking over a long arc of somebody's journey and how do you have interventions or optimization early on in order to lead to better outcomes throughout that entire person's life. The typical person stays on commercial health insurance 2 to 3 years at max, and at the longest end on a Medicare Advantage plan for 6 to 10 years. And so, excuse me, a Medicare plan for 6 to 10 years. And so, the notion that we've got anyone that's aligned with us from a financial standpoint that's incentivized to help us optimize our health from a financial point of view, it's just not there. The only one that kind of has that is life insurance, and they're just actually better at selecting risk rather than intervening to manage it. So I think that it'll be— I've seen a couple of companies pop up where they're looking at how do I think about an entire person's healthcare journey and thinking about whether it's financial products and the healthcare interventions. But I think we're a ways away from that, both from an understanding and behavior and a financial alignment.

Yeah. What's the status of data in healthcare and the ability to index it, make it interoperable, utilize it? Startups that are built that leverage it or because of it, or how do you sort of make sense of what's happening there?

From a data— is the question really around data acquisition and data access? Yes. Okay. I think it's important to specify which kinds of data. So there's lots of different types of data, whether it's on electronic medical records data, whether it's on care data, genetic data, imaging data. I'll pick one and and drill down. So imaging data, I think, has been one where we've seen a lot of companies come up and leverage AI in medical imaging in order to do better, faster, cheaper diagnosis or better courses of care. My view on data and data access is it's not a long-term defensible moat. It might be a near-term head start if you've got some sort of early access. Purely kind of within the segment of AI, and in particular AI medical imaging, very few have true proprietary access to data in order to build their models and enable them. Because what you're going to end up with is you still need to have enough data in order to train models in order to go through FDA or have FDA approval. And so I think of it as more of a near-term head start and an important, necessary but not sufficient assets to access. But what I think really drives the value creation of a company is leveraging that data in order to build models, in order to have the right use case for a product or a solution that also has the right business model. So the example that I'll give there is a company invested in Viz.ai. They, much like a lot of other companies, were looking at AI and MRI and CT scan data. In order to do better, faster diagnosis of certain types of conditions. What I think they grabbed onto really, really thoughtfully and really quickly was AI for identification for stroke care. So something that was timely, something that speed became a very important component of the product, not just a nice to have where, you know, I think in other business models, speed is, oh, well, I'll make radiologists faster because now all of a sudden they can do 45 scans in an hour instead of 15 scans in an hour, which really just drives down cost and drives up output. But what Viz did was they identified a use case around identifying certain types of stroke patients and then built the end-to-end workflow of the product so that not only does it identify them accurately, but it also sends that imaging data to the neurosurgeon who could perform that surgery. And so bypassing all of the steps that were wasting minutes in a normal hospital workflow where it goes through somebody reviewing the scans and then through triage, et cetera, it immediately sends the identification of those scans all the way to the person who would be performing the surgery so that he or she can then pull that patient all the way through and reduce the time to a matter of minutes and saving brain function and saving lives. And also saving money for the entire system so that that person can live a healthy life. So that's a very long-winded way of saying data is important. It is necessary but not sufficient. And it can be a head start, but in my view, not a long-term defensible moat.

Totally agree. What I would add on to that is this notion of data agility, which is increasingly critical these days because all of these technologies that we pontificated about for the last hour are producing data. They're ingesting data and they're producing data. And I think without the agility to actually have this kind of interoperability with existing data management systems, it's just going to produce a bunch of siloed information that is not actually going to kind of contribute to innovation. So, you know, we didn't really talk about this, but open standards like FHIR, you know, Fast Health Interoperability Resources, transforming how we manage data are going to be critical, and there are some interesting technologies emerging around that specifically. How do you convert legacy health data? How do you anonymize and enable secondary use of this data? How do you ingest data from sensors and devices and this sort of, you know, Internet of Medical Things, if you will? And then finally, how do you integrate with the plethora of APIs that are out there to actually understand what all this data means, to visualize it, and to analyze it? These are all going to be very important. And there's still quite a few systems who don't even have— are fully on-prem. There's no cloud component there. And so there's still quite a bit of room for growth in that regard. It's a very important foundation to power all the innovation we've been talking about.

I think that's a really good point, Deena. Totally.

Some people talk about sort of the— the need to unbundle hospitals or elements of the hospital system. Have you seen startups do that in interesting ways, or how do you think about— what does that concept mean to you? Or make it more effective or efficient or reorient it in some way?

I can chime in, and then I'd love to hear Kristen's thoughts. I mean, people have been talking about this for a long time, but now more than ever, we need to figure out how to get people out of the hospitals, how to care for people without relying on these very costly, very inefficient modes of care. And so while I think it's been sort of a sexy topic, it is a critical one now. And I think it's going to impel some serious change, given what we're dealing with, with the current pandemic.

With just a couple minutes remaining, just zoom out. What did we not cover that we, that we should cover lastly? Or are there anything we didn't get to that you think is exciting right now or exciting to mention?

I have just two things. We talked a little bit about virtual trials, but I do think it's important to think about the whole spectrum of healthcare, which starts with research. And so I'd be very curious. I'm always looking for interesting technologies that are helping to catalyze that area. And adjacent to that, which is also important for the patient provider stuff, is security. Security, you know, just think about what we're all experiencing in our normal day-to-day lives with regard to these, you know, these Zoom meetings and so on, and some of the controversy associated with security there. Amplify that when you're talking about very sensitive patient information, and that's just the virtual visit component of it. There is so much more there on the imaging side, on the interoperability side, etc. And so I think that there's some really interesting opportunities there for companies that are specifically looking at security, privacy, information sharing, and making sure that there's a foundation of ethics there as well. And one of the companies doing that on the R&D side with clinical trials that I'm a big fan of in our portfolio is Electrolab.

Awesome. Kristin, anything you want to close with that we didn't get to that you think is particularly interesting, or any wrap-up words?

Yeah, I think You know, I've been in this space for a long time, and I'm actually more excited than ever about companies that are starting this space. I think that, you know, there's been a buildup of a lack of action for a really long time that I think those gates are opening, both, you know, as Deena mentioned, on the data side with FHIR protocols and opening up there, but also just an openness to changing workflow and to changing the way that we think about treating people and caring for people right now. So I'm more excited now more than ever on the opportunity for new companies to be built in this space. The one other area that I'd highlight too is just, you know, especially for companies that are thinking about personas and how to address people and whom that they should go after in order to build that wedge. You know, one thing that's interesting that I, that I've read about that I keep talking about is women in this country make 80% of all healthcare decisions. So you acquire one woman, you are not just acquiring her, you are acquiring her kids who she's caregiving for, you're acquiring her parents who she might be caregiving for, and all of the people around her that she might be influencing. And so I think companies, companies that are, that are addressing and thinking about women as stakeholders, I think are also really interesting opportunities as well, just because we do make lots of decisions. But yeah, like I said, the parting thought here is just, you know, the world is changing rapidly. Want to leave with, you know, the sentiment that I'm sure Deena shares, which is just a lot of gratitude for the clinicians that are on the front lines providing care and all the administrators that are helping make sure those doors stay open and all of the people that are, that are really caring for us and caring for each other and caring for their families.

It's a perfect place to wrap. My guests have been Kristen Baker-Spone of CRV and Deena Shakir of Lux. If you're building something fascinating in the space, definitely reach out to them. You'd be lucky to have them on your cap table. We're lucky to co-invest with them when we can. And thank you both for coming on. This has been a great episode.

Thanks so much. Thanks, Deena.

Thanks for having us. It was fun.

If you're an early-stage entrepreneur, we'd love to hear from you. Check us out at villageglobal.vc.