Health Tech Investor Gets Candid on How Startups Can Thrive in a COVID-Constrained World
Alyssa Jaffee, Vice President of 7Wire Ventures, opens up about how COVID changed the investment landscape and how health tech startups can navigate the uncertain waters.
COVID-19 profoundly altered healthcare’s regulatory framework and caused historic shifts in reimbursement. To get an investor’s inside perspective on these changes, and how startups can thrive within them, we invited Alyssa Jaffee, Vice President of 7Wire Ventures, to join StartUp Health’s weekly Expert Office Hour. Jaffee’s investment focus is on healthcare, digital health and tech-enabled services, and she was quick to share real-life examples of how the COVID-19 pandemic was impacting startups. Here are a few highlights from the wisdom she shared on the call.
Could you introduce yourself and 7Wire Ventures?
I’m an operator-turned-investor. I used to launch enterprise technologies to large health systems at the Advisory Board Company. I managed teams there, then after business school, I transitioned more to institutional investing. I worked for a couple of smaller funds, started my own company, raised a small round — about a million bucks — and then I went to work for Pritzker Group Venture Capital. I did exclusively venture, predominantly into healthcare. Over a year and a half ago I was recruited to join 7Wire Ventures.
Our thesis is the ideal ‘Informed, Connected Health Consumer’ and why it’s so powerful today. As a whole, we’re Series A investors. We do less deals, put more capital, and get very involved with our companies. We both invest in and start companies, such as Livongo Health. Our LP base is about 60% strategic, so the health plans and providers in our fund work alongside us to drive value.
Right now, there is tremendous opportunity. For the companies that are empowering consumers to be stewards of their own health care — meeting you where you are — there’s an opportunity to build a new digital front door instead
What are the opportunities digital health companies should be taking advantage of during this time?
Right now, there is tremendous opportunity. For the companies that are empowering consumers to be stewards of their own health care — meeting you where you are — there’s an opportunity to build a new digital front door instead. For example, from my portfolio, Higi has been working on that while still offering in-person stations.
But as economies start to open up, you need to start to consider where these communities are located — it could be community centers, grocery stores, religious institutions, and places that people frequent. We need access to this type of information. That poses two questions: One, how do you actually show your core offering and show how you can be transformative? Second is, how do you attract new customers through expansion in new geographies? When our companies can support all 50 states, it ends up being an accelerant to attract those new customers.
The last piece is the expansion of capabilities, which means overcoming the pressure from COVID-19. Staying on your path, not straying away from it. All of these companies who are staying true to their core, but actually are expanding some of their capabilities to take advantage of the COVID-19 situation, that’s what’s ideal right now.
How has reimbursement shifted towards wellness services, i.e. coaching, nutrition, massage, meditation, and functional medicine, if at all?
I think this isn’t COVID-19 related — these trends were already happening before the pandemic started. There is actually a significant appetite to start doing things outside of the 4 walls of the hospital. These types of companies originally partnered with employers and that’s for a reason, right? There’s a dual benefit for them — providing “health” through wellness but also providing services that can increase employee retention. When looking at the relationship with payers, personally, I don’t think premiums are going to go down, so payers now have to find more to fill.
I don’t typically invest in direct to consumer businesses. And there’s a reason, direct to consumer businesses are very different than B2B2C. When we look at those businesses that start direct to consumer and then have to generate real outcomes data, they don’t have attribution. They aren’t able to close the loop. Ultimately, they’re kind of put in a situation where there may be disadvantages to getting very large in health care and ultimately win in their market category.
Have you seen the willingness of patients to share their HIPAA or healthcare data shift? Does it benefit them, or is it for the benefit of public health?
Now, I think consumers have a much bigger willingness to share data. I actually don’t think that consumers are the constraint. I think it is our lack of connectivity and inability to share. Today, there is little structure that allows consumers access to own their data in a way that still can be powerful. So, until we’re able to bridge that gap, to me that’s one of the biggest blindspots vs. consumer appetite. For example, I do think consumers are aware there’s a lot going on right now about facial recognition — when it’s appropriate, when it’s not. Especially as there are biases associated with it. So I think consumers are aware. I don’t think that they’re unengaged with wanting to share information if it ultimately benefits them in the long-run.
What do you think about remote patient monitoring, such as collecting glucose levels?
So the ideal ‘Informed, Connected Health Consumer’ I talked about has access to healthcare data and information. That’s not standardized yet. For me, what I care about in the world, and what I’m trying to build is the end engagement of a consumer to be able to get themselves from ‘sick care’ to ‘well care.’ That healthcare meets them where they are, wherever they are. So for me, remote patient monitoring is an enabler to make that happen. It’s what we’ve built at Livongo and why we’ve had so much success. Ultimately, we are finally empowering people to be stewards of their own health.
Are there changes in the regulatory environment or reimbursement trends you expect to stay long-term or revert to pre-COVID times?
What is here to stay was already in motion pre-COVID. However, stop-gap solutions or rushed regulatory changes that came specifically for Covid-19 may ultimately be unwound. For example, platforms like Zoom and Facebook Messenger may continue to thrive briefly. Maybe Zoom will create a healthcare-focused product because of this, but ultimately, I think that’s going to be pulled back. I think that we’ve created some relaxants without much thought that may become a bit dangerous in our ability and desire to move quickly.
But on the whole, do I think that remote patient monitoring, telemedicine, telehealth, etc. are going to be encouraged? Yes. Do I think that the geographic boundaries of states are going to start to fade as we think about populations? Yes. Do I think CMS is going to do a better job and payer mix is going to expand as we think about coverage? Yes, but all of those things, you know, were already underway. It’s hard to predict the slope of this curve, but I hope we’re not going back to the same level we started at.
Do you think COVID-19 is changing interest and investments in social determinants of health, given that certain populations have been disproportionately affected?
I will be disappointed if we don’t keep investing dollars in this space. From an investor perspective, there are high returns that can be generated if we think holistically about consumers of healthcare. We should be helping those who don’t have sufficient resources. The challenge is what and how those investments are made on the investor side. For example, some of the bigger infrastructure players I think have been chosen. That said, there are more platform players around, whether that be communication, navigation, or engagement, that are still up for grabs. We should always lean into the environment. Looking at trends, valuations are coming down a little bit, but it shouldn’t be about money, but rather urgency.
What recommendations do you have for these entrepreneurs raising capital today to get your attention, especially through a virtual format?
One is, how do you reach me? Two, when you are in front of me and it’s Zoom based fundraising, what are you doing? For the first point, thoughtful outreach or warm introductions are vital to connecting with VCs, and if an entrepreneur’s mission doesn’t match my focus areas, then it’s frankly incompatible. Showing effort also goes a long way — LinkedIn might be easier to access, but going the extra mile to find my email shows some character. I’ll still respond, but LinkedIn is more difficult from a process perspective. Communication is important for our firm, and we try to actively engage and respond to the market, but the best course of action is to spend the time on the front-end to make the discussion more meaningful on the back-end. For the second point, spend time making zoom-meetings more humanized. Invest in getting to know the people on the other end of the screen. Venture investors are in this for the long-haul, this is a “marriage”! The more we engage in conversation, the better you will understand if i’m a good fit for your board and determine how helpful I can be in growing your business.
What is the ideal startup you would like to invest in?
If you are a company raising a series A (our initial check is $3M-$5M, $7M-$10M over the life of the investment) and the company fits our thesis of the Informed, Connected Health Consumer. Plus, if you have real revenue that you’re looking to scale, I will take that call every single time. Ultimately, since our thesis is more narrow, it ends up being a significant factor early on in our decision-making process. If a consumer isn’t getting access to their own data to make their own healthcare decisions, or can’t empower themselves to be stewards of their own health, then it doesn’t suit our thesis. We ask you: what kind of solution are you selling and how are you engaging end-users? Moreover, from a financial perspective, what are you showing this quarter? What did you do last quarter? These trends are important.
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