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On Healthcare

Updated: Aug 2, 2018

Investing in fixing the US Healthcare system is a top priority for Heron Rock. It aligns our mutual desire to make an impact in society with our desire to generate outsized capital returns for our families and Limited Partners.

A quarter of the investments we've made in 2018 thus far are healthcare-related investments. We led Virgo's seed round and have followed on from prior personal investments in Opencare, Phil, Clarify Health along with new investments in Hint Health and two small promising, angel stage companies.

We are not experts and yet we have high conviction in being able to understand the structural problems of healthcare systems and being able to recognize what we believe will become a better standard of care than the status quo. We expect our healthcare companies to shrink the overall category spend which we believe provides an unfair differentiation against incumbent solutions, whilst eliminating more waste from the system.

We are decidedly software investors in healthcare, even when we invest in companies where hardware is a part of the solution (as it often is), we invest in software-driven innovation.

Values Matter

While strong values alignment matter to us across our entire portfolio, we spend more time ensuring that we are backing the right people with the right values in healthcare.

All too often we see incredible entrepreneurs start with a very noble mission only to weaken the integrity of their mission as they discover just how much money exists in the healthcare system that is relatively easy to dislodge.

We want to ensure that the integrity of the mission and vision of the Company stays strong as the Company continues to unlock greater revenue opportunities. In addition, we only want to work with Founders who undertake a strong ethical and moral commitment to building the powerful technological and data-driven solutions that we are providing them capital to build. We will seek to exit any position as quickly as possible should we see the Company's leadership not stewarding the power of their creations in a fair and responsible way.

Many oars in the water

For companies reliant on selling into providers and payers, our ideal mix of an early team is a natural sales person as CEO, a strong Director of Engineering and a sales leader with relatively fresh and relevant relationships and a very strong product leader capable of fusing their vision with an effective sales and customer feedback mechanism. In most investments we make, we are investing recognizing that there are gaps in the core team that need to be filled. If the business is expecting most of it's usage and revenue to come from providers and payers, we are less willing to invest where we see key gaps in the team.

Our views on Direct to Consumer models.

We have a strong preference for owning the entire care experience directly and are always excited about opportunities to either own or have a hand at facilitating every step of the patient journey. That said, we are under no illusions about the complexities associated with such ambitions. We have seen many companies fail (thankfully none that we have invested in) in healthcare when their approach is largely focused on more effectively arbitraging demand than actually building real capabilities of delivering or facilitating a better patient experience. Here we're looking at the "been there, done that" quality of the team. While we're very open to first time founders, we want to see that they recognize and are humbled by the magnitude of their ambitions and have a team of very capable lieutenants in key functional areas required to win.

Spending time on the frontier

An area of continued interest and excitement is the intersection of software and life sciences I.P. Our prior investment in Aspect Biosystems opened our eyes to the power of combining the power of software to facilitate discovery with the ability to co-own I.P without having to be responsible for the risks and capital associated with bringing a drug or other novel discovery to market. Our recent investment in ProteinQure is indicative of our desire to find companies that can marry the relative capital efficiency of a software company with the relative financial upside of major life sciences I.P creation or co-ownership.

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