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How Pankaj Jethwani is flipping the VC model to solve for healthcare
235 Plays1 year ago
Explore a new way of building startups- unlike traditional methods, Venture Studios doesn't wait for founders to pitch ideas. Instead, they have a clear vision and find founders to bring it to life. Pankaj Jethwani offers valuable insights into this strategy. Leading India's pioneering Venture Studio and spearheading a health-tech startup named W Health Ventures, he possesses extensive expertise in the domain.
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Read more about 2070 Health and W Health Ventures:-
1.We build ventures in spaces with large unmet needs: 2070 Health
3.Pankaj Jethwani On W Health Ventures’ India Investment Playbook
4.W Health Ventures hosted an industry discussion on: Why time to scale healthcare in India is now
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Transcript
Introduction to Pankaj Jetwani and 2070 Health
00:00:00
Speaker
Hi everyone, I am Bankajitwani, CEO of 2070 Health.
Building a Business: Approaches and Models
00:00:16
Speaker
So typically as most of us represent, there are two ways to build a business. One is the Thanda approach, where you have a business which is earning money and the money is reinvested to grow the business.
00:00:27
Speaker
The second is the VC funded approach in which you create a product or some early traction or find an interesting idea and then you raise funds on the back of it and use those funds to grow your business. But there's a very interesting third approach if businesses get built. That is the venture studio approach. So a venture studio is essentially like an offshoot of a venture capital fund except that it
00:00:55
Speaker
does not go and listen to pitches from founders, but it has an investment thesis and it finds founders who will execute on that thesis.
00:01:05
Speaker
Aka Jetwani runs a health-focused venture studio called 2070 Health. And he has built some fascinating businesses within that venture studio. This episode is really a masterclass in understanding the different ways in which investors understand businesses and how they build businesses. And Pankaj has deep expertise in the health tech space because not only does he run a venture studio, but he also runs a health tech VC called W Health.
Pankaj's Background and Career Shift
00:01:51
Speaker
I grew up in Mumbai. I spent most of my childhood there. And then, you know, when I joined medical school, I moved around a little bit, came back to Mumbai, went to Delhi for work, and then moved to the US. So I've been around a few places, but spent most of my nights in Mumbai. You were a practicing doctor in Delhi after your medical school?
00:01:58
Speaker
You're listening to the founder thesis podcast and I'm your host Akshay Dutt.
00:02:17
Speaker
So I practiced in Mumbai for a year and thought I will take a brief pause on practicing. A bunch of experiences. Like what made you want to chase track from being a practitioner to, I mean, you know, you decided to do an MBA. So what led to that decision?
00:02:40
Speaker
A bunch of things. The MBA came later. The MBA came four or five years into working. I grew up in a business family. My father ran a small, he's a childhood accountant, he ran a mid-sized practice, mainly worked with small entrepreneurs, mid-sized businesses. My grandparents, I don't know, this is going back several decades, but my grandparents
00:03:09
Speaker
emigrated from Pakistan during the partition.
00:03:15
Speaker
And they landed in a small, in the middle of nowhere, place called Yavatmal, close to Napur. That time it was really tiny. Now it's a decent-sized town. And like most people who left everything and moved, they came with nothing. I would say a little and started trading small. My grandfather used to sell combs and agar patties and railway stations.
00:03:43
Speaker
So I had that ethic built in. Everyone around me did business. My father was the first in his generation. There were eight siblings. He was the first in his generation to get an education.
00:03:58
Speaker
He moved from Awatmal to Mumbai to pursue a medical degree, never made it, and became embarked on the journey of becoming a charter accountant.
00:04:15
Speaker
It took forever to clear the exams. It took 10 years or something. It was a really long time because half the time it was working for the family business, which basically by then had grown a little bit to operating wholesale stores. So half the time it was in. So I grew up with that.
00:04:34
Speaker
There's a dinner table conversation where I would see my heart, which wasn't very, very frequent. It was all about what is happening in the world, all about the challenges and complexities of running small businesses. And these were, so that is always partly upbringing. Gone to medical school, went to medical school obviously in India when you're 16, 17, very early in your life.
Early Entrepreneurship and Personal Influences
00:05:01
Speaker
I got in because I was interested in multiple things, you know, science being one of them, gave the exam, passed it, got a free government seat, so I was like, why not? My brother at that point was also older to me, was also...
00:05:16
Speaker
pursuing his medical education and use the role model of sorts, followed his league without thinking much. Go and love the science, loved the minute-by-minute problem solving you have to do. It's not very different from running a business, right? It is, I mean, there's a business side of health, which is like running a business.
00:05:36
Speaker
but there's a day-to-day patient interaction where you're solving problems, sometimes simple, sometimes complex. So like the entire journey, the education, the science, the unlock that it gave, that it could have on patients' lives, but always... What kind of medicine were you practicing? So I did, I completed my MBBS and was done my
00:06:01
Speaker
I had multiple options on what to do next, what kind of specialization to do. Internal medicine was what I had in mind, done my steps, ready to, that was an option of going abroad and pursuing that.
00:06:16
Speaker
The, while in medical school, started doing, pursuing different passion projects, right? Be it, you know, random, that time there was no startup ecosystem, or there was very limited of a startup ecosystem. I had zero background in technology, but it was curious about what was happening. So, started thinking about different problems that you're seeing around, good, good businesses all attend.
00:06:43
Speaker
So tried a couple of things, a couple of them didn't work, something worked, et cetera. So I had started my first kind of small scale business, right, of the 18 or 19 in my school. And that bug stayed inside me. You know, once I graduated, spent a year in practice, year and a half, and had that decision, I thought, okay, what do I do next? Is it?
00:07:09
Speaker
pursue a life of clinical medicine or should step out with an help and something inside. There's also a bunch of personal experiences around that time. My father who I just spoke about got diagnosed with a late stage brain tumor and you know going from being a doctor and seeing in the government setting seeing hundreds of patients a day
00:07:34
Speaker
suddenly became a caregiver and started navigating the healthcare system from the lens of a patient and a patient's caregiver. And I think that was a switch off moment. I was like, okay, there's a lot that needs to be fixed around us. And that we were fairly fortunate in that being able to afford the right treatment, right time.
00:08:01
Speaker
the cancer was late, he passed away a few months later. But that kind of left a desire that status quo, there are lots of opportunities to impact lives of a lot of people. And maybe doing that as a physician, seeing
00:08:25
Speaker
one patient in mind is aware and is a very notable way of doing it. Maybe there is something else as well to address this at a systemic level.
Consulting and Public Health Initiatives
00:08:35
Speaker
So I took the plunge and started working on things. It was at the right place, right time, but got to join the Boston Consulting Group while they were building a public sector focused healthcare practice. And that was the first and the second experience after deciding to pause on the practice run.
00:08:59
Speaker
No, I was privileged in two ways. One, I had a support of a very calm family. You know, a lot of people would feel it's a career limiting move to give up something it's hard to do and charter path not taken.
00:09:24
Speaker
On the second hand, always there was a safety, there was a fallback option. I could come back doing this and maybe, you know, be delayed by a year or so, but there was a path and there was a path that was waiting.
00:09:40
Speaker
BCG typically hires like MBAs, right? How did they end up hiring you? I have no idea, man. I actually didn't know what management consulting was, to be honest. I was at a conference talking in a panel.
00:09:58
Speaker
suddenly met someone from a consulting firm I must not name, not BCG. And he gave me his card saying, hey, listen, are you interested in being a management consultant? What's next for you?
00:10:14
Speaker
I used to do some public health work, and that is why I was on the panel. And those are the days of the low, the 2G network. Things didn't work. I ran to the bathroom, and I was like, what does McKinsey? And finally, Google loaded, saying, OK, it's a management company. I'm like, what is a management company?
00:10:30
Speaker
Well, you know, you have complex problems and you solve it. And I'm like, oh, this sounds interesting. Hey, why not? So then anyway, I reached out to my network, requested for introductions to four, five, six firms that, you know, got connected with someone at BCG who was, she, someone I deeply respect and admire.
00:10:53
Speaker
and who was building a very courageous public sector practice. And within that, they were interested in healthcare as well. And then started working with BCG. And I won't go into the project because I'm not allowed to, but it is a bunch of
00:11:14
Speaker
unlearning for me as a physician. As a physician, you're an expert in the consult room with a patient and a relative and yourself, you make decisions in three minutes and five minutes, this is the data you have and that's it. And consulting is exactly not that. It's very data-driven, process-driven,
00:11:36
Speaker
So remember my first project, I know the project leader laid out the problem statement. Give you like a very broad understanding of what a project could be like a government body or a state government or a city government, someone would come to you with a like with some concern around public health infrastructure, which you would give them a recommendation on like how to solve it. So we built
00:12:03
Speaker
That is typical management consulting. I think what we were doing differently was taking large scale transformation methods. Like how do we solve systemic issues around
00:12:16
Speaker
primary care, tertiary care, insurance, et cetera. So a bunch of different methods. And then we got private sector record into building the foundation elements of these large systems, be it technology, data, staffing, training, done that really well for education.
00:12:40
Speaker
try to see okay how can we dig that playbook at BCG for education and apply it to maybe health care and maybe some other areas. So the challenge was personally for me it was transformative experience because you went from being an expert to being the nobody.
00:13:03
Speaker
and from relying on your intuition to relying on data and process and had to unlearn a lot of bad habits or sometimes good habits. I was talking about like my first or second project I remember. I don't remember the project data came in as I put this is the problem we're trying to solve. I was like, oh, it's easy. Here's the answer. I looked at me saying, no, you have six months to go. That's not the answer.
00:13:30
Speaker
And yeah, it has made a lot of friendships, learned a lot, but really, it's only grateful for, you know, a bunch of people to take a bet on me.
Social Enterprise and Fortified Foods
00:13:42
Speaker
And on the same time, I started a social enterprise in the fortified food space.
00:13:48
Speaker
And the genesis of that was while I was practicing still, I was practicing with the guidance system and a bunch of my patients were my nearest, you know, imagine children, patients, you know, large number of them are my nearest. And that kind of made treating simple conditions a little bit more difficult.
00:14:09
Speaker
Remember, I was in a stop to an oncologist once, and he mentioned, he asked me what the fiber survival is for our children with cancer in India. I said 40-50%. That's right. What is it in the US? I don't know, maybe 70, no, 90-95%. I was like, yeah, it makes sense. I'm sure they have better chemotherapy infrastructure.
00:14:37
Speaker
He said sure, but a lot of the times 80-90% of the drugs we use are the same.
00:14:42
Speaker
It's a whole bunch of things around it. Nutrition, environmental factors, hygiene, and obviously other medical and social factors. So this malnutrition thing was constantly annoying because there weren't great solutions.
00:15:08
Speaker
As a doctor, if I would describe a nutraceutical, it's a therapeutic food that you take, you know, hopefully better. Like a Tripton or something like that. Yeah, a Tripton is super expensive. Like a Pediashore or something, right? Okay. It's a dollar and a half a selling. It's like 100 rupees a selling. Now, which patient, they're making $2 a day, $3 a day, $10 a day.
00:15:31
Speaker
would be able to afford neurosurgicals, won't even, won't even, you know, essential drug lists are not available in the government pharmacies or not. Why should protein be so expensive? Think about it, it's, should be able to make this in seven to ten years.
00:15:51
Speaker
And my mother and I, when we would take my father for chemotherapy, you know, we would see a sea of patients and 78% of them were menorrhage as well. So after my dad passed away, around the same time, and all this was happening, you know, professionally, I was switching gears and all that stuff, my mom also made a decision that she doesn't want to practice. She was a lawyer. She doesn't want to practice anymore. She would practice with my father.
00:16:18
Speaker
She wanted to do something, kind of help contribute. She wanted to build another career in helping people. And so we started with this problem statement. We have a lot of patients who are malnourished, children who are malnourished, women who are malnourished.
00:16:36
Speaker
can we make affordable inexpensive foods that are virgin protein and vitamins? We knew nothing about it. We tried a bunch of things. The first probably thousand meals were made in our own kitchen where we were experimenting
00:16:54
Speaker
ingredients, different foods, fortifying them, trying to make this holy grail that okay, 15 grams of protein in a serving for a child. Also rich in other things. And started with a very stupid idea that let's make fortified soy milk. Soy because a lot of Indian children are nactose intolerant.
00:17:22
Speaker
And you're like, OK, you can maybe make some in our kitchen. It is cheap to make. Able to make it at 10 or 12 rupees a liter. And we can flavor it to kill the nutty taste of soy, the nutty aftertaste of soy. So we came up with the recipe. We got mango as a flavor and as a preservatives. We got loaded with some sugar to make it a little bit more tasty. Added LIG. I remember very clearly your first batch.
00:17:52
Speaker
to kill the nutty taste of the milk and ended up with a healthy, tasty soy milk which was mango flavored with about 8 to 10 grams of protein. Waste of idea because those children liked it. The supply chain of milk is terrible. You would have to transport it in cold stone. It would take us more money to safely transport it to people in need than compared to the manufacturing parts itself.
00:18:21
Speaker
But one thing happened during the experience was we asked for help and we asked for help at the highest level. And we didn't know how to fortify stuff, right? We didn't know how to add micronutrients, vitamins, minerals in our kitchen. You could do it in large industrial setups, but how do you do it safely? And I wrote an email to a few people at big pharma, big food companies, you know, your DSM, your Amul, the word.
00:18:51
Speaker
And everyone responded. What is DSM? DSM is a Dutch multinational. It does fortification. A lot of people responded and helped us, obviously pro bono, and helped us figure it out.
00:19:08
Speaker
an author told us that what we're doing is a little stupid and we need to change course and fast forward I think 12 years, this is a 12-year-old something. We've served about 50 million meals through this initiative. We have about 25 or 30 different types of foods we make.
00:19:25
Speaker
These are a combination of cereals, mixed nuts, mixed, fortified cookies, porridges, all of that that are ready to eat, that are loaded with micronutrients as well as protein.
00:19:39
Speaker
that still operate in 10 cents or 7-8 rupees price point. We run this as a social enterprise, all the money goes back into scaling the mission. So far we've served about, I'd say close to 3 lakh children and women and that kind of was a
00:20:11
Speaker
When you say social enterprise, it doesn't mean you were relying on donations. It just means that you did not have an objective of
00:20:20
Speaker
taking out profits like you wanted to keep profits lower because there's a bad business to make profits in. Now there are probably a thousand brands in that space in the for-profit range. Obviously not too many folks in the nonprofit space there.
00:20:42
Speaker
So we're equivalent to what Akshay Pathra does beautifully for mid-day beings. We're trying to do for breakfasts. First is an ignored me. 80% Indian children from low-income societies don't have breakfast. And so we're saying, can we give a powerful start to that day through a fortified breakfast? And the organization is called the breakfast tradition. It's a hybrid. It's as a nonprofit. It does a for-profit, but all the profits get plowed.
00:21:11
Speaker
We do get splowed into the organization itself and very fortunate to have long-term trusting donors, non-profits, individuals, foundations, Indian, American who are helping out on the credit or in terms of resources or capital or
00:21:39
Speaker
or even the meals themselves that allows us to serve more people. And how do you distribute? Is it sold through retail or is it supplied through a school? So hospitals, schools, preschools are minorities. So mainly working with government facilities. We work closely with different government agencies. And we provide a six-month nutrition program.
00:22:08
Speaker
That includes daily breakfast, sometimes a second and a third meal, depending on the malnutrition status. We track every single child for their malnutrition status before and after. We also provide certain other evidence-based interventions like we do health check-up, we do deworming, vitamin A prophylaxis, depending on the age.
00:22:26
Speaker
We do a lot of nutrition and hygiene education for children as well as their parents. Small things may have a small impact. And together we find that 90% plus of the children gained weight. I think 98% of the children in our programs gained weight in six months. We've done that. If we wouldn't have been there, the children would have gained weight in any cases. A lot of them. And 60% to 70% show improvements in their malnutrition status.
00:22:55
Speaker
Also, so getting a very large database of what's what and what's not, all this data is tracked in our tech platform. And more importantly, these are simple
00:23:09
Speaker
meals. We manufacture them to some co-packers across India and it's a fairly straightforward asset light kind of set. Why do you provide meals or the breakfasts only for six months?
00:23:30
Speaker
We don't, at least for six months. Okay. Because lower than that, it's time. Doesn't mean that, you know, during COVID, anything, and we got rid of the ration, we did this fortified, we did everything.
00:23:46
Speaker
Someone comes in and says that, okay, here is, I can pay for three months of support. We'll try to match it with another three months. The goal is to feed as many children high quality breakfast that are fortified so that they, and then also teach them a bunch of things around hygiene and nutrition.
00:24:05
Speaker
Because we're not taught that ever. Bents are not taught that. And then also provide some wraparound services, being deworming, vitamin A, et cetera. And so it's a drop in the ocean when it comes to the size of the problem. But I think what we are gearing towards is saying that, look, we have a national metamine program.
00:24:27
Speaker
We need a national breakfast program. And you know, medium meals are fought and cooked for the right reasons. Breakfast can be fortified and manufactured. So those are two lines of advocacy that look, we need a national breakfast program and it will not cost us as much compared to the ROI it will have on children of the future of the country.
00:24:52
Speaker
And maybe the approach of doing this might be a little different. Let's do fortified, made to specifications versus ad hoc and carblo. Let's provide one protein to scale. If we win both the battles, that's phenomenal. If we win one of the two battles, it's still to stop. Amazing.
Healthcare Innovation and Medicare in the U.S.
00:25:15
Speaker
Okay. So what next after BCG? How many years did you spend in BCG?
00:25:20
Speaker
couple of years, felt stronger. And someone advised me that if I ever want to raise the ranks, I need to get an MBA. I need to get a real degree, because my degree is not super valid in that context. So applied to business school, went to the working program, was very fortunate to get in. And when I was there, the world around me was changing.
00:25:48
Speaker
There was a lot of, the decade prior to that was a decade of a lot of money going into health tech, but very little success, very little adoption, very little revenue reality. But a lot of that has changed. It's a time when the Teladocs and the Lemongos of the world were becoming real large companies. There were thousands and millions of, thousands of doctors adopting it, millions of patients adopting it.
00:26:12
Speaker
And I was feeling that I was in the middle of a time when my industry was getting disrupted through entrepreneurship and through technology. So, you know, despite instead of going back, you know, also I was an immigrant. I had visa issues and all that stuff. I had a loan to pay back, all that stuff. Working in the startup.
00:26:30
Speaker
felt very attracted to do, but it was very hard to do because of these other realities. So ended up not going back to consulting, traditional part of, you know, going back consulting, going to big tech, but ended up joining or working with few startups and then ended up joining one in a Boston based primary care company. And spent a few years there, again, learned a lot about
00:27:01
Speaker
unlearned a lot about care delivery and learned a lot about how technology can make care delivery truly superior and truly patient-centric. And that is the next phase for me personally. You're talking about the IORA health, the Boston-based startup that you joined. And what was IORA solving?
00:27:27
Speaker
So Iona was solving the fact that our seniors patients about the age of 65 are not getting the right healthcare. You know, things are very transactional.
00:27:43
Speaker
doctors get paid when you see a patient. So you are tempted to do a little bit more than what is needed. And a lot of times you don't do a lot that is needed for overall health and care. And what I was mindset was that, look, the system of caring for patients is wrong. And we need an outcomes driven model where we are
00:28:09
Speaker
compensated for making people healthy and keeping them out of hospital versus doing a lot of things for them, per se. So that two things, right, that needed a new care model, a new technology system, a new care model, a new way of delivering care, and it needed a financial model.
00:28:32
Speaker
traditional way of fee for service care, I see a patient I get paid, I do a lab test I get paid, I prescribe a medication I get paid, etc. That is that needed to change as well. So those two things I would have questioned and dreamt that we can change. Now as you can imagine Medicare is one trillion dollars in spend. So
00:29:00
Speaker
And Medicare is the government-run health insurance system in the US? Yeah, above the age of 65, most Americans have access to Medicare, which is basically government-provided insurance. It's copay, and there are supplemental plans, and there are other things that patients can also take and may need. But it provides coverage to patients who have been paying social security and working before.
00:29:33
Speaker
And so that is what we were dreaming to do. And the thesis was, we will overspend on primary care. So typically 5% of total health care for a senior, for a person about age of 65, is primary care. Let's double triple this.
00:29:56
Speaker
Let's provide abundance of high quality primary care. We are managing actively patients underlying illnesses where we're building a relationship with them so that they trust us and they are over time slowly changing their behaviors so that over time
00:30:15
Speaker
They cost less to the system. Why? Because they are better. They don't rush to the hospital. They come to us. They don't get admitted unnecessarily. They don't go through specialists for no reason. The waste in the industry is taken care of. And then how do we make money? Because we are spending more. It's a higher cost model. We get money because the total cost of care goes down for these patients.
00:30:40
Speaker
And so the business model for us was, let's take risk on the total cost of care. Let's become a pseudo insurance company. By pseudo, I mean that we still worked with large insurance companies who provided the administrative services. But the total risk on the patient's total cost of care was borne by us. So instead of spending five rupees on primary care, we started spending 10 or 15.
00:31:04
Speaker
And with the thesis that instead of the patient costing 100 rupees to the system over time will start costing 80 or 70 or 60. And that will happen because the patient will stick around. We'll build a relationship with them. They will feel better and at a population level.
00:31:22
Speaker
you will save money and you will reduce the total cost. And over time, we learned a lot of things about what worked, what didn't work, what kind of systems we needed to build, what we built, our technology platform from Toronto, because everything was built, keeping FIFA Salas medicine in mind back in the day, 10 years ago.
00:31:43
Speaker
So we made audacious goals. We raised a lot of venture capital. Sure, we made a lot of mistakes in the journey. And then eventually we got acquired by one medical, and then one medical, an IORA to get acquired by the Sun.
00:32:00
Speaker
as a part of their overall health care strategy going forward. So it was a rocket ship kind of experience. We probably tripled, or in three years, we probably hit the next star revenue. So there's a time where we had started seeing a lot more patients, open-world markets, and building a bunch of tools and technology that was not me.
00:32:29
Speaker
for. We had access to the kind of data because we owned our technology, we had access to the kind of data that not too many providers had on data on patients but also data on how our practices were running, how our doctors were performing, how our coaches were doing etc.
00:32:47
Speaker
Geriatric medicine is complex. It's not that straightforward because if you take a 75 or 80 year old patient and you check the blood, you do a blood test, you do a lot of things that will not be, that will be out of range. Doesn't mean that they need to be treated like to be.
00:33:04
Speaker
And it's not a video game that you kill everything that you see. And it's complex and it needs longitudinal
00:33:18
Speaker
few on things and not everything will work out and not everything will be solved. But a longitudinal view of the patient helps us unlock a lot of value. Some patients need to go, you know, and a point in time view doesn't help at all. Today, my patients blood sugar zacks or the HV once a year,
00:33:41
Speaker
you know, 8.6. The blood pressure is 160 by 90. Those data points are useless. If I'm a healthy adult, I will actively manage those data points. You know, I would change medications, I'd add stuff, I'd reduce stuff.
00:33:56
Speaker
I see a senior with those kind of vitamins or those kind of parameters and a medication list and a diet that they're on. There's very little I can do without understanding the last six months, the last two months. So what else is undergoing in kidneys, the liver, in the eyes, in the heart?
00:34:17
Speaker
And that is why geriatric medicine is more difficult. A bunch of patients are present to us with 10 or 12 medications. My wife's grandmother, I was talking to, I was with her recently. She was on 20 medications. She came to me with a medication list, which was two pages back and forth.
00:34:44
Speaker
What is this? Is this an essay? Is this a medication list? And I was like, get your box. I want to see the medications. She got like a big box there. She has all the access in the world. She has like 10 doctors in the family. And yet she has four medications for hypertension, two medications for her pain.
00:35:01
Speaker
you know, three or four multivitamins, a bunch of other things for the heart, and two sleeping. I'm like, what's happening? You don't need this, right? So a lot of this we questioned and changed, right? Overtime, slowly. Can't change. Care for an older overnight. The built-up technology platform that enabled that, right? How do we spot? Sorry.
00:35:27
Speaker
Let me just do a quick recap of my understanding. So a way for an Indian audience to understand is, for example, if Apollo Hospital was to charge people an annual subscription or a premium, instead of charging them for every medicine they sell, for every test they run, for every procedure they do, instead of that they just charge a cohort of, let's say, 10,000 people, an annual premium.
00:35:54
Speaker
manage those 10,000 people and typically the way what you talked about spend like there's more spend on like there's very less spend just 5% on primary use so that is increased so that the spend on actual interventions is reduced leading to a like a profitable situation for the care provider.
00:36:19
Speaker
In this example, Apollo was charging patients because the government is not paying. In that example, even what we did, the government was a payer. And so the entire burden of acquiring patients with the willingness to pay, no one wants to pay that kind of money.
00:36:34
Speaker
right. That wasn't an issue in the US when we were in India. We've looked at the geographic thesis maybe two or three times and we've killed it every time because we haven't found a great way to forwardness for people to pay the amount of money it would take to provide the right kind of care without cutting owners. So anyway,
00:37:04
Speaker
built a bunch of technology, service and service model around it. The technology was largely to capture data at every step so that there is a lot of data or like what else.
00:37:16
Speaker
technology was to do a more effective population health management, right? Because at a clinic, I had 2000 patients. So we had 1000, 2000 patients. We had a care team of maybe two or three doctors, four or five health coaches, one or two nurses, one manager.
00:37:35
Speaker
Now, these are high needs patients. Of my 1000, 100 would probably cost 40 to 50% of total spend for that cohort. So how do I spot these 100 patients and make sure that they have been rounded or they've been taken care of more frequently? How do I then go to the next 100 or 200 and take care of them adequately?
00:38:01
Speaker
And then how do I make sure that my healthy adults, healthy seniors, sixties, seventies are being tended to least once a year or twice a year. So that level of like triaging and population health focus one. The second is bunch of our time and resources went into, um, making sure that when patients eventually ended up in the hospital, right? Like seniors, uh,
00:38:27
Speaker
20% of seniors above the age of 65 will go to the hospital this once a year for whatever reason.
00:38:35
Speaker
our patients landed over the hospital. Nick, how do we build in systems so that as soon as they end up at some hospital, we are notified, and then we are able to proactively care for them through our transition navigators, right, through our care journey that we approach. And then obviously technology to fix from a patient facing web apps and apps so that we can effectively provide relationship based
00:39:03
Speaker
primary care as a team.
00:39:09
Speaker
So that was that journey. After that journey, I was looking to do something zero to one again, very, very early. I wanted to start from scratch. Ended up meeting Sunil Vatwani, who was a longtime mentor, who I knew from my BCG days. And I went to him with a business idea.
00:39:38
Speaker
Who is Sunil Vadwani, if you could? Sure. Sunil is a serial technology entrepreneur, seasoned entrepreneur. He's built multiple companies like iGit and Stech, both of which went public and iGit got bought up.
00:39:58
Speaker
He's been a founder and then he's also been a serial engineer investor and advisor to tech companies in the US and India. So, ask me to come on board and team up to start W Health Ventures.
00:40:18
Speaker
And I had no clue about what Inchocapital was. So an accident when Inchocapital was. Operate a physician at heart more than anything else. And we started investing at the intersection, not the GNK, the Green Big US.
00:40:31
Speaker
Then the pandemic hit and the reality of the pandemic dawned on us on what's happening. And on the negatives we understood and saw the level of fragility in our health systems globally.
00:40:49
Speaker
At the same time, we saw a marked adoption of health tech throughout the world. India being no different. Given my roads and Sunil's roads and interests, we were gravitating towards doing more in it because we were seeing a lot of deals. And we also were seeing suddenly that deal flow being the quality flow versus what we were seeing maybe here for truth or not.
00:41:15
Speaker
So set up a small team in India to start sourcing healthcare companies in it. And made eight investments for in the US for an India workforce. And knock on wood, you know, learned a lot about what's working, what's not hard work, you know, what are the playbooks that can be also support maybe two and a half thousand companies across India and the US.
00:41:41
Speaker
to see what's investable, what's not at different stages. While we were doing this, we saw a bunch of wide spaces that were not being addressed. But building in healthcare is hard. Healthcare is a fairly complex industry. It's very regulated. And for the right reasons, you can't build fast and break things when it comes to people's health.
00:42:08
Speaker
And there are multiple stakeholders. If you're building and consumer, building and tech, every one stakeholder who's paying for the service or the products.
00:42:19
Speaker
In healthcare, it's that, really for the patient, but you're also building for the doctor, and you're also building for the pharma company, and you're also influenced by the insurance company, and you also need to care about the relative of the patient, and you also need to have your ethics and model grounded, and you know you can't also build faster. So it's fairly regulated, multiple stakeholders, fairly complex. It's also an industry that hates change. As a doctor, I can say it, I can be shameless and be like, we doctors hate change.
00:42:48
Speaker
We all want to think about futuristic ideas and concepts and paper napkin and everything, but it takes 17 years for anything that's evidence-based to percolate down to the last position.
Impact of COVID-19 on Health Tech
00:42:59
Speaker
Some of these things are changing because of technology adoption, but it's a slow to change industry and it hates outsiders. There's a general mistrust.
00:43:08
Speaker
for sometimes not the wrong reasons, right? Because people have come and kind of done unethical things very, very quickly and, you know, that have not gone down well for patients. So in this environment, building in healthcare is hard. What we saw was that thousands of founders suddenly out of nowhere were building in healthcare. And two reasons, or three reasons, that either sector itself needed transformation in a dear and vulnerable
00:43:37
Speaker
The second was, there was a success story somewhere else. Some other parts of the world, we were starting to see success. And they were like, OK, this is working somewhere else. There was a general digitization that was enabling Indians of buying content online, viewing content online, buying products, et cetera. And so that behavior was changing slowly. And then finally, COVID truly proved our lack of foundational of health care and the system.
00:44:05
Speaker
and also made healthcare personal for a lot of people, a lot of folks in tech, you know, never need, 32 year old, you know, person living in Bangalore or Mumbai and you're healthy, relatively, you don't really interact with the healthcare system, right? But suddenly, healthcare became personal for all of us. So we started seeing an influx of founders, first time founders, who are now, who had built
00:44:32
Speaker
you know, Ola, Uber, whatever, Amazon, Flipkart. And now suddenly we're like, okay, let's solve healthcare problems. So the first wave of innovation that we started seeing in the country was mainly horizontal place, right? Let's build platforms for, let's digitize them. Let's create your telemedicine platforms and e-pharmacies and surgery navigation platforms and EMR companies and this ad. And a bunch of
00:44:58
Speaker
The approach was very deck-first, right? And what we were seeing, so there were multiple white spaces, there are millions or hundreds of millions of patients who had or were suffering from something. And so the market is large, willingness to pay is high, but those solutions are not being, those clinical first innovation solutions are not being built.
00:45:28
Speaker
So in addition to investing through a fund, we launched a venture studio called 2017 Health, where we do deep diligence on problems, where we have confidence that this is a real problem to solve. It's large, it's compelling. We get on board entrepreneurs and residents who kind of build out the model with us, the business model.
00:45:57
Speaker
Then we launch and fund these companies, once there is conviction, and support its growth, its zero to one growth, through a powerful innovation platform. Our innovation platform now folks from product engineering, go to market, growth, marketing, talent, detail finance, the building blocks of what is needed to build in the zero to one phases.
00:46:19
Speaker
With the goal that we need to build companies faster, better, cheaper. We need to build in spaces where we are first to market. The framework is fairly simple. Large patient problem. Large number of also patients facing the problem. Status score being inefficient. We being confident that we'd be able to build a 10 expert solution.
2070 Health's Dual Strategy and Fund Allocation
00:46:42
Speaker
and also be first to market. So if all these conditions are true, then we could decide to build one in that space. So as an organization, we are going from a fund to being a fund that will invest in outside companies and also a studio that lots of builder companies from the ground.
00:47:08
Speaker
So we're moving from an investor-only role to an investor-and-pinter role. And that is because, and this is fairly common, say, in the US, this kind of model, because when you are seeing a lot and when you are sitting on a lot of IB, you also spot a bunch of interesting, exciting business models that no one is building.
00:47:31
Speaker
At that point, having a mechanism to roll up our sleeves and build something is powerful. And that's what we have at 2070 with about 40 to 50. A bunch of papers and hundreds of ideas to build. So that's the second phase of what we're really trying to do. We're really trying to help build companies for a billion Indians, not for 10, 20, 50, 100, for a billion Indians.
00:48:01
Speaker
in areas around us out. So the last year or so of launch, we launched the studio about a year ago. Instead, we have built four companies. So before we talk about what the studio has built, I have a couple of questions. What was the part one size for WL?
00:48:23
Speaker
So the total allocation across fund one, follow on and the studio and the studio incubations for a hundred million dollars. So about 30 odd million for the first one, 30 odd million allocated for the studio incubations and about $40 million in reserve. Okay. And this was all like, this was like a family office, like all of it was one of his own wealth.
00:48:50
Speaker
This was a group of helpers. Okay, got it. And what were the Indian companies? You said there were four Indian and four US companies that have been invested in. So four Indian companies are in the diabetes space. Currently market data about 2 million of diabetes on the path.
00:49:12
Speaker
creating digital diabetes. Second company is Weiser in the mental health space, building a behavioral health AI platform for the world from India. So operating in about 95 plus countries to go to market in the US and with about seven odd million patients on the platform. And people have had, my rough estimate is about a billion conversations on Weiser.
00:49:40
Speaker
So really building an AI therapist for shots. How do you spell Y, sir? V-A-I-S-A. W-Y-S-A. W-I-S-A, okay.
00:49:50
Speaker
4 a.m. friend in the middle of the night. Third company is GHC, the good health company. It's a D2C product company focused on categories like hair, skin, sexual wellness, weight loss for men and women both, also for children.
00:50:10
Speaker
some categories under the brand names Mars, Saturn and Pluto and rocket ship approved really high quality products and solutions where there is a lot of stigma
00:50:27
Speaker
and a lot of barriers to get. A fourth company in our portfolio is a company called MyL. It's a printing platform, about 9 million Indian parents on the background, and providing a community peer-to-peer support for parents. So lots of questions during pregnancy, after pregnancy, after delivery.
00:50:54
Speaker
and then a curated set of high quality products and services designed specifically for parents targeted to parents who have certain needs and solutions. So about 150 odd products and solutions that Milo distribute. So it's a community and content along with commerce as the way to monetize.
00:51:20
Speaker
You said that you were an accidental VC. How did you hone your sense of judgment? I guess the biggest skill which a VC brings to the table is that sense of judgment, which may be based on data and there may be an element of instinct in it also.
00:51:39
Speaker
this is a good investment, this is not a good investment or like you spoke about how the deal flow improved significantly once COVID hit and you were getting much better quality startups. How do you define this is a better quality startup as opposed to another one? Help me understand a bit about the mind of an investor because you kind of went through the journey of developing the mind of an investor. I want to understand that a bit.
Evaluating Healthcare Startups
00:52:09
Speaker
Long way to go. I have a long way to go. But look, I think living in health care, the fundamentals of the business remain the same. But there's an added layer of complexity. The fundamentals of business are still hard. What is the product or service you're offering? Are differentiated or unique? Are compelling?
00:52:30
Speaker
How much would it, how would you acquire patients? What is your cost of acquisition? What is your lifetime? And with the basic, the fundamentals remain the same. What kind of gross margins are you able to make? What kind of net margins are you able to make? Et cetera. What kind of assets do you need to put in place? The added complexity is, this is on the right side of healthcare chains for patients. Are patients getting better? And what is the long-term mood?
00:52:58
Speaker
And I think we are fairly conservative investors, right? We are fairly focused on business fundamentals. And that is the mindset of our LPs. I am very fortunate to have the kind of experience that they bring to the table and the IIC and the experience of the IIC. And also the constitutional.
00:53:25
Speaker
We're now about 50 people across the front of the studio. And we have folks from the investing background, but also from startups, consumer startups, skilled healthcare companies, skilled consumer companies, etc. So I think the
00:53:46
Speaker
Being a healthcare investor is being a consumer in India. It's being a consumer investment plus being a healthcare subject matter, not an expert, but at least having a strong point of view on what is good business, what is bad.
00:54:01
Speaker
So the way you evaluate a business is like you bring to the table your subject matter expertise to understand whether from a technical perspective this will solve a problem or not. What else do you look at? Like how large the impact is? Like the TAM?
00:54:18
Speaker
Yeah, all that remains the same. You have to look at time, you have to look at economics, you have to look at differentiation, at moat, at what is the real IP here. A lot of the struggle that we see in health tech companies that we see around us is that a bunch of them have limited moat. There are a bunch of meters in the market. We see hundreds of certain kinds of business models in the market.
00:54:45
Speaker
And that your question to founders there is how do you differentiate yourself against that school? And yeah, and that's a big part of our evaluation. Then on the stuff, we talked to a large number of patients and asked them what solution and see, okay, if I were to build this in half a million, a million dollars in capital, would I be able to build this? The answer is yes, they're very unlikely to invest. And when we looked at Weiser, they had not spent a single dollar in marketing in their life.
00:55:15
Speaker
had 2 million patients who had found VISA, downloaded it. 150 people had written to VISA saying, I'm alive here today because of you. I was about to commit suicide, but then I used this. I was about so. And kind of clinical results, the third party validated clinical trials, the kind of data that was coming, I would never be. And Joe and Ramakan, the founders of VISA and the VISA team,
00:55:40
Speaker
had built it with a very strong patient plans that the global patient population completely resonated. And so you go to the Play Store today, the average rating is 4.8, 4.9. And it's been the same for across hundreds of thousands of reviews. So that is special. And there is definitely a data mode. There is a technology mode.
00:56:08
Speaker
And there's now a clinical mode because they've been validated across the clinical studies, 45 clinical studies, 15 clinical trials in the US, in the UK, in India, with an FDA breakthrough designation.
00:56:26
Speaker
and with grants from a large number of reputed institutes, including the NHS, and a couple of grants that I'm not allowed to talk about. But that is truly differentiated. And what risk we took when we're coming in is that we'll figure out the business model in the B2B business model in the US and UK, and that was in its early signs of majority.
00:56:50
Speaker
And that is the value that we bought as an investor, the US-India corridor expertise. And similarly, the companies we have invested, my mental litmus test is that I can build this in a million dollars myself while not investing it, because then what is the mood? I can build it somewhere. Okay, very interesting. And then the one thing
00:57:14
Speaker
one question sorry not directly related but would you say that company like pristine care has a moat or is it just money that is the moat there would it qualify as a health tech company or is it more like a sales enablement because they essentially sell surgeries for hospitals right like yeah look I think
Venture Studios and Industry Opportunities
00:57:40
Speaker
It's always tempting to hear a lot of narratives around this, around surgery enablement companies. Pristin has taught the industry a whole lot of stuff. Before that, we all running hospitals were sitting in a high horses saying that all these companies, all these helter companies don't know anything.
00:58:00
Speaker
and I know my customer and I have this beautiful hospital and I have been around for 25 years and my doctors are subject matter experts and people treat them like gods and they will only come to me. It doesn't matter if it's a complex heart surgery or if it's a pilot's operation, they will only come to me.
00:58:18
Speaker
pristine came and taught us that guys that's not how our folks that's not how the world works and that patients care about experience patients care about convenience there is a bunch of uh opacity
00:58:34
Speaker
or there's a lack of transparency in the way you operate, and that is not patient-centric. So sure, you know, Pristine runs ads better than most other people would and has built technology better than, and look, I don't know the business well enough about to know, to understand their practices around marketing and sales, but I know for a matter of fact that Pristine shook up the hospital industry
00:58:59
Speaker
and forced them to relook at their approach towards patient acquisition. And in dawn, helped the entire ecosystem kind of step up the game. It came to digital and making investments in digital.
00:59:22
Speaker
Now, are we an investor in Pristine or any company in that space? The whole surgery selection in marketplace? No, because of whatever reason. But Pristine definitely taught us. Pristine and companies like Pristine taught us a lot. Now, is it a sales enable? Does it do better marketing and sales enablement? Sure. Does it have a role to play in healthcare? It does. Will it solve all the healthcare problems it wants? No single company can.
00:59:51
Speaker
Will it survive for the next five years? I'm not the right person to answer that. Is it doing everything ethically and cleanly? I don't know. And I wouldn't comment. But the pristine team was able to raise a lot of capital and was able to teach a lot of us a lot of things. And I don't think people say that at all. So I wanted to say that.
01:00:15
Speaker
Okay. Okay. Interesting. And I have never, and I've never spoken to the pristine Congress in my life. So this is all, this is all what I'm hearing and seeing from the market and then also learning from patients. Right. Right. Right. Okay. This venture studio model, is there any name that an Indian audience would be familiar with? Is there a venture studio in India?
01:00:46
Speaker
Someone like a rocket internet, which set up Jabong in India, would that be like an early version of a venture studio? For sure. For sure. Look, venture studios work really well in industries that are complex, right? That's one.
01:01:10
Speaker
The second thing for a venture studio to work is you need the market to be large. You can't build a venture studio and you can do whatever you want, but it's hard to build a venture studio in, say,
01:01:31
Speaker
I don't know consumer travel because you have only two or three models. But in healthcare is very complex. And there are 30 to 40 disease areas and there are
01:01:45
Speaker
maybe 50 to 60 companies you can, in just CAD, there are 20 to 30 companies you can build in pharmaceuticals, four or five companies you can insurance, six or seven companies you can build in wellness. So scope of activity in the market size of time is very large.
01:02:04
Speaker
And so we've seen across the world in areas which are opaque, non-transparent, where insiders dominate, where multiple companies can be built on one operating block, or there's a lot of synergies to building multiple companies.
01:02:24
Speaker
There we see venture studios thriving, per se. Healthcare being one of them, a bunch of the unicorns we know from the West have been built in this fashion, in a true venture studio or a pseudo venture studio, where you have built, you know, we've seen companies like HIMSS and Oscar and Lavango and it's being built in some way or form of venture studio by a fund that kind of took this, you know, build and invest kind of.
01:02:54
Speaker
Now a rocket is a kind of industry. The underlying nuances, how much ownership does the venture studio take? And how much ownership does a founder take? Now with the rocket internet, that number was very high skewed towards the venture studio. The rocket internet model, 90% of the company was probably owned by a profit. People don't quote me on the number. Maybe the number is 80 or 90, but a high degree of ownership.
01:03:23
Speaker
that meant that these companies became, if there was a good outcome, Rocket made a lot of money, and they've done that multiple times in different places in the world. But if you need to raise a lot of external capital, then outside VCs are on with investment companies that are predominantly owned by venture studios, and their founders don't have enough skin to gain and act more as employees.
01:03:52
Speaker
So when we were building this, we were very clear that look, from a capital perspective, this needs to mirror what a company would look like after the pre-seed and seed run. The kind of dilution that you would expect at pre-seed and seed, we will take, and we'll put in the capital it takes to get them there. And instead of taking two years, we'll get them there in six to nine months, or nine to 12 months, so that founders still have a majority ownership. And look, there are companies we will build
01:04:19
Speaker
We don't need outside capital, where we are building more of a services player, where we are building, or where we are confident and want to deploy a lot more capital, almost like a private equity player. There we will take lives and get operator CEOs to come and operate, and a lot of people are interested in that opportunity.
01:04:43
Speaker
So really at the studio we're building two types of companies. We're building companies that are venture that would need, we will continue to invest and we need other venture capitalists to come in. And that resembles a capital debt. It resembles that of a normal venture backed company that has gone through a pre-seed round, a seed round. And there will be companies we build elsewhere, especially in the India US corridor and India Middle East corridor.
01:05:11
Speaker
where they will resemble more of private equity ownership. And the capital outlay that we will have will be much larger.
01:05:23
Speaker
Talk to me about some of the companies in each of these buckets. Give me some examples of the private equity bucket companies where you have a majority ownership. We launched a studio about a year ago. In fact, the first founder we got on board was about 10 months ago. We built four companies. Three of them are out in the open. Actually, all four are out in the open.
01:05:50
Speaker
Three of them have been around for a few months. The fourth has just been launched. Three companies of the four are focused on the retail market and focused on care delivery innovation. Let's build new wage care companies there. The companies are elevated now in the medical weight loss space, bringing a completely different model to mid-loss.
01:06:11
Speaker
The second company is a chronic pain space, mainly focused on back pain, neck pain, chin pain, bringing 10X better solution to status quo on chronic pain. The third company is a company called BBMD. It's a pediatric company, a modern pediatric experience. This would be offline, like this is like a digital thing, like for
01:06:34
Speaker
It's both. All these companies have elements of their omnichannel. The goal is to build where the patients need us. In the middle of the night at 3am, if you need a pediatrician, they'll be available to you on text. So it's an omnichannel kind of business model.
01:06:52
Speaker
with some offline touch points. And then the fourth company is in the B2B services space in the US-India corridor, a company called Reveal. And the goal there was helping enterprises, hospitals, insurance companies, pharma companies, build better products for technology products and AI products and services for their own business. So Reveal we launched with
01:07:20
Speaker
a high-quality, high-caliber team in the US. Our CEO, Sanchak, comes with over 20 years of IT services experience in companies like Infosys and Global Logic and others. Chief medical officer comes from the Harvard Ecosystem. He's been a Harvard professor, a surgeon, serial tech entrepreneur, and inventor. And he kind of brings in the physician perspective of building healthcare products.
01:07:46
Speaker
And so we're like, look, different kind of healthcare technology form that will build patients with a very strong physician and nurse lens, with a very strong clinical lens, and help you build faster at a cheaper number.
01:08:04
Speaker
large engineering talent pool, both on the co-planet development side as well as on the AI services side in India. So, companies have been around for a couple of quarters, have a large and a growing base in the US.
01:08:22
Speaker
So that is the more traditional tech services company with a very strong USB for clients here in the US, or partners here in the US. And we would be in the private equity model where you would have a majority stake. This is like a services business. It's not the kind of business which would need to go out and raise external capital a lot.
01:08:48
Speaker
So I will not comment on the captivity, but what I will say is that we will, we're investors in revealing, we're hoping to build this to a large extent, funding internally. Got it. Okay. Okay. And the first three, are they more of the venture style where they'll need to go out, raise external capital and because they're all creating like a productized offerings.
01:09:18
Speaker
For sure. So we're in early stages of PMF for them and they're building in very attractive spaces, building high quality solutions that are centered around the needs of patients. What's your thesis on finding product market fit or PMF? What's the way in which a startup should go about trying to find PMF before they raise too much capital?
01:09:47
Speaker
So I'm a conservative when it comes to this, right? I think the first PMF is for us is clinical PMF. Is it meaningfully valuable for patients? Are patients really seeing an impact or can this be substituted?
01:10:02
Speaker
80% efficacy somewhere else. If the answer is 80% efficacy somewhere else, we shouldn't be doing, we shouldn't be in this business. The second kind of PMF is like a commercial PMF, like how do you get, is everything has to be, are there decent margins you can make early on, et cetera.
01:10:21
Speaker
One thing I've realized is the company starts at the gross margin, probably end up in the same gross margin range in two or three years. It's not going to significantly increase or decrease. There is efficiencies of scale, but in healthcare services or tech-enabled healthcare services, we are very conservative about margins. We need high margin, high quality businesses.
01:10:47
Speaker
So that's the second kind of thing for us, a product market fit. The third is a little different, is around defensible and scale. Sure, you've gotten your first 1,000, 2,000, 5,000 patients. Can this grow significantly large when new entrants come to the market? And will your PMF stay? Will your patient be willing to pay the same amount that they're paying?
01:11:12
Speaker
Will the LDB stay or increase? So what is your moat really? What is your differentiator? And how do you protect yourself against 10 other people who will be motivated by employers?
01:11:22
Speaker
And that is where, right? So very, when we are building the thesis out or when we are investing in outside companies or building our own companies, that's one thing. What is, is it data? Is it product? Is it care model? Is it brand? Is it just some expertise or IP that we have from somewhere else? Is it borrowed IP from somewhere else or licensed IP from somewhere else?
01:11:45
Speaker
A lot of times, it's multiple of these things, of these factors that help build a bond. And if you're confident about that, then the goal is, OK, how do we lock in distribution? How do we go as fast as possible without, I mean, the optimizing factor here is that of capital, right? I don't want to build large bond businesses in healthcare services because we've not seen that. Now, what has happened?
01:12:14
Speaker
is you know, if you ask me who's made a lot of money in healthcare in India, two things, two kind of companies come to mind. One your pharma companies, second is your hospitals.
01:12:29
Speaker
Hospitals obviously follow a private equity kind of model. There is an asset barrier. There's high asset upfront investment. And that gets compensated for 40% to 50% GMs. Maybe 60% cross margins, depending on the specialty.
01:12:45
Speaker
Right. What we started messaging in was tech enabled services. So hospital is asset heavy services. We're saying let's invest in tech enabled services where you take away the asset, introduce technology to achieve the 50% cross measure and 25% hypothetical, a bit more.
01:13:08
Speaker
So that is the first wave of all investing. And you're like, okay, let's invest in companies that are building tech enabled healthcare services, where there is digital scale and where the margins resemble that of hospitals without the investment that you need in the complex. Now emerging into an era over the next two or three years,
01:13:30
Speaker
where we will not invest in tech-enabled healthcare services companies. We will invest in AI-enabled healthcare services so that the scale is faster and the GMs that we would anticipate there are 70-20%. Instead of having a concert or a coach cost 500 rupees for 30 minutes, can we make that interaction cost 50 rupees because AI is powering a lot of people?
01:13:57
Speaker
while still being clinically safe. The fundamentals and the DNA of a lot of our businesses will change a lot. And folks who are able to adopt AI tools and solutions that are honestly, you know, rampantly increasing in size, scope, services and ease ability of use.
01:14:19
Speaker
Well, that is the next wave in our services where we will have AI-enabled healthcare services that will operate at a different gross margin profile. And then the industry will catch up and then everything will look like 50, 60% again. But for that limited period of time, the earlier doctors will see a really interesting jump in margins. And suddenly, healthcare services will be, I believe, will be more investible than what it has traditionally been.
01:14:48
Speaker
So a company like Goki, which is into fitness, would be tech enabled service because they have these human coaches where it's just that the interaction is all digital and you don't need it. It's asset light and pure technology enabled interaction between coaches and their consumers whom they call as players. Whereas Vysa, am I pronouncing it right?
01:15:12
Speaker
So VISA is AI enabled where there is no human therapist who is chatting with patients who have these mental health problems, but there is an AI bot. So the elimination of the coach in a way is what will make a company move from tech enabled to AI enabled.
01:15:33
Speaker
Yeah, and the advisor also has a layer to escalate, right? So maybe one out of every 20 conversations we'll get, will there be an option to escalate it to a coach? And an employer might pay for it, a B2B partner might pay for it, a patient might pay for it themselves. But there is an option of escalating visor to a human because AI can't solve everything.
01:16:01
Speaker
Just like a human can't solve everything, right? Just one human can't solve everything. So yeah, that's right. So I think tech enabled is where we're in, the era where very rapidly we will see AI enabled services businesses. And a lot of the existing companies will also adopt more and more AI tools. And it will become an enabler just like technology is. Just that it will significantly impact the input costs of these companies.
01:16:31
Speaker
Am I right in thinking about it this way? Healthcare services is largely in the business of delivering adherence.
01:16:41
Speaker
to live in care, right? Everything, everything from. I mean, mostly like these companies would want their users to adhere to a plan and if they are able to achieve a high level of adherence by the users, the impact automatically happens. Like at the core, what they need to deliver is high adherence to the plan that is recommended. So healthcare sources are as simple as you go to a doctor.
01:17:06
Speaker
The doctor is providing you care, and that is healthcare services. The most traditional form of healthcare services is you walking to a clinic, waiting in the consult room, going and talking to the doctor. The doctor is seeing you, writing a prescription, you're going. That is healthcare services at its most core fundamental. You walk into a hospital, they do an exam, and they put a bandage, that's healthcare services. You get a surgery, that's healthcare services.
01:17:32
Speaker
Everything that you get within, that's how we classify healthcare services as a weak definition and people will define it. And so there are multiple aspects. Sure, a tech enabled healthcare services company would monetize in multiple ways. It could monetize by selling subscriptions. It could monetize by selling consoles. It could monetize by selling products and services.
01:17:55
Speaker
It could monetize by selling its own branded pharma. It could monetize by sending labs, whatever, multiple different business models. There are probably half a dozen scale business models, maybe a dozen non-business models that exist in healthcare. So how do you make money? Who pays for it? Patients might pay, employers might pay, insurance companies might, the government might pay. There are four or five ways to get paid right here in D2C or B2B2C kind of models.
01:18:25
Speaker
Then you have B2B models where an enterprise would pay for something. The goal of a healthcare sources company is to, on the demand side, be able to generate cost effectively and then supply it cost efficiently in a way or manner that improves its lives of patients. And it's a virtue cycle. In healthcare, more than any other industry,
01:18:54
Speaker
I believe the role of trust is very important because people move mountains to care for their loved ones and blindly trust the system. And they will trust the system. You need to do good.
01:19:16
Speaker
So you go to a skilled hospital or you go to a skilled doctor. There are so many of our key opinion leaders who have never advertised in a day in their life. But you go there waiting on thousands and thousands of patients that they treat every month. And their practices keep on flourishing because of the word of mouth and trust. They are not launching updates on their app.
01:19:38
Speaker
or they're not, probably they're not even using any technology. It doesn't matter. It's all trust. So the challenge that helped the new page, you know, help your startups have is how do you build this trust, but how do you build this, you know, time frame that is okay with venture.
01:19:54
Speaker
the private equity fund will acquire someone who has trust, right? And so they will inherit the, you know, the emotional trust that the hospital or the doctor has for a healthcare startup. We are building the trust from zero, but we don't have eight or 10 years to build it. You have six to 12 months to build it. So how do you build trust rapidly is the, is, is an interesting problem that a lot of our, of our companies try to address.
01:20:23
Speaker
And there's no way to do it besides doing what's right for patients over and over and over. Fascinating. I guess as an investor, you would also be looking at companies which have built trust to be good investments. Like that could be one of the lengths to evaluate a deal which comes to you. Of course, absolutely.
01:20:48
Speaker
Okay, interesting. What do you think are the opportunities right now? And like, you know, off the top of your head, you gave me like a number for each type of business that there are 40 companies that can be built in this space and five companies that can be built in this space.
01:21:04
Speaker
So, you know, which tells me that you have very deeply studied the entire healthcare ecosystem and you have a very clear understanding of what kind of companies, what kind of opportunities exist today. Could you share a bit on that?
01:21:21
Speaker
Look, this is an industry. It'll take rocket science to find problems. There are ample number of problems around us. Everything from there are about 30-odd sub-specialties. Every one of them is poorly managed. The time varies for each one of them. Diabetes is an obvious problem to solve because
01:21:42
Speaker
70 million or 100 million Indians are diabetic, 200 million live with pre-diabetes, and that's not gonna get worse. I can name specialty after specialty where this can be true. 150 million Indians living today, right, will have cancer at some point in their life.
01:22:00
Speaker
and that's a scary number if you think about it and the underlying causes are many you're just living longer or you're diagnosed more often or lifestyle is getting worse over time and there are a bunch of externalities that are now at the end
01:22:15
Speaker
But the reality is 150 million Indians living today will have cancer at some point in their life, may or may not kill them, but will have cancer at some point in their life. And we have a couple thousand medical oncologists to take care of them. And it's not that our supply is increasing very rapidly. In India, this is maybe dated a little bit.
01:22:37
Speaker
In India, we were graduating about 50,000 MEPS doctors. I know this was 10 years ago. If I remember correctly, that number might be 70 today.
01:22:46
Speaker
But also 30,000 doctors die every year because they're getting old and they pass away. And so as a system, we have 20,000 net doctors getting added, of which I'm sure 5-6,000 folks like myself are running out of the country and going to the US or the UK or the Middle East or somewhere.
01:23:07
Speaker
and supply a bunch of people. Let's build a medical college, sure. And 100 doctors, sure. Let's build 10 medical colleges, 1,000 doctors, sure. That's never going to solve the problem. All of these are good to have small contributors towards large, large problems. The only way to solve a lot is to
01:23:31
Speaker
is by leveraging innovation in clinical medicine and then using the right technology in AI to enable the ecosystem and building a lot of this, the patient front and center. So technology is the only way that we can solve the large complex problems that we have in the global South, that we have in India.
01:23:56
Speaker
Unlike the US, maybe in the US, you don't need a lot of this. You have a decent doctor-to-patient ratio. Even here, you do, everywhere you do. But in India, the only way to solve all these problems is to answer your original question. You mentioned cancer. You mentioned any specialty. If you're building in pediatrics, I think that's a huge problem area where a lot of value will be unlocked. You have multiple specialties like that can be disrupted.
01:24:26
Speaker
On the other hand, there are a bunch of other problems around, you know, healthcare training. We export engineers throughout the world. Can we export clinicians throughout the world? We do already. Can that be a difference? AI will enable a whole lot of new business models that don't exist. There is a bunch of industries are non-investable in healthcare.
01:24:52
Speaker
because of the margin profile telemedicine if I may name one right the biggest cost of telemedicine the biggest cost driver of telemedicine is the cost of the
01:25:04
Speaker
So you book a doctor appointment, you pay 800 rupees, 750 goes to the doctor, 700 goes to the doctor, 100 bucks. Your cost of acquisition is 300, 400 rupees. There's very limited loyalty to the platform because you're connected to the doctor. Maybe you'll sell a little bit of medications at the back end, you'll do something, you're there, whatever. But it's a place where 85% or 80% of your revenue is going to that cost center, which is the doctor.
01:25:31
Speaker
Maybe that is 50% for some businesses, 80% for some other businesses.
01:25:35
Speaker
Now, suddenly, AI can make the cost of console go down from 500 to 50. And that's when telemedicine business becomes real. So I can enable a lot of innovation downstream. We're getting there early there. We're in the cycle of height. And there'll be a plateau. There'll be a phase of disappointment, whatever that cycle is called. And then there'll be a plateau of reality hitting it.
01:26:01
Speaker
But as an investor, we are excited about the power of AI to enable businesses. It may not be a standalone business model in itself, but businesses that are using it and the foundation to serve patients.
01:26:19
Speaker
The third thing that I'm excited about is in a US, India Middle East corridor, there are a bunch of problems again, enterprise problems that companies from India are solving. Four or five, you know, cons in the space that no one talks about, no one knows a lot about, you know, right from your
01:26:40
Speaker
Indigene, Inovis, Sidious, Emits. These are mainly services companies, maybe with a product element or product with added bolt-on services.
01:26:52
Speaker
And that space is extremely interesting. And we're looking at and tracking a large number of companies and we want to also build some companies in this. So I feel that's an investible area that a lot of funds like ourselves are looking at. And so those are some, I can go on. Those are some areas. Fascinating. How do you recruit an entrepreneur?
01:27:21
Speaker
As a venture studio, you have a strong team in place to build out a thesis, to create processes, etc. But you need that entrepreneur with enough skill in the game to drive the business. How does that kind of recruitment happen?
01:27:38
Speaker
So we don't hire the recruit entrepreneurs, we partner with them. But it's a band-aid, it's important because we're partnering with partners and we see ourselves enabling their journey and an idea is worth nothing without the right founder.
01:27:59
Speaker
The first founder we got on board took us maybe 110 interviews and conversations with 110 people. And how did you generate these 110 interested leads?
01:28:14
Speaker
hard work and grit. We have a talent team that scouts multiple platforms. We have spoken with, we've sourced about 40 to 50,000 profiles over the last 80 months. And this is across the chain, right? From a marketing manager to a software developer to a founder. We have, um,
01:28:42
Speaker
spoken with 1000 plus art founder and it's sourced maybe three or four thousand spoken with a thousand maybe evaluated or had multiple conversation maybe a hundred or so and we've gone very deep and maybe 50 or 60
01:29:01
Speaker
we've gotten on board about 25 to 30 founders and CXOs so far, you know, right from a CEO, CEO to a head of marketing to a VP of founding VP of engineering or whatever the title might be about 25 to 30 odd founders and CXOs and first employees, you know, that we've hired across these different companies and the, uh,
01:29:30
Speaker
The answer number one is just high grit and just doing the work, doing the rounds. Being now we understand founder archetypes much better. We have a bunch of like we, when we interview them and we have a lot of conversations with them, we spend a lot of time with them. It's one of those irreversible, early reversible decisions, right?
01:29:57
Speaker
And then we will have a bunch of hard skill assessment and soft skill assessment. And then we also team up and bond us together. They work together as entrepreneurs in residence before signing up and joining. When folks are entrepreneurs in residence, we get to work with them. They get to work with us. They get to work on the business. We get to work on the business. So all three, all four of these competitions need to match up for them to move. And we have an all-in entrepreneur in residence.
01:30:27
Speaker
The reason I call it all in is you need to be extremely passionate and hungry about your idea. So found a passion for it is extremely important.
01:30:38
Speaker
And one of the ways we have to assess that is that, look, you're going to get most of it. This is a concept. Let's come in and let's go evaluate the concept a little bit more. A bunch of these people have large amounts of equity.
01:30:58
Speaker
high salaries, a lot at stake. And they quit and they come back with a small stipend, a couple thousand dollars, which is 10 times or 20 times pay cut. And at the same time, no guarantee of capital. We will come on board. You will spend three to six months of your life. We will dream this together.
01:31:26
Speaker
if it works on the other end, is a little bit of seed capital. And we will co-grid it with you. But we may not co-grid it with you. And you may not co-grid it with you. So it's all in. It's a filter dust to see if someone is truly passionate about this, if they're willing to take the plunge.
01:31:54
Speaker
and going through it. And more often than not, I think founders see value in the ideation process, the early enablement, the support in the zero to one, and a bunch of high quality playbooks in the stakes, whatever that, you know, that they get to learn from, along with a bunch of high quality.
01:32:18
Speaker
who are helping them in the very journey that they find value. Different founders find different parts of this very problem, more helpful. In order to the core of it, the way we have found working for us and our different venture studios will do different things.
01:32:38
Speaker
Our talent ecosystem in India for health care is still nascent. So it's not that we have multiple third time, fourth time, fifth time founders. If we had that, like we have in the US, it's easy. In India, we do. So we're not only hiring people at the studio. When we hire for the studio or we get on board founders, it's the same. You need to be extremely passionate about what you solve.
01:33:03
Speaker
or what we're solving. And then you see the reason why you're passionate. In other words, it's a smart idea. I'm really passionate about it. There needs to be a personal reason to be really passionate about it. There needs to be this all-in-entrepreneur, like no guarantee full risk to mimic what entrepreneurship is all about. And that's been helpful for us.
01:33:26
Speaker
I love the rigor with which you do this process. I mean, I'm sure it would have been tempting to take shortcuts. You find someone you really like, and you say, no, this guy is really amazing. I'm sure he'll make it work. But then to still go through that rigor is incredible. Look, I'm sure we'll all make mistakes in the journey. But yeah, this is probably the biggest predictor of success, the quality of founder.
01:33:53
Speaker
And that's just like investing in founders. This is as critical. And so we take our time here.
01:34:01
Speaker
Your approach reminds me a lot of what a doctor would do. As a doctor, you need to trust the process. You may not see the result today. It might take three weeks or three months to see the result, but you trust the process, which is what seems to be happening here also in the way in which you are onboarding entrepreneurs. In terms of build a process, trust the process, be rigorous about following the process.
01:34:30
Speaker
Yeah, and be okay when the process doesn't work. For example, in our business with Diora, if we were very successful at managing patients, what would the end goal be? The person would die 10 years later. There's only one way out of geriatric care setting.
01:34:53
Speaker
The only time you stop being a patient is when you're not around anymore. That's when I'm immensely successful. My patients will stay, and the only way out is, you know, the way out. And that's okay. That is success,
Supporting Entrepreneurs: Platform and Tools
01:35:09
Speaker
right? Like we are in a weird, dark humor way.
01:35:16
Speaker
Amazing. You said you built a platform to support the entrepreneur. So for example, like you have a recruitment team which supports them with hiring and you have like a team of lawyers to support them with contracts and stuff like that. Is that what it was when you say platform?
01:35:34
Speaker
So we have multiple team notes. We do have a talent team. We have one lawyer, thankfully not more, a country trainer. We have a finance team. We have a fundraising team, et cetera. I think the core of it is we have a solid product team, about 15 to 20 engineers and, I mean, as contractors and sample time.
01:35:56
Speaker
and 7 to 8 folks in product and design. We are building a universal stack, a modular stack which has patient-facing software, doctor-facing software, some AI tools, and a lot of growth software. So that companies get to use that on day zero and build on top of it. Specific things that they need for their specific business. That's one.
01:36:21
Speaker
The second team that we're really set about is a launcher group, good market team. The goal of this team is to take something from an idea along with the founder and build out the team and launch the company. Our pain management business after diligence and after all investment committee said, okay, go build it.
01:36:40
Speaker
And after we had the founders in place, we launched the company and saw our first patient in 53 days. In 53 days, we hired doctors. We hired a care team. We built our day zero clinical model, which is friendly complex. We implemented our technology. We got insurance contracts. We got hospital contracts. We set up shop and shop. We got the supplies. We trained the team and we started seeing patients. So all of this happened in
01:37:09
Speaker
53 days, thanks to the go-to-market team obviously, but obviously led by serial founders who are built in healthcare multiple times.
01:37:20
Speaker
so who knew the tricks and trades and we were able to get a team that has done that multiple times. So that's the platform. So let's go to market, product, marketing, a bunch of companies will also do online patient acquisition.
01:37:39
Speaker
how do you do tele-sales? How do you do marketing? What kind of value proposition? What kind of metrics are good enough? What kind of metrics are not? How do you acquire patients offline? How do you build trust within the doctor community? How do you make sure that doctors and a bunch of ecosystems are important? Your B2B partnerships is a big one.
01:38:00
Speaker
So how do you partner with hospitals very, very early? Again, hospitals are very discourse and very reputation conscious. And for a month, six or month, three or month to start up, to be able to partner with a large pharma company or a large hospital chain doesn't happen and doesn't happen at all. But thanks to the work that our team does in partnerships and B2B work, I think a bunch of health systems and pharma companies are investing alongside us in our companies.
01:38:27
Speaker
and are also giving them an early shot. That, okay, let's do a violet together, you know, in a month six, and it really shows pregnancy. So that is something that we spend a lot of time on. Okay, interesting.
AI in Healthcare
01:38:43
Speaker
One last question I have.
01:38:47
Speaker
You know, while you do talk of AI-enabled healthcare services being the way to make large profitable businesses, I'm wondering if I would want to choose speaking to an AI for diagnosing my problem and getting a solution versus speaking to a human being.
01:39:09
Speaker
I guess in most cases I would want to speak to a human being, be it for weight loss or pain management or even like a teleconsult or whatever it is. Is it that there is a generational change happening and the next generation would not be thinking like me?
01:39:31
Speaker
You are the consumer, right? So it needs to be built in such a way that is extremely consumer-centric. The enablement needs to be AI-led. The interaction can still be fairly
01:39:46
Speaker
be it a voice-enabled AI, be it a text-enabled AI. Imagine what's happening, your doctor, in the middle of the night. The doctor will ask you questions. Here, the AI can ask you questions. That has been trained by doctors and trained by... All that data then goes and gets sent to a doctor, go by it. Yeah, go by different doctors and...
01:40:11
Speaker
So, the clinical decision-making still is going to be human-led until we have FDA approvals or AI making decisions. All the prescriptions and next steps will still be fairly human-led. A lot of the administrative and data-capturing work can happen through AI. Click a picture of your rash, your baby's rash, and send it on WhatsApp.
01:40:37
Speaker
Because a lot of that stuff is going to be what would have been otherwise done by doctors with a very high cost and can be replaced by the consumer experience cannot
01:40:50
Speaker
be diluted for efficiency gains because that's not good business. So founders will have to figure that bit out and that's where the technology will take some time.
Final Thoughts and Call to Action
01:41:04
Speaker
I think the business is hard. Business and healthcare is definitely hard. And I think that the studio, what we're trying to do is to
01:41:18
Speaker
enable our founders to certain companies that are meaningful for patients, then they'll faster but cheaper.
01:41:24
Speaker
And despite all the playbooks and all the stuff and talent and IP and tech and all that we have in house, there are only two states of building a startup. That is one of absolute terror and the other of absolute delight or exhalation. And I'm quoting someone, not me. And the lack of sleep makes it worse.
01:41:49
Speaker
And the reality is that what we are trying to build is being an enabler for founders to solve really, really hard problems in a fairly capital efficient and time efficient manner.
01:42:03
Speaker
And hopefully our innate belief is that building some of these businesses that should be good for business but very high on purpose will enable us to let ecosystem of founders and investors who are dreaming to build and solve some of these.
01:42:27
Speaker
Seemingly impossible problems of managing 150 million patients with cancer with 2000 medical oncologists, et cetera.
01:42:38
Speaker
And that brings us to the end of this conversation. I want to ask you for a favor now. Did you like listening to the show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them. Do you have questions for any of the guests that you heard about in the show? I'd love to get your questions and pass them on to the guests. Write to me at adatthepodium.in. That's adatthepodium.in.