A Golden Era of Investment in Digital Health: Part 1
PublishedMarch 11, 2022
Welcome to the CEO Corner, where Buoy CEO and Cofounder Andrew Le, MD, sits down with industry leaders to chat about the provocative topics of healthcare today. Andrew recently spoke with Julie Yoo, general partner at Andreessen Horowitz (a16z). She leads investments in healthcare technology, focusing on companies that are modernizing how we access, pay for, and experience the healthcare system. Previously, Julie was the cofounder, chief product officer, and board director at Kyruus, a venture-backed healthtech company recognized as a market leader in patient access. Julie and Andrew talk about life-or-death decisions inside multibillion-dollar companies and hyper-segmentation in the VC market.
This interview has been edited and condensed for clarity.
Andrew Le, MD: Welcome, Julie. Could you tell us about your journey and how you got to where you are today?
Julie Yoo: Sure. I was the child of two immigrants from Korea who grew up wanting to be a doctor. I attended MIT in Boston as a pre-med major. This was in the late ‘90s during the original dot-com boom. I got swept up in the wave and completed a computer science major in addition to pre-med. That was the beginning of my passion for the intersection of healthcare and technology.
What drew me in was that biology is an area we know so little about. At that time, there were certain areas of biology in which we were getting to a critical mass of understanding, so that we could flip our mindset from discovery and serendipity to engineering and be deliberate about how we designed and optimized systems. This notion of the engineering of science really fascinated me.
This was before there was anything close to a digital health industry, as we know it today. Instead, I went into the basic enterprise software world. I worked at a company called Endeca in the e-commerce space and had a wonderful ride—writing code initially, doing frontline work as a sales engineer.
This was right when the government started talking about meaningful use in high tech in healthcare. I became excited about the rise of enterprise tech in the retail space and opportunities for that to occur in high healthcare as well.
“One of the most significant advances in healthcare is the use of electronic health records. Meaningful use means that electronic health record technology is used in a "meaningful" way, and ensures that health information is shared and exchanged to improve patient care.” - Mike Miliard, Healthcareitnews.com
I made a career change into healthcare by way of grad school and never looked back. I’ve been in the healthcare space for about 15 years, always in startups, primarily in product roles. I have done work in the pharma space, in the payer space, and most recently as a founder of Kyruus in the provider space.
I never intended to become a venture capitalist. But when I stepped down from Kyruus and moved out west, I connected with a new team. I feel extreme conviction about the platform we're building—it’s the type of investor I wish I’d had access to when I was an entrepreneur raising capital.
Julie Yoo with Kyruus Cofounders Vinay Mohta (L), and Graham Gardner, MD, MBA (R). Image courtesy Twitter.
Andrew: Amazing. I look up to you, and I know a lot of people do. Let’s chat about your transition from a founder and CPO of Kyruus to a prominent healthcare VC. What have you learned as a venture capitalist that you didn't appreciate as a founder?
Julie: I've been at this for just under three years, and there are a couple things I did not appreciate as a founder. Having been on the operating side of the market until this point, I felt it was unintuitive.
One is getting an opportunity to see what greatness looks like. This is a privilege very few entrepreneurs have from the inside. We're invested in these iconic companies that are a billion dollars large. When your head's down building your startup, you’re not exposed to what it takes to build a company to $10 billion, $50 billion, $100 billion.
How did it get there? What key decisions did a founder make along the way that kept them in the life category versus a death category? All these companies have stories about how they were at the cusp of death but made some critical strategic decision that kept them on the other side of that line. It's mind-blowing to see the inside track on those organizations.
Image courtesy Twitter
A second thing would be that when you're an entrepreneur, you're like, "VCs don't have real jobs; they don't really do work." This is still my mindset: You entrepreneurs are the ones with the real jobs. You're in the arena doing the hard work of building a company from nothing.
But VC is a lot of work, especially at a place like Andreessen Horowitz where we're primarily ex-founders. Our entire mindset and ethos is around building. The way we support our companies is very substantive. We have an operating-oriented mindset. It’s a ton of work to give first-class support to our companies and founders. The stereotype of the old-dude VC sitting around with their feet kicked up on the desk is false—at least if you want to compete in this market these days.
"The stereotype of the old-dude VC sitting around with their feet kicked up on the desk is false—at least if you want to compete in this market these days."
The last thing is how much hyper-segmentation there is in the VC market. I used to think about VC as this monolithic thing. This was a testament to the time when I was a founder raising capital. There were about 10 firms investing in digital health. The universe was relatively small.
Now there are so many sources of capital that people like you can choose from. It’s key to understand how the sector focus of a fund influences their style of supporting companies. For instance, if they have a focus across all markets versus a hyper focus on digital health. And stage focus: How long a journey can they stay around for, and what does that mean for how we underwrite investments?
I had no appreciation of that as a founder. But I've seen how it has significant implications for the way relationships play out in the long term. So, that means being precise about segmenting the VC market and having a thesis on what makes for the best fit for your company at a given stage and point in time, versus spraying and praying and hoping for a term sheet.
Andrew: I'm going to go off script, Julie. I'm fascinated about the decision points that you highlighted that keep someone in the life category. Can you give an example?
Julie: A lot of them have to do with decisions around capital. There have been several prominent examples in our portfolio over the last couple of years. COVID slammed entire industries and made revenue streams of hundreds of millions of dollars go to zero overnight. In situations like that, you have a cost structure and burn that you need to continue feeding. Suddenly, a major source of capital goes away.
Universally, the reason the companies even had options—and ultimately made the right decision—boiled down to relationships. The firms that saved them were the ones they had a trusted relationship with—not just with an individual partner but the whole partnership. In many cases, you must make a committee decision overnight about whether to allocate a significant amount of funds to a company, and it’s not clear that they're even going to survive.
“...the reason the companies even had options—and ultimately made the right decision—boiled down to relationships.”
In all those cases, I saw that because we had such a strong relationship with the founders, we could make super high-conviction and fast decisions. And they trusted us to not put in crazy structure or terms that would strangle them if they survived. Those situations were extremely anxiety inducing but, ultimately, people were able to succeed against all odds.
See a16z.com/disclosures for important information.
In Part 2 of the conversation, Julie and Andrew discuss the inflection points behind the explosion of digital health investment and why she’s bullish on unbundling primary care.
About the participants:
Julie Yoo is a general partner at Andreessen Horowitz (a16z), leading investments in healthcare technology while focusing on companies that are modernizing how we access, pay for, and experience the healthcare system.
Andrew Le, MD, is the CEO and Cofounder of Buoy Health.