Several tweets today from Benchmark Capital partner Bill Gurley suggests that the legendary VC firm – famous for their backing of eBay, Uber, OpenTable, and Yelp, among others – may be preparing to get serious about healthcare, and aggressively crowdsource their search for new opportunities.
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“Spending time studying where the Internet intersects with healthcare. If you have ideas and want to chat, contact me: firstname.lastname@example.org,” he initially tweeted, adding, “100% convinced US healthcare market is really messed up & that means opportunity, 17% of GDP.”
Perhaps most interestingly, Gurley noted that “approach must be orthogonal/disruptive. Not interested in ideas that partner closely with current players.” He asserts,“i dont want a quick exit, but I don’t want to worry about trials and regulation too much either.“
This positioning would seem to align Gurley with other technology VCs like Vinod Khosla, who believe the greatest opportunities lie in working outside the current system, which they tend to view as irredeemably dysfunctional.
Others firms, while perhaps sharing a similar view of the status quo (“calcified hairball system of care”), nevertheless seem to strive to identify solutions that address pain-points of current players, and more generally, try to work within the framework of the existing system. I’d place Venrock, Aberdare, and Sequoia in this category. Notably, Venrock’s efforts here are led by physician Bob Kocher, Aberdare has a legacy in life science and recently pivoted to healthcare services and digital health (capstoned by the hiring of physician Mo Kaushal), and Sequoia’s efforts seem to be led by former healthcare CEO, Todd Cozzens.
(Conspicuously absent from this list are firms like Social+Capital, my 2013 digital health investor of the year; while I might be tempted to place founder Chamath Palihapitiya squarely in the Gurley/Khosla camp, at least some of his portfolio companies, such as Geoff Clapp’s Better, seem focused, at least initially, on working within the existing system.)
The fundamental question isn’t so much whether healthcare needs disruption (it does), but rather, whether this change is more likely to be achieved by brash brilliant upstarts, working from without, or by savvy, visionary insiders, who know where to look for seams.
A recent, unsettling HBR post by Jason Hwang (co-author of The Innovator’s Prescription) and Ateev Mehrotra, describes what they see as the failure of retail clinics to transform healthcare. “Understanding their disappointing performance is particularly important,” Hwang and Mehrotra write,
“given that retail clinics are viewed as the prototypical example of how disruptive innovation can change the health care system for the better. The idea of disruptive innovation, a concept pioneered by the Harvard Business School’s Clayton Christensen and written about previously in HBR and in a book that one of us co-authored, is that industries are more commonly transformed by new entrants, rather than entrenched players. Disruptive companies get their start by offering affordability, convenience, and simplicity to previously neglected market segments that are too small and low margin for incumbents to pursue or aggressively defend.
Retail clinics fit this description to a tee “
Nevertheless, Hwang and Mehrotra argue, retail clinics were derailed by “perversities in regulations and reimbursement.” (An assertion with which Christensen, as well as HMS Dean Jeffrey Flier and researcher Vineeta Vijayaraghavan, would seem to agree.)
Yet, if anyone has reason to believe in the ability of a promising idea to overcome “perversities in regulation,” it just might be Bill Gurley, a fellow who invested in an upstart car service that that has had to fight its way into a historically regulated and impenetrable market, and aside from displeasing Jessica Seinfeld, seems to have been remarkably successful.
The abiding hope is that whether led from the inside or the outside, the irresistible force of inspired entrepreneurship will find some way to dislodge the immovable object of contemporary healthcare.