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Brown invests in healthcare startups for Oak, a VC firm headquartered in Greenwich, Connecticut
There has been a big debate the last few years over whether the Series A crunch is real or not.
What everyone can agree on, however, is that there are definitely more seed and early-stage funds now than ever before, and more people willing to give money to young companies looking to make it big.
But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?
We're highlighting key members of the community to find out.
Nancy Brown joined Oak HC/FT as Venture Partner in 2014.
Nancy is also a mentor for MassChallenge where she helps the next generation of high-impact entrepreneurs grow and succeed.
Prior to joining Oak HC/FT, Nancy was Vice President of Strategy and Business Development for McKesson Technology Solutions. She has more than 25 years of experience in clinical research and automating clinical information systems, combining management, consulting and information technology skills. At McKesson, she was responsible for helping the company develop, acquire and apply new capabilities that position it to lead the industry and accelerate its Better Health 2020™ strategy, helping healthcare networks reduce costs, coordinate care, assume more risk and manage complex payment models.
Previously, Nancy was Chief Growth Officer at MedVentive, which was acquired by McKesson in 2012. Before joining MedVentive, she served as Senior Vice President of Corporate Development of athenahealth and was responsible for identifying opportunities that drive growth and operational improvements. She also held the position of Senior Vice President of Clinical Service and spearheaded the creation of athenahealth’s clinical product line. Prior to joining athenahealth in 2004, she was a senior vice president at McKesson Corporation, focused on marketing and strategic planning. She joined McKesson in 1999 when it acquired a company she co-founded, Abaton.com, a provider of internet-based clinical solutions for the ambulatory market. Earlier, she spent eight years at Harvard Community Health Plan where she held several senior management roles.
Nancy earned a BS at the University of New Hampshire, and an MBA from Northeastern University.
VatorNews: Tell me a bit about your background. What led you to the venture capital world?
Nancy Brown: I’m new to the venture side of the world. I spent the last 30 years in healthcare, starting out in the delivery system here in Boston. And that SaaS model meant we had all the insurance risk—we were the insurer for a million members and we delivered all the care. It was a great vantage point in terms of really understanding what it meant to own a population and to have complete control over the benefits offered and the delivery vehicle. We had very consistent views of how all care should be delivered to get to an optimal cost and quality outcome.
It really worked well except for that most people didn’t want to be tied into a closed, small panel of doctors or hospitals. But it taught me that in order to get to a consistent outcome you have to have control over process.
Making a very long story short, I then opted out of being on the delivery systems side and became an entrepreneur because one of the factors for success was technology. So we were obviously a hardcore service company but didn’t have much technology available--this was back in the early 90s--to take all these beautiful rules that we had derived from our analytics and put them at the point of care.
So I had a series of companies—three startups, two of them were bought by McKesson, and one in the middle was athenahealth, where I was for a long time. And Athena is very much a model focused on what we [at Oak HC/FT] love the most, which is tech-enabled services.
VN: What is your investment philosophy or methodology?
NB: As a firm, later-stage growth investments with extraordinary growth potential and dynamic entrepreneurs are the backbone of our investment philosophy. On the healthcare side, we are focused on investing in tech enabled services that use the latest and greatest technology to run business efficiently and to provide superior patient care and experiences. There’s a growing universe of employers that realize tools and services that truly reinvest into the wellbeing of employees will build a better company and pay dividends over the long-term.
VN: What do you like to invest in? What are your categories of interest?
NB: What I absolutely love about our firm is that we have very specific areas of interest. We’re really about driving cost and quality, and we’re all about large-scale platforms. We don’t invest in "band aids"—features or functions that can be stuck onto some other application to make it work better. We’re about people managing wholesale change of a process.
In terms of investment, we work really hard to find companies who are in beautiful growth modes around those areas, but we’re not afraid to start from scratch in some cases. We are always meeting with new entrepreneurs.
We are agnostic to the state of the company. While we prefer those in growth mode but we have invested in everything from early-stage startups to very mature, high-growth companies in the past year and a half since our firm's inception.
VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?
NB: We look at companies focused on cost savings, quality improvements, operational efficiencies, the ability to reduce complexity in existing processes, and those that are using data—not doing analytics for analytics’ sake but actually using insights from data to drive improvements. Those are the broad categories that we focus on when assessing a company's value that it can bring to the marketplace.
We’ve done quite a few investments in healthcare delivery. There are populations where you need to be expert to really figure out how to improve cost and quality. One area of great interest to us is palliative care, a popular topic based on end of life management.
When I talk about palliative care, I talk about our company Aspire. This is a great service because it reduces cost, improves quality of life, and improves satisfaction of everyone involved; and Aspire, specifically, has organized a network of palliative care providers across the country to serve this need. They create contracts with payers to go after this population, contact them, and bring them into the program, resulting in cost-efficient solutions and superior patient care. In order to run a business like that successfully you have to be tech-enabled, you have to use technology in all aspects of that business to make sure you can scale it and be consistent.
Another example of a focus on a subset of the population is a company in New York City, which we invested in very early, called Quartet Health. They are focused on patients who have two disease states: one is medical and one is mental health. The body of work that led to this company was the realization that patients who have underlying mental health conditions and then a medical condition spend more on the medical care in an unnecessary way.
A simple example of this is if you have anxiety and depression as a chronic condition, and you are then told you need a hip replaced or you have cancer or you have a cardiac situation, it will cause your anxiety and depression to worsen, and will likely result in behaviors of wanting more tests done. So this company, which also contracts with payers, finds the patients of interest and engages them in more services, which I love because it isn’t about going in and keeping people from services, but going in, finding people, and offering them more services to help them manage their situation better. Quartet's philosophy is focused on service through caregivers using tech enablement to do it efficiently and effectively in a contemporary way.
VN: What do you look for in companies that you put money in? What are the most important qualities?
NB: It’s pretty consistent.
Number one is the team. We know that no matter what state the company is in, the future is going to be about leadership and the ability to react to change, whether the change be growth—companies growing so fast they have to evolve their structure—or having to pivot because the original view of the company may not be exactly what the market wanted.
Number two is the addressable market, or the opportunity. I think I do about five to six meetings a week with new companies. There are people who have started companies who are going to do fine—they’re never going to be a big company because it’s not a large addressable market. A great example of market need is the investment we just did in Hometeam in New York, who is reinventing home care for the older adult community.
The third is we really want to see validation around that market. We absolutely love when there’s already great interest or a big customer. Maybe they’re not completely signed but there’s such a market interest that they’re willing to work with our company and help develop them.
VN: What kind of traction do you look for in your startups?
NB: In health care, it’s not unusual for people to get stuck at different stages of growth. Some of our companies we like to see going from $25 to $50 million [in revenue]. Growth modes for every one of our companies is different depending on where they’re starting from. We want to see a really beautiful progression.
High growth is when they have a nice trajectory to $100 million. I look at these things every day. We see folks that have been around for five years and they’re just getting to $500,000 or $1 million and the visibility from getting from $1 million to $5 million and $10 million is murky—that’s a red flag for us.
These days, a seed round is yesterday's Series A, meaning today a company raises a $3 million seed and no one blinks. But 10 years ago, $3 million was a Series A. So what are the attributes to get that seed round? Since it's a "seed" does it imply that a company doesn't have to be that far along?
We’re a growth equity shop, so 70 to 80 percent of our investments are in growth deals. But we do early stages, typically Series A since seed rounds are typically smaller dollars. There are a lot of VCs out there that have specific capital dedicated to seed deals but that’s not really our sweet spot.
VN: What are the attributes of a company getting a Series A?
NB: Back in my day, there was quite a distance between the seed, Series A, and Series B. These days, it’s really hard to tell what people are calling these different series and how quickly they’re going to move. We don’t do seed fundings but we keep an eye on them because they can quickly move to a Series A and beyond.
VN: Given all the money moving into the private sector, I believe there's more money going into late-stage deals in 2015 than there was during the heyday, back in 2000, do you think we're in a bubble?
NB: I lived through the 2000s. There’s more money going in at every stage. There are people investing in health care that were not traditionally healthcare investors. We pride ourselves on the fact that we’ve been investing in health care for 35 years. We are tried and true.
Back in 2000, there were a lot of people that came and invested in this space, often large corporations that decided they could make a lot of money. Health care is not for wimps or inexperienced people. It’s very easy to be misled. I’m not saying people are misleading, I’m saying it’s very easy to not understand the complexity of what it takes to be successful. When I see some of the valuations that people were requesting and getting in the last couple years, it was concerning to me because I didn’t believe the value creation had come yet. Eventually the investors would figure that out. The partners at Oak HC/FT pride ourselves on the fact that we've been investing in health care for 35 years. We are tried and true and have been through many of these market cycles.
VN: If we're in a bubble, how does that affect your investing?
NB: This is why I absolutely love our portfolio. We’re extraordinarily disciplined around all of our investments and the expectations associated with those. We are not going to be affected by a bubble because we’re not doing stag investing. We’re so experienced that we don’t get enamored with shiny objects that seem too good to be true.
Our companies are doing hard work in a smart way. They’re going in, finding patients, delivering a real service—they’re not just putting a Fitbit on someone, they’re actually applying very rigorous approaches to change.
I found back in 2000, the companies that had real value—meaning they were really providing value and could prove that—exceeded. Look at athenahealth as an example. The same will be true now. We’ll continue to bolster the companies that are contributing value in a real way.
VN: What do you like best about being a VC? What makes you excited?
NB: I probably answer this question every day because I haven’t traditionally been one. So when I see my friends, it usually starts with “you’ve entered the dark side,” which I don’t get because I work for VC veteran Ann Lamont and there’s nothing dark about how we do investing. We’re not buying and flipping, we're in it for the long haul with our entrepreneurs, and it’s absolutely a pleasure to work with them.
What I love the most is the vantage point. Imagine you’re sitting in one place and all these opportunities, all these ideas, all these incredibly smart people find you. We find them too, but it’s my job to meet with smart, creative, mission-driven people every day. I can’t say 100% are that way, but 97% of them are good people. Are they all running companies I want to invest in? No, but at the very least I learn something from every meeting.
A lot of times the ones I don’t invest in can be helpful to our portfolio companies. So it’s just a crazy-good vantage point. It’s crazy that this is even called a job it’s so good.
VN: What is the size of your current fund?
NB: $500 million (Oak HC/FT, closed June 2014).
VN: What is the investment range? How much do you put into each startup?
NB: It’s between $5 and $35 million—we can flex up or down for the right investment.
VN: Is there a typical percent that you want of a round?
NB: We typically try to own around 20%.
VN: What series do you typically invest in?
NB: Series A.
VN: In a typical year how many startups do you invest in?
As many as we feel strongly about. In our first 20 months we have made 18 investments, and they come in ebbs and flows. When there’s traction and capital available and we feel strongly about team and mission and market, we’ll make it happen. But we don’t want to put numbers to it per se.
VN: Is there anything else you think I should know about you or the firm?
NB: We’re often seeing entrepreneurs who are meeting with a lot of venture capital firms in fundraising mode. It’s so much fun when they realize that we’re not typical. We have a ton of experience, thanks to Ann and Andrew, who have been investing for 30 years and have sat on many boards or venture partners like me who come from the healthcare industry—so just the amount of experience that we have and the level of questions we ask.
Our team is incredible. We also have a partner we haven’t mentioned, David Black, who is a technology partner. His knowledge, when I was at [athenahealth], wasn’t about fundraising but about supporting us throughout our journey with major technology situations. Zeke Emanuel recently joined our firm as well. He has tremendous experience as an oncologist, helped create the Affordable Care Act, and who has clear points of view about care and how to reduce waste.
That’s such a distinction and it’s not unusual for us to hear, “Wow! Those are not questions we usually get asked.” And that’s in a good way. That is so helpful to us because what these entrepreneurs understand is that getting money is not that hard. Getting associated with a firm that can give you money and support throughout the journey along all levels—operational, financial, technical—is hard to find.
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Oak HC/FT is the premier venture growth-equity fund investing in Healthcare Information & Services (“HC”) and Financial Services Technology (“FT”). We are focused on driving transformation in these industries by providing entrepreneurs and companies with strategic counsel, board-level participation, business plan execution and access to our extensive network of industry leaders.