GSR Ventures is focused on investing in artificial intelligence and digital healthcareRead more...
An investor in sci-fi-like digital health looks to revolutionize 'failed' healthcare system
As entrepreneurship has become a global meme, with the title of "Founder" worn like a badge of accomplishment, there's no shortage of emerging investors on hand to fund these wide-eyed optimists.
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.
Scott Barclay is a new Investing Partner at Data Collective Venture Capital (DCVC).
Barclay has a long history of helping to build companies at the intersection of health and data.
He began his career in capital markets and the Boston Consulting Group before immersing in health care in 2005 at CVS Health. There, he operated innovation projects across pharmacy, pharmacy benefit management (PBM) and retail clinic. He also fixed and scaled the first national e-prescribing use case. He helped create Surescripts – an e-prescription network for moving large sets of health data sold to Allscripts. From 2009 to 2012 he scaled e-prescribing to encompass almost all prescriptions in the United States and attempted to expand it to solve all interoperability use cases.
Barclay became a full-time Partner with DCVC in 2017 but has been investing with the fund since 2015.
In his blog of October 2017 Barclay addressed the question that affects every person: “Why have we not reinvented the hospital?” With powerful modern technologies revolutionizing all other fields of our existence, the United States’ industrialized healthcare system fails and falls behind, expensive and obscure. At DCVC, Barclay is looking to invest in that Elon Musk who will break through the current limitations in health care.
Barclay received his MBA from INSEAD, which he calls a “special, global-oriented place.”
Here, Barclay answers our questions about his and DCVC’s investment methods, talks about some of the teams he has been a part of, and about redesigning health care through data.
(Editor's note: Scott will be speaking at SplashX Invent Health: Future of Clinics on March 15, at HP headquarters in Palo Alto. Join Scott and more influencers at the salon-styled gathering where we'll take a deep dive into how local care is changing and becoming more about wellness and less about sick-care. Hear from Walgreens Health's CMO, HP's global medical director, Sutter Health's Walk-in Care, Kaiser, and CEOs of Omada, Health IQ, JustAnswer; Plus VCs from McKesson, Norwest, Mayfield, Khosla, DCVC, Comcast.)
VatorNews: What is your investment philosophy or methodology?
Scott Barclay: At Data Collective, we are a small team with a large amount of capital to do early-stage investing. We are among the earliest investors to believe that you can use data and deep compute to solve problems for good.
Almost everything I invest in involves health data, evidence and product that has empathy. In particular, I lead a portfolio that we call Computational Care. I think the future of computing data means bringing these capabilities closer to the healthcare patient and to the empathetic human that touches a patient. This may take place in some of our most complicated clinical environments where our loved ones are vulnerable, like an ICU (intensive care unit), or this may be something consumerist that pushes intelligence closer to our daily life.
The question I ask is: how do we enable teams to take on these huge problems in a way that lets them accomplish something much greater than themselves?
VN: What are some top investments you were a part of? What stood out about those investments in particular?
SB: We’re big investors in Karius, which leverages genomics, machine learning and proprietary processes to enable hypothesis-free infectious disease (ID) testing. We invested because of the team and the potential for human impact, starting with immunocompromised oncology patients, but quickly showing evidence with such a broad spectrum fundamental to how we treat ID and how ID impacts clinical research.
Another one is Medical Informatics, or MIC. This is a female-led early special team doing deep compute on top of the ICU – historically, a “firehose” environment of health data left unused – now captured, standardized and made usable for true learning. Again, our angle was the technical and empathetic understanding of the team and the size of opportunity, as well as envisioning a future where a special company uses data to solve exceptionally hard problems in a defensible way.
One more I will name is Swift Medical, a company that applies machine vision to the smartphone at the bedside for wound care. Today Swift is used through SNFs [Skilled Nursing Facilities] to auto-workflow wound care, and tomorrow it will be used throughout all care arenas, like the hospital and home health, with significant impact on real-time clinical supervision and feedback loops to a more efficient supply chain. This system is tightly integrated into the EMR [electronic medical record] and into the workflow and supply chain.
These three are really great examples of our computational theses, pushing compute closer to the patient or the care extender.
VN: What do you look for in companies that you put money in?
SB: We don’t have an investment formula or a checklist. An investment for us must have two things: a unique, or proprietary, view on data and compute that creates defensibility, and an exponential upside in terms of impact and economic returns. Our investors expect us to work very hard to be on the leading edge of almost science-fiction-like capabilities at the intersection of data and the future of human potential, and to work very hard to serve those companies.
In the Computational Care space, a key consideration is timing and an understanding of the dependencies to scale.
Finally, I would say we care very much about the CEO and the team – who are the members and how can we help?
VN: What kind of traction do you look for in your startups?
SB: Traction depends entirely upon our view of the problem. We have put significant money into teams working on hard, science-fiction-like problems without traction. There may not even be proof yet, but we believe there can be proof, and this is the best team in the world to solve the problem.
In other cases, where we expect competition to be more vociferous, we are more likely to do the hard, early work to make sure we’re picking the winner. For example, Swift Medical is one of tens of companies applying machine vision to the skin. However, we think it is uniquely placed to be the one that does wound care in all critical settings across the globe, and it already has certain traction and momentum; it is arguably already well ahead of the rest of the world.
VN: How much time goes into the process of meeting a startup and making an investment, and how do you conduct your due diligence?
SB: We’re very disciplined in backing companies that are in scope to our vision and to our investors’ expectations, and we’re disciplined to taking major shots on the future.
We’ve made decisions with our investment committee in 24 to 36 hours. There have been other times where the right thing for the company and for us was to develop a relationship where the diligence ends up taking quite a while, but we would add value, help on the way, and then do the right type of deal many months later.
There is a third example: investments where we took a hard look, we were polite, and we passed on the deal. We were very direct with the founders, we told them what we were looking for that they weren’t yet doing. Then, 12 to 18 months later, we earned their respect and they came back, and we subsequently joined the cap table.
We want to run a very tight process that values the entrepreneur’s and our time, and we want to be very direct and clear about how we’re thinking. On the other hand, there’s not one process that we follow each time. We meet companies that are in very different places at different times, so we have to be flexible.
VN: What is the investment range?
SB: Our entry investment in a company can be between a $250,000 seed check and leading a large Series A. Following that, we maintain capital to support our investments substantially.
VN: What is the size of your current fund?
SB: We invest in seed and Series A out of a $230-million early-stage fund, and we also have several funds that can follow-on and invest in later stages. We manage about $1 billion of capital, which is growing.
VN: In a typical year how many startups do you invest in?
SB: In the Computational Care portfolio, which I think is most germane for our upcoming Vator event, but is only a small part of Data Collective, in the past year we’ve done four Series A and seven to eight seed investments.
VN: How did you get immersed in the field of health care and what led you to the venture capital world?
SB: Getting into health care for me started with my work on transformation projects inside CVS Health. As a strategist and operator, I knew how to build teams. Where I was naïve, but right, was in thinking that if I could find a way to come alongside the pharmacist, but with a wide-aperture lens, I would learn a tremendous amount about how the system of care works, and where it doesn’t work, and I would find ways to start contributing.
Then, as I became more of a leader and took ownership of different businesses, I always tried to choose the idea that was more future-facing, revolutionizing that journey of patient and data. I got to work on many important initiatives, but helping to move prescription electronically, versus by phone and fax, became the first scalable use case where I got involved in the creation of companies and large innovations. I think what we built at Surescripts was the first digital health unicorn.
Why am I a venture capitalist? On one hand, I’m not enamored with it: one should always be cautious of high-ego industries, but on the other hand, at the intense early stage, it’s a wonderful combination of ideas, teams, and helping with execution.
Further than that, I’m just a kid in a candy shop at Data Collective. Some of my strengths are additive across the portfolio, and I get to extend our industry leading computation expertise into a space that brings strategic advantage and value for the future of human health.
VN: What do you like best about being a VC?
SB: Every single day is a combination of hard judgments, new ideas, and walks alongside inspirational entrepreneurial teams – in a trusted environment. I’m quite lucky.
VN: What are your expectations for the digital healthcare industry in the near future?
SB: So far, digital health was mostly a failure for early-stage investors. Many have soured. But over the next 15 years, almost all care provision will be reinvented with compute, empathy and evidence, and now is the time to invest. So, we are bullish, and we want founders and co-investors to be more ambitious. I should say we are extremely bullish, but patient and careful about timing.
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