- Entrepreneurs with a background in tech are now looking at healthcare as the next area to be disrupted.
- But GV’s David Schenkein and Krishna Yeshwant have tried to avoid backing companies with founders who have a background in tech alone.
- Instead, the team will send the entrepreneurs out on crash courses to learn more about the industry. Yeshwant said it takes about six months to fully understand that the healthcare industry is both “screwed up” and has “perverse” incentives.
- Very few entrepreneurs make it to that point, he said.
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For those with a tech background looking to tackle the $3.5 trillion healthcare industry, there’s a lot to learn.
VCs David Schenkein and Krishna Yeshwant have seen it play out before. Schenkein and Yeshwant are both physicians and venture capitalists who co-lead the life science investment team at GV, formerly Google Ventures. GV oversees more than $4.5 billion invested in 300 companies.
Here’s how it goes: An entrepreneur who’s done a stint at a big tech company in Silicon Valley decides to take a crack at healthcare after getting a glimpse of how complicated the system can be. That often happens without the would-be entrepreneur having much work experience in healthcare.
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To help tech employees looking to make the jump into healthcare, Yeshwant said that GV set up a program where Google employees and others can go in and do four one-week rotations for a crash course in the healthcare industry. The team will also set up mini-residencies that embed the tech entrepreneurs into established companies in the industry.
Getting up to speed in healthcare
Getting immersed in the healthcare industry for the first time can teach some brutal lessons.
“Most of the time, when we find tech people who are interested in healthcare, they spend on the order of three months before they realize how screwed up it is,” Yeshwant said. He said about half of the people trying to build healthcare companies drop out at that point.
“Then six months in, they realize it’s not just screwed up, it’s perverse: You make more money by keeping a patient sicker,” Yeshwant said, alluding to the way healthcare gets paid for based on how much care is provided to a patient.
At that point, the thought crosses the tech entrepreneur’s mind that it might be easier to do another social or mobile venture, he said.
“Then a very small number of people continue to push through that,” Yeshwant said.
A successful transition from tech to healthcare
An example of that, Yeshwant said, was the founding team at Flatiron Health.
Co-founders Nat Turner and Zach Weinberg sold their advertising technology startup to Google in 2010 for more than $70 million. A year into life at Google, the two started thinking about building a company that would eventually become Flatiron in 2012.
During a process that took about 18 months, Turner and Weinberg would bounce ideas off of the GV team to figure out what area of healthcare they might want to tackle, Yeshwant said.
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As they came up with ideas, Yeshwant would send them out for some real-world experience. For instance, when Turner and Weinberg were considering working in the laboratory space, the GV team suggested they meet with companies like Quest Diagnostics and LabCorp. Turner and Weinberg went out and did just that.
The two also spent time traveling around to about 50 cancer centers around the country, Turner told Business Insider in 2016.
Eventually, the team built out Flatiron Health, a New York-based healthcare-technology company that collects clinical data from cancer patients, such as what medications they’ve taken and how they have responded. GV led the company’s series A and series B rounds.
The company sold for $1.9 billion to the Swiss pharma giant Roche in 2018.
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