December 27: Today on the Community channel, it’s an Interview in Action live from HLTH ‘22 with Justin Norden, MD, Partner at GSR Ventures. What kinds of investments are health tech focused venture funds making in this current market?
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Welcome to this week Health Community. My name is Bill Russell. I'm a former CIO for a 16 hospital system and creator of this Week Health, A set of channels dedicated to keeping health IT staff current and engaged. Today we have an interview in action from the 2023 fall conferences of CHIME in San Antonio and HLTH in Las Vegas, and we want to thank our show sponsors who are. In our mission to develop the next generation of health leaders and they are Olive, Rubrik, Trellix, Medigate, and F5. Check them out at this weekhealth.com and 📍 here we go.
All right. Here we are, another interview in action from the Health 2022 conference in Vegas. And we are joined by Justin Norton, Dr. Justin Norton, with GSR Ventures. Tell us what is GSR Ventures. Perfect. Well thanks so much for having me. So, GSR Ventures, we're a health tech focused venture fund today, a little bit over three and a half billion dollars in your management, and we'll lead seed through series B investments and health technology.
We define health technology companies as companies trying to use new technologies, new tools to fundamentally change how we're delivering care. Shooting for two x, three x, five x, or even 10 x improvements over the status quo. Done everything from software for clinical trials, companies like medical to digital therapeutics, to asynchronous telemedicine platforms, to AI solutions in the hospital.
That's where we get it particularly excited. You're wearing the Stanford. Jersey here. So what's, what's your connection? I, I am proud alumni of the school and still, still keep a foot there. So actually teach a course on digital health for first year medical students, for business students at the school for engineering students.
One of the most popular electives in the, in, in digital health and really across the landscape. And so just understanding where the future is going. There's just incredible demand from early. So, Justin, help me to understand why this is an elective at Stanford Medicine. Shouldn't it be a required for, actually,
I had this conversation with Dr. Klasko. Okay. The next generation of, physicians mm-hmm. nurses, what? Mm-hmm. , they have to understand digital medicine. Yeah. So talk to me about the class. What's, what's actually in the class? Yeah. So the course. The digital future of healthcare and really goes over a whole survey starting from what is over the law of the landscape, and then diving into a few key areas, what is the future of telemedicine, wearable devices, big data analytics, mental health, et cetera, and bring in some of the leading industry experts from around the world to come in, teach with our medical students, and just give people a peak at what their future of practice might look like.
Because it's gonna be different as we're gonna have prescription digital. That doctors are gonna be, have to explain and understand to patients, to telemedicine encounters, to texting based encounters, et cetera. The future's gonna look very different in terms of why it's not a required course.
We could spend hours talking about the glacial transformation process of medical school curricula and the kind of many voices involved have been involved in a few of the transformations actually at Stanford. So it starts with an elective and you see where demand is, and then over time what are the skillsets and things that, for these future physicians, what, what technologies?
I talked to John Glasser. We were, we were just riffing on when I came into the industry, we, we'd tell everybody, you're gonna have a PC someday. And they'd look at us like, you're, you're nuts. And then the internet came around and we say, Hey, you're gonna be on the internet someday. They said, you're nuts then mobile phones.
We said, Hey, everybody's gonna have a mobile phone. They said, you're nuts. What's the technologies or the, the trends that we're seeing right now? If we talk about 'em right now, people will say, Hey, you're nuts. But we can see glimpses of this is really gonna have an impact on, on care, on medicine, on health.
So one of the things that would, maybe you wouldn't say I'm nuts for, but actually you know, some of the things we're starting to see now, and I'm biased, used to work on the Apple, apple health team, but if you asked a few years ago, say, are wearables gonna have an impact in healthcare, everyone. Everyone said these are a toy.
They solved the December problem of what? To get a loved one for the holidays. Well, physicians don't want all that data either. They don't yet and they're not ready for it. But it's coming. It's coming. When you have your car has sensors to tell you when you need a checkup, when you're low on gas, when something's different, all of these technologies are getting cheaper, easier, and we're building the algorithms to make it easier for both the patient and physician to do something actionable.
That's the piece we've been missing, but that's the piece that you see tons of companies. Starting to develop. And so we are gonna have much more continuous monitoring whether it's wearable devices, whether it's a smart toilet, a smart mirror, what you name it, that's coming. I think in the future of healthcare, I was, I was a little disappointed in the last round of Apple announcements.
O only because I, I, I, I expect it to be moving a little faster than it, it is moving. And I understand that the sensors we're constantly tweaking the sensors. What is the challenge to where my shirt doesn't have sensor? And, and my shoes don't have sensors. What, what's, what's slowing us down on?
Is it the cost? Is it the size of the sensors? Is it the types of sensors? Is it the FDA proc? I mean, what is all this thing? Yeah. So it's been many, many years since I'm been on the, on the HA healthcare team side nothing proprietary of this sort. Right. But I think one of the interesting things is what does aen, what does it really take for sensor to be ready for.
And Apple is usually the one where it won't be the first one to deploy something that's kind of half bakes. Apple cares incredibly about its brand, it's reputation. So when Apple decides to launch a sleep tracking feature, actually if you look at the data, it's probably best in market.
And so actually used to study, do studies with the old basis watch. This was a company that got bought by Intel. Ended up shutting it down because actually the, the watch overheated a few times for some patients, but they had everything from galvanic skin response to all these other tools, which.
Can find really interesting kind of physiologic parameters that we can use for prediction or understanding of disease. So these things will all come back. It takes time. You want to make sure there's a real use case. So it took time before saying, Hey, we're gonna put the ECG in the watch, we're gonna put temperature in the watch.
Because that really helps with period prediction and cycle tracking. And so all of these things will, will take time. But I would say it's not incremental. How many watches are deployed across people across the country. You know these, that's a huge change from where people thought it. Just a number of years ago.
So it'll take time, but, but it's going in the right direction. And it's interesting, that information to the physician, it's like, give me the insights, don't gimme the raw data. And and we have to, we, we have to take care of the liability aspect of it. They're like, look, I don't wanna be liable for this data.
That's like filtering in here. And I only look at the record when the person's coming in. Correct. Now, all of a sudden, yeah. So we have, we have a lot of things to address. GSR Ventures. Ventures, yes. Interesting. I want to talk to you a little bit. The space that we're in, we're seeing, oh, first of all, there's a lot of players here.
Absolutely. And I, I've talked to some and there's just a general feeling that we're going to see over the next year or two, three years. We're gonna see sort of a weaning out process because this is gonna be, this already is a little bit of a tight time. We're seeing people pull back, try to get longer runways and that.
what are you seeing and what are you telling the companies that you're partnered with at this point? Absolutely. So the funding landscape has changed. We went from a peak in 2021, which really realistically we won't see for many, many, many years to come. So the funding landscape has changed growing at all costs, which was probably the right strategy in 2021 has shifted.
It's at least a path towards profitability. Engine to turn that on, making sure our gross margin is a little more intact and just being growing more efficiently. So that's here to stay. We're seeing that across the, across the portfolio. With that said, there's still plenty of room, and actually we're pretty optimistic about the future of digital health and companies growing.
Yes. There'll be consolidation. Yes. There'll be some more m and a activity as companies struggle to grow into kind of the valuation they have and figure out what's happening. So that's why we're seeing some of the layoffs, some of the changes. But fundamentally, there are businesses that are growing well.
It's not like we've solved. I, I wish, I wish we had self healthcare. It's not like even digital health is still, despite what the conference may appear, is still a fraction of the care that's being delivered today. So there isn't a tremendous amount of room to grow into our 4 trillion healthcare market.
And so yes, there's a little bit of a speed bump in the road, but actually from us, and actually we surveyed almost 50 other leading digital health investors about what they think about the future in the future landscape. And actually most people think it'll be quite, Most people think it'll be between 15 to 20 billion for the next year.
People think valuations will come down call it 20%. But this really is still kind of a healthy landscape of lots of innovation and good technology happening. Where are, are the business models? Are we seeing B2C business models? Are we shying away from those and still looking at direct to employer payer kind of models?
Yeah, so I think if you look back to the early days right of, of digital health, Tried to be a direct to consumer, pivoted to employers as it was kind of really more sustainable. We saw a little bit of hymns and hers and Roman kind of start to change that where we said, Hey, can we get cheap capital?
Can we kind of throw that into customer acquisition and can we keep customers around long enough to kind of regroup that cost? What's changed in the current investing climate is we're really seeing that's difficult. The public market doesn't want to pay for it. These companies are paying, spending too much money acquiring patients, and so I think there's really been a.
From the investor side funding kind of B2C business model. So yes, there's gonna be still lots of businesses targeting employers, but I think to us actually, we're getting more excited about companies targeting payers. Payers have a little bit of a higher bar for evidence. They need to see more clear ROI that employers never really demanded.
Better clinical data that they're kind of seen the clinical improvement. But when you're in with a payer, you can really get deployed at scale across a larger patient population. And so we're super excited about companies trying to focus on that. If the payer wants you to, to white label, essentially they want to keep their brand front and center.
Is that something that you would look at somebody and go, it depends. Or is it like, no, that's a, that's a solid strategy. Depends on the company. It depends. It depends eventually. What is your strategy for growth? I think it's a, it is a solid strategy for a lot of companies where, yes, you get the distribution, you can kind of use some of the payer branding and marketing to kind of get out.
And if that's the channel that you can negotiate, then. Separately, then you have to deal with how do we want to build our brand? How do we want to get notice? How do we want to make sure we can talk about this relationship so we can sign on other payers as healthcare, want those reference customers and things like that.
So you gotta be thoughtful if you don't get to control, but I think white label is a solution that makes sense a lot of times in healthcare. 📍 📍 All right. We're gonna be doing webinars a little different this year. I've talked to you a little bit about this. We got together with our advisors. They told us, Hey, you gotta do 'em different. They're just not serving the community well. And we said, what do you want? They said, community generated topics. Great contributors. Not product driven. They want a more honest and open discussion. And they said what we want is not no on-demand webinars. We want once and done type webinars on a consistent date and time. So every first Thursday of the month. Our first one being January 5th first Thursday a month, one o'clock Eastern time. We are gonna be doing a webinar. You can count on it. Put it on your calendar every first Thursday of the month at one o'clock Eastern time. We're gonna do a webinar. The topics are gonna be generated by the community, and we would love to have you there. Our first one, January 5th, priorities for 2023. A CIO discussion with Integrated Delivery Networks, February 2nd, we're gonna come back with Academic Medical Center CIOs talking about their priorities. And then we're gonna hit some of the other great topics that they've given us for the year, and we would love to have you join us again this week, health.com, top right hand corner, it'll have our current webinar and our upcoming webinars. You can sign up right there. And if you miss it, it's not on demand anymore, so. We would love to have you there. Make sure somebody from your team is there taking notes and bringing stuff back to your staff. So we hope that this works out. Any feedback? Go ahead and send us a note. We would love to hear about it. 📍 📍
So last question, B2B to the provider space. I mean what, what are you seeing there and what's your coaching there? I think the sales cycles are so long.
It's, it's a, it's a down economy already on the provider side. I'm just curious what your thoughts are. Yeah, so it's funny actually in the course, you talk to people come in you're here trying to do healthcare innovation and oh, providers are the problem. And this blows the minds of kind of many early medical students getting to see that.
But yes physicians and provider behavior is hard to change. We still fund companies, we still look at providers, funded a company recently targeting providers. How do you have your message? You better be spot on if you're gonna get a health system C-suite and get all call it 12 different stakeholders to the table to sell a 7, 8 50 contract.
That's one of the challenges, isn't it? Yeah. There's so many stakeholders and so you better have a message. You better be touching a problem that they really, really care about. It can't be a new solution. You're kind of not gonna get through the door. It's gonna take too long for the sales cycle. You're not gonna have the squeeze.
But when you touch something like automation or. , which is really kind of item one, which had never healthcare always solved this by just hiring more people. Now all of a sudden in covid, that's not gonna happen. And you see many, many more providers leaving the workforce. So this problem, I think, is here to stay.
So when you're touching something like that, then you can cut through a little bit faster. Not that it's gonna be in the weeks, but you can cut down that sales cycle maybe from 18 months maybe to that six to 12 month range, and really provide value to these systems who. Efficiency gain who need kind of other kind of revenue streams. And so if you can touch those buckets, selling the health systems might be okay. Fantastic. Justin, I wanna thank you for your time. Will, thank you so much for 📍 having me.
Another great interview. I wanna thank everybody who spent time with us at the conferences. I love hearing from people on the front lines and it is Phenomen. That they have taken the time to share their wisdom and experience with the community, which is greatly appreciated. We also want to thank our channel sponsors one more time, who invest in our mission to develop the next generation of health leaders. They are Olive, Rubrik, 📍 Trellix, Medigate and F5. Thanks for listening. That's all for now.