Fueling Investment Through Disruption — Full Transcript
As entrepreneurs begin to transform healthcare, venture capitalists continue to take an interest in the space
Leslie Bottorff, Managing Director of Healthcare at GE Ventures, sits down with Unity Stoakes to discuss being a VC in the healthcare sector and the exciting future of healthcare innovation.
Key takeaways from this episode of StartUp Health NOW can be found here.
[00:05] Unity Stoakes: Welcome to StartUp Health Now! The weekly webcast that celebrates the healthcare transformers and changemakers reimagining healthcare. My name is Unity Stokes and today we’re at Health 2.0 in Santa Clara, California having a conversation with Leslie Bottorff. Leslie is managing director of healthcare at GE Ventures. Today we’re going to be digging into what it’s like to be a vc in healthcare and discuss why we are at the end of the beginning. Stick around. It’s gonna be a great show.
[00:36] Intro Music
[1:15] Unity: Alright Leslie it’s great to be back with you. How are you?
[1:17] Leslie Bottorff: Great, great. A fun conference.
[1 :20] Unity: Yeah, we’re at Health 2.0 here in Santa Clara and I thought we start out, I’d love to learn more about your background. Maybe if you can share just how you got involved in healthcare and then how you got involved in venture.
[1:31] Leslie: Right. Well, you know I have been in healthcare my entire career. I majored in medical engineering in school at Purdue. And even during high school had this idea that I wanted to build the 6million dollar man. Which is a television show at the time.
[1:49] Unity: Yeah. I remember that.
[1:50] Leslie: And became interested in that. And so I went to Purdue. So, my career evolved from there I actually went into sales and marketing after that. But of technical products. I felt that my expertise was more in explaining technical processes than in designing them.
[2:09] Unity: So did you start in the corporate side of things when you graduated?
[2:12] Leslie: Well I actually was a sales person. General Electric at the time were hiring engineers to be salespeople and training us to sell all their cat scanners, cardiac cath labs, and all of their very sophisticated imaging equipment. And so I sold, I carried a bag for four years, and really loved it. It was a great job. And I am just very interested in the technology. So I left that for a couple years to go get an MBA because I was more interested in being on the marketing side than the sales side. And ended up coming out to Silicon Valley and working in different sales and marketing roles for a series of startup companies. So very early on in my career I catered to going with the startup companies and working with entrepreneurs. I went initially with a company called Nellcor which is the company that put pulse oximeters on the map. If you might recall, we took it public while I was there. I was in marketing. And then another company called Menlo Care that was a spin off Raychem a materials technology company that we sold to Johnson and Johnson. And then another one called Ventritex that was one of the early implantable defibrillator companies. And that was eventually, it went public, and eventually became St. Jude’s implantable defibrillator.
[3:31] Unity: So you were on the inside of all those organizations.
[3:34] Leslie: I was in various sales and marketing roles and basically working on the positioning of those products and the initial commercial launch of all of those company’s products. And, I love that. I got great experience in a lot of different types of companies and different backgrounds, different subsegments, disease states, and then ended up actually going back to a large company. I went to Medtronic as a VP of sales and marketing of the cardiac ablation division. But it was the startup company they had bought. And they needed somebody who had been in a startup company to come in and help them ramp up, get ready for their launch, and ramp up their product when it got ready. So I did that launch which was a startup within a very large corporation. And after we got that to where it was cash flow positive, Medtronic decided to meld that in with some other divisions. And I had done four startups essentially at that point. And been in the growth phases and the positioning of all of those. And, ended up talking with some friends of mine who were in the venture business. And, ended up going as a consultant to ONSET Ventures. A venture firm that does early stage medical device investing which is what I’ve been doing my whole life. So, and really like that a lot and ended up becoming at a general partner with ONSET Ventures.
[4:56] Unity: Was it a big shift to go from building companies to then the venture side and be on the other side in investing in new startups?
[5:06] Leslie: It was in that, when you’re an entrepreneur and on the operating side of the business you are the doer. You are the one that thinks of all the stuff and implements it. And as a venture capitalist we are not in that position. We are there to help the entrepreneurs and advise them. And so you’re an advisor in that way. But if you’re an early stage venture investor you can really get involved in supporting and helping the entrepreneurs in a lot of ways. And one of them is their network. Another is helping them sort of hash out strategy, being a sounding board for them. And so you can do a lot of things. So in that way there’s a lot of similarities, but it’s definitely a different role.
[5:50] Unity: So your now with the GE ventures Healthcare Group and leading that up. There’s an interesting trend going on with corporate venture arms investing, doing a lot of investing today. And also at the early stage. I’d love for you to maybe talk about GE ventures strategy and maybe the the health care strategy as well.
[6:14] Leslie: Right, ok. Well, so GE has been investing as a venture investor for a while now, a good number of years now. And prior to about 3 to 4 years ago though they were doing that half out of the division, the given operating division and half out of the GE Capital, GE capital private equity group. And that became difficult for two different entities to really quickly prosecute the investments and therefore it to really be able to be as involved as they’d like to. And so the leadership of GE Jeff Immelt and Beth Comstock decided, you know, that’s not really working for what we want. Because what GE wants out of this is, even though we’re a very large successful company we are constantly needing to reinvent ourselves and to bring innovation and people who are innovators into, either into the company or into a position that we could, we could partner with them, we can learn from them, and we can have a synergy together. And the days are gone I think when one company has to own the end to end solution. There are you know, more and more what we see in healthcare certainly, and even in some other verticals of GE is it, that you need to deliver an overall solution, an overall product solution to the customers rather than just “here’s my my widget”. One way or another. And so, we can’t do that by ourselves. We need to be figuring out innovative ways to partner with startup companies that are more agile and can move quicker than a large company and make it a win-win for everybody. And so that’s really what GE ventures is about.
[8:07] Unity: And I think it’s it’s really interesting that there’s initiatives to focus with early-stage startups. Which is pretty unique. I think according to the StartUp Health Insights, GE Ventures is now one of the most active if not the most active this year for corporate venture in terms of health care at the early stage. What is the the thinking there? Why is it important to also focus, even has a large venture group and large corporation, to be focusing at the earliest stages where sometimes the startups don’t even know their business model yet or they’re just figuring out what they’re doing?
[8:47] Leslie: Well, and we are partnered with StartUp Health for that very reason. That we really need to be involved in that process because the fact is that it in our vertical, certainly in healthcare, the entire healthcare system is being disrupted. And that’s in the United States and it’s also happening globally. And so that’s no doubt going to disrupt a lot of the the current players business over time and also provide incredible opportunity. And one of the things that I’ve learned in the venture business is whenever there is disruption there is opportunity. And we want to be on the front end to help entrepreneurships shape how that happens, and you know and partner with them to make it happen. And we want to be a part of that whole process so what we need to see, you know the quote from Wayne Gretzky was “I don’t need to see where the puck is I need to see where it’s going”. We need to see where where the new business models and the new technology plays are going and we need to be a part of it and figure out how we can benefit from with our business by helping these entrepreneurs with their business.
[9:55] Unity: One of the questions I think a lot of startups often ask is, should we partner with the, with the corporate partner of corporate venture, and what are some of the benefits of, now the capital itself has become such a commodity, what are some of the benefits of really partnering with an organization like GE Ventures if you’re a start up today?
[10:18] Leslie: Yes. And I’ve been in the venture business for over 17 years now and it always was that you don’t really take the corporates right away. But I think that’s looking at it from a little bit different angle than what, certainly what GE Ventures is doing. It used to be that the corporates would only invest in things they wanted to buy in one to three years. And they bought you or not, and it could taint you if they didn’t buy you. But it was very much an extension of business development. And so the idea that GE Ventures has is that there might be some of that, we might invest in some companies that we end up buying. Certainly there’s optionality. But that will be a small percentage of the overall picture. A Lot of these other companies, we will end up partnering with in one way or another and so it’s important to us to be able to get in on the earlier stages of how they’re developing their business models so that we can in fact do that. And we can help them bring it forward we can help them scale. We’re in 170 countries, there’s no better company out there at scaling business than GE. And so, we feel like that it’s important, we’ll be investing across all stages but particularly to keep our hand and working with these entrepreneurs on the early stage so we can help, you know, make some of those things happen and give them options. And so, therefore, and we’re open to investing with other vc’s and also with other corporates. We’re okay with that.
[11:47] Unity: So if you, if you invest in a company, it’s not like they couldn’t go get a customer that might be in a similar line of business as you. What are the rules of engagement on something like that?
[12:00] Leslie: Right
[12:01] Unity: Or is it a case by case basis?
[12:02] Leslie: No, I mean usually we don’t have any ties at all. There might be, if they had a tie to GE it would be with the business unit, not with the ventures people. And that would be, you know, that company’s choice to do that. And our business unit’s choice. So we don’t require any particular ties to invest in, you know, to invest from GE Ventures. And so they are free to do, you know, to take other investors. And so that should not be a constraint for working with GE.
[12:36] Unity: Yep. One of the things, it’s been really great to see GE Ventures grow over the last few years and really establish such a great presence on the West Coast and really around the world. What are some of the innovations that you are looking for today that you care about today? Specifically on the health care side of things?
[12:59] Leslie: Well, we think that this whole area of digital health is just tremendously exciting. And there are going to be a lot of good companies that come out of that and a lot of exciting things for how healthcare is, the direction of healthcare and how it’s going to be deployed. One of the areas we think is a lot of activity right now but has a lot of ways to go, is virtual health. And when we say virtual health, that could be a lot of different types of modalities and ways of delivering care. It’s not just telemedicine. It’s not just the old fashioned, you know, on the phone, we’re gonna have a doctor talk to a patient, that’s not it. It’s, that could be part of it, but it’s using the entire breadth of what’s available to us on the internet and data analytics and you know, many other techniques. Patient engagement techniques, behavioral techniques, to affect the best solution in the end. And we just think there is a lot of opportunity there for innovation and better care models. Another area that we are interested in is, would be, taking the middle man, let’s call it that, out of a lot of the administrative things that have to happen with healthcare and a lot of the logistics that have to happen. There’s a lot of money spent on that.
[14:27] Unity: And that’s what the Uber’s of the world have done so well. In other, you know, for transportation, for example.
[14:33] Leslie: Exactly. Exactly. And that includes everything from payments and risk coding, and how you even get paid and how the transaction happens, all the way to many clinical processes. And referral patterns, and just every aspect of healthcare. And so we think that there’s tremendous potential there as well. We think there’s great potential in analytics. And one thing I would say about analytics is we’ve had a tremendous amount of entrepreneurs come to us just in the last couple of years and say, you know here, I’ve got these data scientists here in Silicon Valley and we’re gonna tell you, you know, everything about who’s gonna live or die of cancer. And, it’s like, what’s your medical backing in terms of who you have working with you, your clinical data? And it’s like, “Oh, my God, we don’t have any clinical data” or anything like that. And that’s not a model at least that GE is gonna be investing in. I mean, because that’s not a model I think that flies with the healthcare business as a — not as a wellness platform, but as a we’re gonna deliver care to patients who need it. The chronic diseases and that kind of thing. I mean what we’re looking for are people who have gone and gotten, used their analytics to give new insights. Give new information about a particular clinical situation, or particular diagnosis, or whatever it is. And I’ll say personal medicine, but that often times, you know a lot of people think, that’s just genomics. And it’s not just genomics. It’s every piece of information that is about that patient that can be, give a useful insight. And so, we’re really interested in companies that are doing that and that are following up with clinical data on their analytics, or their decision support tool, and we just think that there’s huge potential for that. We have a number of companies that are pursuing that area.
[16:36] Unity: Are you excited about the pace of innovation that you’re seeing? Having seen so many different things in healthcare over the years are you surprised by how fast things are moving, say with digital health, precision medicine you mentioned, virtual health as you talked about, is it getting to where it needs to be or are we just at the earliest of stages and we can’t even imagine where it’s going to go? What’s your view on maybe where it’s going?
[17:08] Leslie: Oh, I think it’s the, I would call it like Churchill, I would call it the end of the beginning. [laughs]. And not the beginning of the end, the end of the beginning. I think that there’s a huge amounts of things that are you know, going to evolve out of this for changing the way we deliver health care. And there’s a lot of activity right now. We made a great start. But there’s a long way to go with it. I think that the pace is fantastic, but any of these things which is great are things that are not physical. You don’t have to prove out a physical, clinical result over
[17:48] Unity: And some of it’s the business models, where the innovations’ coming from.
[17:50] Leslie: Exactly. A lot of it’s the business model. It can make a big difference in how a patient’s treated, how efficacious it is, and how much it costs. And cost is really a problem in our system today. And so, it doesn’t surprise me that that can go faster. But in the end of the day, even companies who are doing decision support and that kind of thing still need to back what their doing with some data. And so, what you’re seeing in the digital health area is that the consumer plays can come forward the quickest.
[18:24] Unity: Like the Fitbits, where
[18:25] Leslie: The Fitbits. Where they don’t have [crosstalk]
[18:26] Unity: They go public in a few years.
[18:28] Leslie: Yeah. It’s a consumer appeal. And it’s got it’s own challenges. But never the less, it can go faster. Because it doesn’t have to have interoperability. It doesn’t have to worry about reimbursement. It’s a self pay model. So it doesn’t have some of the things that are harder about really delivering medical care to people who have chronic diseases. Those are gonna take, those models will take a bit longer. The other ones that can happen quickly and you see a lot of this, are the ones that are about the operations of healthcare systems itself. And that’s not so much clinical. It’s more, you need to go get the economic data of how does this system work, and save the insurer’s money. And that’s an important proof point but it’s different than a clinical trial. And then, but I think you’ll also see coming forward all these things that make a difference in actual clinical practice of medicine and that will take longer. It’s gotta go through, you know, more regulatory scrutiny, more clinical information and trials, more economic scrutiny and reimbursement. But it’s tremendously exciting. And that’s moving fast also.
[19:32] Unity: So, for an organization such as yours that has these very large, important businesses in healthcare and there’s these new threats of destructors, or innovators may be coming in that could displace some of those legacy businesses or established businesses, how does an organization like yours think about that? Is it, is there an opportunity to own or invest in those new emerging ones, or try to sort of maintain the success of the current business as long as possible? Is this innovator’s dilemma strategy?
[20:17] Leslie: Yeah. Well, we certainly want to maintain our businesses as long as possible but it’s a losing strategy for us or any other big company to say, ‘Oh, you know, I’ll just try to keep those guys down and it won’t happen’. If it’s a better way to serve the customer and to deliver the care in a cheaper way it’s gonna, it’s gonna happen. And so, we would rather be a part of you know, how can that play in? I mean we would rather be a part of disrupting ourselves than somebody else do it for us? I guess that’s the bottom line. And so that’s why, you know, we’re working with these startup companies and trying to figure out, you know, we can do it, if we can do it better, let’s figure out what it is. And how we do it. Because it’s just a loser strategy just to say I’m gonna try to keep everyone else down and not do anything different. I think that that’s not gonna work for anybody.
[21:10] Unity: You guys have been very progressive I think with focusing on external innovation and partnering and collaborating on external innovation. What would your advice be maybe to other large organizations. Maybe even in other industries or parts of health or health care, maybe they’re a consumer company. In terms of that strategy of going very early and focusing externally. What would your advice to maybe other large companies. Because it can be challenging I think for a large organization and smaller organizations to pair up effectively.
[21:49] Leslie: Right. Right. I mean, and that’s one of the reasons that we have a venture business that this is a, as venture capitalists and a venture investor we can work with those companies more effectively without getting in their way and slowing them down. Because we don’t want to do that. And that’s hard for a large company that can’t move on a dime. And there are many constituencies, many regulatory things they need to worry about. They’re focused on their own business at the moment. So, this is organizationally, a way that we can work with these companies and have that happen over time. So, to other corporations, I would say one way or another you’re going to need to embrace some of these changes that are happening to the industry. And so, each corporation is going to have to figure out how can we do that, what works for us without disrupting you know, our current business. And you know making that slow down, or without slowing down the entrepreneurs. So, it’s not easy. It’s not easy for a very large organization to work with some, an organization that’s really different from them and their needs are really different and their speed is different.
[23:01] Unity: I think that’s one of the reasons our partnerships been so effective over the last few years is GE brings the ability to really help scale and we’re very used to nurturing these companies at the very earliest stages and it just seems to be a perfect marriage of bringing those two forces together. So it’s been great, and we’re looking forward to working on this next group of companies around payment solutions and virtual health. I think we’re going to start to see some really interesting ideas and companies emerge from that collaboration.
[23:36] Leslie: And we’re very excited about it also. We’ve had a great partnership with StartUp Health and you guys have done a great job with the companies that we worked with you on so far and that’s what made us want to do some more. And we think that we bring our own unique set of skill sets to the party that are different from yours and they’re very complimentary. And so we really think that we can help these companies in a big way. And it won’t happen on the first day. Things have to evolve over time but we think we can help them and we think they’ll help us so that’s why we’re doing this.
[24:11] Unity: Well fantastic. Well thank you so much for your time and your collaboration partnership it’s wonderful to to work with you on transforming health care. Thank you so much.
[24:21] Leslie: Wonderful to be here.
[24:22] Unity: Thank you.