Bad Blood, Good Urine, Great People!
Great venture capital investments tend to have a few essential elements. They always have remarkable founders, learn-it-alls and not know-it-alls. They tackle big or emerging markets, disrupting the big ones with a better digitally driven customer experience like Uber’s ride-sharing, or disruptive innovation such as the PC, and, in some cases, creating a new growing market like Checkpoint did 25 years ago in the Firewall market. They often have a big secular trend driving them from Moore’s law in the PC and Mobile computing domain to Urbanization in the case of WeWork and Micromobility. More often than not, they are in an area where the founder and investor has had previous success.
At Aleph, we tend to prioritize a few additional elements to the ones listed above. We prefer founders who are mission driven. In a world moving from Ben Graham’s value investing to a world driven by human capital and what I call “Values investing,”, mission is critical to recruiting the best talent and delighting customers. We also have a penchant for contrarian bets, founders and investments that go against the zeitgeist. We consider a fresh perspective on a market to be feature and not a bug. When we invested in Lemonade and sought a co-investor, many investors turned the Company down because Daniel and Shai had no experience in insurance and its complex web of problems and regulation. Exactly! That is why we invested in these mission driven entrepreneurs with a virgin perspective on insurance and its opportunity.
Until now, I have never invested in a digital health company, nor in the medical area. When we raised Aleph, we had no intention of investing in medical-related businesses. However, every once in a while, an entrepreneur comes along who you must partner with: Someone who is mission driven, who sees the market differently because he does not come from it, who is a learn-it-all and has deep values while bringing incredible customer value.
We are thrilled that Yonatan Adiri and Healthy.io were willing to take our investment and give us a seat at the table while He, Ron Zohar and their amazing team simultaneously improve patient outcomes and reduce the cost of healthcare around the globe. Yonatan has a mission driven background, first trying to solve transportation at Getaround and then serving as CTO for Israeli President Shimon Peres, a mission-driven man par excellence. While Yonatan did not have any prior experience in Digital Health, we were blown away by how much he and the team has learned and knows about reimbursement codes, robotics, lighting conditions, patients, behavioral nudges, and the FDA to get this diagnostic to as many people as possible and to ensure adherence by patients.
We have gotten to know Yonatan over the last bunch of years and I have been visiting with the Company and him very regularly, watching as a nascent idea to enable smartphones to perform clinical diagnoses became a reality. This software on the smartphone is already saving lives, discomfort and hundreds of millions of dollars. Yonatan and team bet that the smartphone’s cost curve and imaging capabilities would improve at a rate that, with just software developed by Healthy.io, you could diagnose multiple medical pathways in the comfort of a patient’s or consumer’s home. Today, well over 100,000 people in 4 countries have tested their urine at home, on their smartphone. Healthy.io has helped patients find critical kidney issues, before it cost them their lives and cost the medical system millions of dollars. In Israel, Healthy.io is easing the hassle pregnant women face in taking frequent urine tests and, in the UK, the same product and technology is helping people discover UTIs, even when the doctor’s office or lab is closed for the holidays. Step into Boots pharmacy and you can just a pick a kit off the shelf, pee in the cup, take a “selfie” and get your results. All of this is done with nothing more than a smartphone and a standard dipstick. Perhaps, more impressively, Healthy.io already received landmark FDA approval for the smartphone diagnostics.
When I began doing the final stages of due diligence before the investment, many of my friends in Silicon Valley suggested that investing in a startup diagnostics company that was promising to eliminate uncomfortable tests would meet resistance both in the medical and funding world. Theranos and Elizabeth Holmes, now the subject of the terrifying but amazing book “Bad Blood”, were very fresh on peoples’ (and especially investors’) minds. The ‘VC world’ they said, was running from diagnostic “breakthroughs” and would run the other way from Urine diagnostics as well.
As Howard Marks says, you need to be right and out of the consensus in order to make money. At least now we were out of the consensus, which increased our desire and resolve to invest. Competition would be scarce as funding ran the other way.
Even though we had never thought to invest in digital health or medical technology, Healthy.io ticked many of our boxes. It was using machine vision, had a unique big data sample of urine and unique, automated, smartphone testing methodologies. These have been core theses and tenets at Aleph since inception. Yonatan eschewed the use of any hardware, and sought to reduce regulatory risk as much as possible by using standard dipsticks. He thought hard about automation that took time and cost out of the process of bringing the product to market. Yonatan and the company told a unique story about “The Medical Selfie.” As much as I despise “Selfies”, I could get behind a medical selfie, which would use what Yonatan presciently called “Kardahsianomics” to make sure your pee does not kill you or bankrupt the health system.
Importantly, this was not an investment in a medical device, a classic single use, hardware-based, point solution. Healthy.io only creates software and data assets, it can build multiple software products on the secular trend driving a sustained improvement in the optics and processing power on the smartphone and the commensurate reduction in its cost. As a digitally native software “lab”, Healthy.io also benefits for the rapid iteration and improvement inherent in these platforms. That will also enable significantly faster improvement of patient outcomes and health.
It is too early to say whether Healthy.io will be a great venture investment. Time will tell. We can already tell you that we have been fortunate to partner with great people on a great mission. We firmly believe that urine is just the first application of the Healthy.io’s technology and the power of the smartphone to provide clinical-grade medical diagnosis that delivers better care at a lower cost. It is already reducing costs in one of the critical industries of our time, the health system whose costs Warren Buffet called a tapeworm.
Please join us in welcoming Healthy.io to the Aleph family. We are honored to partner with them and look forward to the great people of Healthy.io reversing the zeitgeist on bad blood by making sure people have good urine.