Why I Invest in Pediatrics

Despite the “small market”, low disease burden, and chronically runny noses, parents are leading the adoption of tech that will eventually redefine healthcare for everyone.

Many rational investors think it’s a waste of time to invest in pediatric health. The segment looks totally uninteresting. Sure, there are 20 million kids under 5 in the US — but they are generally pretty healthy. They account for only a tiny fraction of total healthcare spend. On top of that, it takes decades to see payback on investments in preventative care and good habit formation for kids. Even single-payer systems have trouble investing with such long time horizons.

But I see something different. I see parents (myself included!) dragging their feet on their own preventative measures, while behaving completely differently for their kids. It’s present bias — the tendency to prioritize immediate payoffs over long-term ones. Adults nearsightedly postpone their own care.

But they act differently when their kids’ health is at stake. There’s no present bias.

On behalf of their kids, parents are proactive and exhibit true agency. Many parents doggedly push beyond required annual well-checks to find solutions for their kids. They are the quarterbacks of their kids’ health. They do their own research and seek out expert opinions, including non-consensus ones. When it comes to their kids, parents are truly model consumers of healthcare.

Through the lens of many traditional healthcare business models — capturing cost savings from insurance companies, large employers, and providers operating under value-based care contracts — pediatrics is definitely uninteresting. There are simply too few people and they are not sick enough to generate the level of cost and potential for savings that move the needle in these models. But US healthcare is slowly but surely moving toward a new equilibrium where patients demonstrate true agency over their care — actively preventing disease and seeking treatment when it arises.

Parents are at the leading edge of adoption of the tools and products that will eventually redefine healthcare for everyone. Here are some examples:

• Genetic testing: Noninvasive prenatal screening and carrier screening are two of the few segments where genetic testing is truly a scaled solution. It informs healthcare decision-making and provides peace of mind during pregnancy. This owes in part to rapidly changing clinical guidelines and favorable insurance reimbursement, but as I wrote several years ago, when it comes to their kids, parents want to know what’s going on.
• Tracking (and changing) behavior: More and more parents and caregivers routinely track their children’s behavior patterns and intervene based on the data. Cribs are fitted with sensors and cameras to continuously monitor vitals and behavioral trends. Parents use apps like Huckleberry (a longtime Spero portfolio company) to track activities from sleep to eating, toileting, and more. This data enables totally personalized recommendations to optimize behavior, which parents increasingly rely on to improve their children’s habits and their own daily lives.
• Personal health record-keeping: While personal health record apps have failed many times over, parents collect their kids’ trendlines and health histories. They’re using a combination of printouts, Google sheets, mandatory vaccine records, school health forms, and the sheer force of memory. I don’t think I’m the only one who still texts my mom to confirm that it’s penicillin that I’m supposed to avoid, having had a mild reaction to it during a surgery 30+ years ago — still vivid in her memory, non-existent in mine.
• Experimenting with new providers: There is an enormous gap between what pediatricians routinely address and what parents need day-to-day. Some of these concerns are behavioral, related to managing tantrums, sleep, or eating. Others are very clinical, like allergies. Pediatricians’ advice for these families is often unsatisfactory. Why do some kids develop allergies and others don’t? Why do some kids tantrum inconsolably and others don’t? Parents are turning to new providers, from integrative medicine to behavioral specialists, for these answers. They incorporate data like behavioral assessments and microbiome testing. They help parents better understand their children’s conditions, providing answers and relief. Our newest investment, Tiny Health, is doing this for thousands of families.
• Community engagement: Even if they don’t participate in any other online communities, parents do get involved in parenting and child health-related groups online. They’re more likely to discuss their kids’ problems than their own. They compare notes on what’s normal, and learn what solutions work for their friends, neighbors, and anonymous online peers. Parental community engagement is unique because parents are happy to share hard-won lessons from earlier phases of their kids’ development and, in exchange, learn what lies ahead for their families.

If you’re building in this space, email me ~ sara@spero.vc