The Inquisitive VC: Nikita Singareddy — RRE Ventures
Nikita is an Investor at RRE Ventures, focusing on enterprise tools, healthcare IT, crypto, and all things consumer. Prior to RRE, she worked on data operations and member strategy at Oscar Health.
We talk about the biggest trends in healthcare, what healthcare investors need to dig into in due diligence, incentive misalignments and more!
NA: Hi Nikita, I appreciate you taking the time out to talk. I’d like to just start with your background and how you broke into the world of venture capital?
NS: Thanks for having me. I guess one easy way to start to frame this is I worked at Oscar Health. I didn’t even know if I was looking for health care necessarily. I knew I wanted to work at a growth-stage startup because I was fresh out of college and was really looking for something that had mentorship and the ability to grow but with a little bit of structure.
It was great that there are a lot of startups in New York now and Oscar was really well placed in terms of the type of role I was looking for, which is data-oriented, but had a lot of ability to affect PnL within a small organization within a larger organization.
We’ve got a lot of freedom to own things and as well as collaborate with different teams, on all things related to population health. So, I think of population health as anything that is really focused on improving patient experience, or the term is really enrolling when you’re an insurance company so enrolling experience and enrolling outcomes in a way that materially improves the cost.
I did a lot of stuff related to regulatory, which has always been a key interest of mine and how I like to think about healthcare investing. I was doing a lot of that and had a network of other operators at healthcare companies because we were all doing a lot of the same things. I also started my own blog, interviewing women in venture capital because it was helpful for me to understand what actually is the venture job.
Then from there, I had built up a relationship over some time with people who worked at RRE. When the time was right, when I was ready to leave Oscar, it worked out that there was a role that was well suited for me at the junior level at RRE.
NA: Yeah, I feel like the blog would definitely help, especially for getting an understanding of what venture capital is. I want to talk a little about health care and what are some of the biggest trends that you have noticed recently?
NS: There are a bunch. Well, I’ll go high level and I know a lot of this is contextualized to the American experience, so take that for what it is.
- General Cost of Care
I think one big orientation is the general cost of care, whether that is the number of people that are underinsured, the number of people on high deductible plans, the sheer cost of things and health care being expensive. That is taking health care, particularly providers facing health care out of reach for a lot of people. That’s one strong trend that we just continue to see.
Related to that is the amount that the individual is actually responsible for. So, not taking into account the act, what insurance is paying for what the employer is paying for. An individual is now paying about 30% of their health care costs, versus 2007–2008, even before the Affordable Care Act, it was only close to like 7 or 8% for the average person.
So even in a very short period of time things have happened that have created and ballooned the amount that people are spending. A lot of it has to do with high deductible health insurance plans. About 50% of people who have insurance have a plan like that, but that’s just too much.
2. Preventative Care Focused Diagnostics
Second, we’ve seen and we’ll always see this in healthcare, but anytime research comes out, we see a Cambrian explosion of companies being built. I think it’s been a very incredible time and preventative care focused diagnostics. Why that’s important is because now you don’t actually have to wait for you to go into an encounter with a physician. We could be getting to the point where you can use urology to be able to identify if you have certain hormones, which may indicate that Oh, actually, I might have an indicator of having kidney disease or something renal related.
I think you can do that for a couple of different types of disease groups, whether it’s in endo, there are things that are doing this in pulmonary, things are doing this for inflammatory bowel disease, etc. And we’re also seeing it in cancer as it relates to even just genetic tests as well as blood biopsies, and some other forms of early-stage identification.
Some of that is happening, it’s a little bit more expensive, but some of it is happening in a way that’s really cheap and really rapid. I think looking at the Abbott COVID test that’s about $5 is a really good example of this, but I believe that we’re going to be able to see that for a whole host of different disease groups and that’s incredible.
A really strong thesis I have is that diagnostics are going to become the first point of care actually, for a lot of people. It used to be seeing the doctor, now it’s actually I got this result that’s accurate, that tells me what disease I have or what clinical complication I have, or it tells me what I may be at risk for. Now it’s cheaper, it’s more affordable, it’s more accurate and it’s rapid, and something I can do frequently.
3. Health in the home
Thirdly, and I think this is again connected to the diagnostic space. Although this isn’t directly just the identification of something maybe for like the first time is health in the home.
We have like these diagnostic things that you can do at home. So there’s like companies like Tytocare, where you can literally have a video chat with a doctor while you’re checking your blood pressure or checking your temperature and you’re having a video conversation with them
Home health is going to help people monitor themselves in a longitudinal fashion, to be able to in the comfort of their home, to take away stress off of hospital resources while allowing for hospital-level care in the home. If that’s necessary, about a third of all care, and there’s some research around this could be done in the home.
I think that’s a really strong trend of what we’re already seeing now with remote patient monitoring, with home health aides, and all the agencies being built up around that with care coordination. So instead of being even in an outpatient facility, like an ambulatory surgery centre, you’re actually in your house.
4. General Standardization
The fourth thing that I think is a really interesting trend is general standardization, which is really important for technology. There have to be standards for either how you pass different types of healthcare data.
A great example of this is the US recently passed some rules around interoperability, so how an Electronic Health Record system can read, write, receive information from different data sources, whether those are vendors or different providers, etc. They created a standard around that called FHIR.
5. Picks & Shovels for Revenue Expansion
Another trend is all the picks and shovels that are related to expanding your revenue, revenue optimization as a healthcare organization. So, if you’re a digital health company, there are a whole bunch of tools that you need. There are certain things that are your competitive advantage that you should own that end to end. There are other things where it just makes sense to be a more profitable business, that you just outsource it.
A lot of those different types of tools are there. I think the most basic one that people know is, video conferencing now that’s available for a lot of people, they can do asynchronous telemedicine, etc. But there are a whole host of other things that need to be involved in the picks and shovels.
How do you do prior authorization? What if I need to get a lab test? How do I actually pass that information from one source to another source? If I want to provide this information from this telemedicine encounter into a larger electronic health record at a hospital what’s the best way to do that and how does it actually receive my information? What kinds of information should I be collecting earlier?
So, I’m pretty excited about the future of the picks and shovels and virtual medicine and digital health.
NA: That is extremely insightful, I understand that most of it would be US-focused, but that’s still really helpful for New Zealand founders since a major focus if you’re building a healthcare company is entering the US market. I saw that you have a new blog that explains incentive misalignment in health care. Could you give a brief overview of what exactly, incentive misalignments in health care are?
NS: Yeah. I started the blog, because, exactly as you said, there’s a lot of weird and wacky things that happen in US healthcare in particular and some of it doesn’t make sense. It’s like, why is this thing the way it is? A lot of times, it’s because there’s that principal-agent problem and because of that, things that we think should follow, don’t follow and it produces a lot of different inefficiencies.
So I wanted to write the blog around why it sometimes seems like health insurance is incentivized a different way than doctors and hospital systems, or incentivized a different way from pharmaceutical companies or incentivized different ways from clinical research organizations, etc.
Because when those players of the ecosystem work together and don’t work together, that’s what creates a lot of problems. So, my goal is to highlight those strange things. A lot of it I have currently oriented around regulations. That’s where a lot of my focus has been.
I did a piece very early on about Stark Law. So that’s like a kickback law and why certain doctors can’t refer to things that they own or have a stake in, to regulations that are coming out by CMS, they’ll put out like a 500-page document, and somebody has to go through and read different rules and get a good understanding of them and identify what’s included and what’s excluded. Why are those things excluded if they are is another element to it.
So that’s really what the initial goal is. I’ve sort of expanded it and maybe I’ll revise the goal of The Waiting Room. I’m writing a piece about how certain healthcare founders acquired their first customers and in that it’s a little less about misalignments. But it has a similar objective, in that it is really hard to require first customers in healthcare.
Nobody really tells you how to do it. There’s no real roadmap. You are fighting against incumbents and inertia. So what do you do? What are the strategies that you take? You can rely on a Rolodex and a lot of people do. So, a list of people that they’ve worked with before, or they have connections to, but that only goes so far you don’t know everyone in the world or everyone in healthcare.
So what approaches did you take to be hacky and scale your business with those customers, a little bit of not exactly misalignments, but trying to make healthcare more understandable and accessible. Even just from a content perspective and information perspective.
NA: I can see how that would definitely add value. When It comes to due diligence when you’re looking into some of these healthcare companies to invest in, what are some crucial areas that healthcare investors really need to be digging into?
NA: Oh, this is a good question. So, especially if you’re looking at some sort of diagnostics companies or anything like that, I think doing some of your scientific diligence is really important. I particularly think that if you’re a healthcare team, you should have a network of people who you are hopefully connected to. So, I recommend that anyone who’s investing in healthcare has a list of pharmaceutical and Life Sciences related contacts to do DD with, the same in the health system world, the same in Health IT. Hopefully, you have doctors that you can talk to as well as clinical research and clinical trial-related organizations.
Other than that, I think knowing some of the nuances of healthcare is a little bit important. But the reason I don’t know if it’s completely necessary if you’re a good investor, I think you’ll do the work to understand something if it doesn’t click.
I think diligence for people can look a little bit different as well if they’re early-stage versus later stage. The later stage is just much more core in the financials. At the seed and series A it’s, of course, important and we want to get a really strong sense of what your financial model looks like, what your sales pipeline looks like, why you’re raising, who the team is?
I want to get a good sense of who is able to do references for you and what they say that’s really important. I look for certain qualities and characteristics in the founding team, whether that’s, Oh, they’ve been repeat founders before so they know how to deal with adversity and they’re really good at working around that, to they have really interesting critical domain expertise, or they’re extremely good at sales and that’s always going to come in handy.
Their ability to galvanize people around a mission is extremely helpful. Really being maniacally focused or pedantically focused on their vision and not getting distracted because very few companies fail from not having enough money from starving most of them fail from taking in too much capital and not knowing what to do with it getting a little bit sidetracked and not nailing product-market fit as soon as they can.
So it’s a whole host of things in the alchemy that you can use to direct your diligence, but yeah everyone does it differently.
NA: That’s a great explanation. My final question is what’s the latest, publicly announced investment you’ve made and why did you make it?
NS: So, we’ve invested in a company recently called Clearstep Health. We’re super excited about it. It was a very scrappy team out of Chicago with Adeel as the co-founder and CEO. I was really excited about it because of the way that they’re thinking about the consumerized healthcare experience, but in a way that really benefits healthcare organizations as well.
That’s on the top of the funnel aspect and then how they actually organize and route and triage within their own capabilities. So, if you make it really easy for healthcare organizations to have an Intercom for healthcare and making it no code and stuff that you can drag around and be customized to a location.
Let’s say that your organization has 20 different locations, can you customize that flow to look a little bit different on different websites or different apps because it’s localized. That’s a really great way to think about the consumerized healthcare experience.
So we’re really excited to make that investment. There are a couple of different companies that people might consider to be a competitor of Clearstep today, but I am not somebody who would ever shy away from making an investment because there are competitors, particularly when founders have a really strong vision and strong execution, and those are the kinds of the people I get really excited about.
NA: Yeah, for sure catering to both the organizations and patients is a good way to go. Thanks so much for chatting to me Nikita. I had a great time.
NS: Thank you for reaching out and having me on Nawaz!
