Nancy Brown, Oak HC/FT, on healthcare investing during and post COVID-19

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In this episode of the Pulse Podcast, we interview Nancy Brown, General Partner at Oak HC/FT, a growth venture capital firm where she focuses on growth equity and early-stage venture opportunities in Healthcare. Oak HC/FT’s latest fund raised $800M in 2019, and currently has $1.9B under management.

Nancy Brown, General Partner at Oak HC/FT

As a General Partner at Oak HC/FT, Nancy serves on the board of Maven, Cricket Health, Axial Healthcare, FireFly Health and Unite Us (a few of which are featured on the Pulse Podcast!). She is also involved both in the entrepreneurial ecosystem as a Board Member of the New England Venture Capital Association and in the Boston healthcare scene as a Board Member for the Boston’s Children Hospital and for MassChallenge HealthTech.

We cover Oak HC/FT’s investment philosophy, how investing and the pace of healthcare innovation has changed since COVID-19, the inspirational leadership their portfolio companies has shown, the importance of humility and mentorship, and as a bonus, we find out Nancy’s new quarantine cooking project.

Nancy Brown, Oak HC/FT, recording

Start — 7:00: From exotic animal reproduction to healthcare entrepreneur

• “What did you want to be when you grew up?”: Nancy draws us in immediately with her unique answer: exotic animal reproductive physiology. While Nancy was in high school, there was a lot of discussion about the Endangered Species Act, and the destruction of species. She was so inspired that she decided early on to dedicate her career to studying and learning about reproducing animals near extinction. She carried this interest through college, with a Bachelors in Zoology!
• Healthcare operator: Her interest in science spurred the beginning of a career in healthcare, especially in new healthcare delivery system models. She began her career at Harvard Community Health Plan, a staff model HMO (which essentially means there is one institution responsible for all of health care delivery and healthcare insurance), where she held senior management roles for 8 years. At Harvard Community Health Plan, she began her journey in redesigning clinical processes.
• Co-founding and selling Abaton.com, the first web-based EMR: In the mid-90s, EPIC was a scheduling system, Cerner was a lab system and the internet was not used at home. Nancy pivoted from working at nonprofit to trying to figure out how to bring this new technology to point of service. Abaton.com, based in Minnesota, was a provider of internet-based clinical solutions for the ambulatory market. In 18 months, Abaton.com was acquired by McKesson in 1999. Nancy’s role shifted from a startup of 50 employees to the largest healthcare company in the world at the time and she became the head of marketing for the healthcare IT division. She learned a lot about marketing and growth at McKesson and brought those lessons into her entrepreneurial world.

7:00–12:00: From healthcare operator to health investor

• Building clinical processes at Athenahealth: For Nancy, her heart was still in early stage companies, so she left McKesson to become the SVP of Corporate Development and Clinical Service for Athenahealth, one of the first tech-enabled service companies. During her six years at Athena Health, she experienced both three years before and after the company went public. She shared the unpredictability of those formative years. She also shares that the dots became to form for her in healthcare investing as the lead investor for Athenahealth at the time was Annie Lamont, who is currently the Managing Director and Founder of Oak HC/FT). Today Athena Health is one of the best EMR systems that healthcare companies can partner with today and works with hundreds of thousands of providers.
• Her second acquisition: After she left Athenahealth, Nancy was Chief Growth Officer at MedVentive, an early stage company focused on providing analytic tools for providers who were taking on risk contracts and clients. MedVenture was also acquired by McKesson and Nancy returned to become the Vice President of Strategy and Business Development for McKesson Technology Solutions. At McKesson, she began to think about venture, as she helped establish a new team focused on a strategic venture fund.
• Serendipitous timing: When Annie Lamont asked Nancy to join newly formed Oak HC/FT, she decided to join the investor side. This also coincided with the when Nancy became a single parent. Nancy shares the unintended consequences of having a very complex and time consuming career, that you often have trade offs in life and she suddenly had to figure out how to not work less, but work smarter.

13:00–15:00: Quick overview of Oak HC/FT and its investment philosophy

• Investment philosophy: When Oak HC/FT was founded six years ago, Oak HC/FT focused on the healthcare side of cost and quality and the ability to substantially move the needle on both fronts. As you peruse their impressive portfolio, you can tell that Oak HC/FT healthcare investments are biased towards tech-enabled service companies.
• Focusing on improving the clinical process: She shares that it’s all about the clinical process (which is a unified theme I hear from her healthcare operating experience and investing theses). She shares that it’s about being able to have a point of view on the clinical process should be and having the tech enablement to take that point of view and consistently scale it nationally.
• Solving undeniable problems: Though this is not strictly the basis of every single one of Oak HC/FT’s investments, many of them find a problem that’s undeniable. For instance, with end-of-life care, it’s undeniable that everyone wins when there are better solutions for getting patients into better palliative care programs.
• A healthcare world where everyone wins: Another theme across all of their healthcare investments is that everyone wins. The patients, the providers, the insurance companies all win, because the clinical process is improved across all stakeholders. Nancy believes that what all their portfolio companies share is new, innovative thinking, a strong point of view and a really good understanding of how to apply technology to an undeniable problem.

15:00–17:00: Some investment theses on the future of healthcare

Virtualization of care: Even before COVID-19, Oak HC/FT has been investing in the virtualization of care (Firefly, Galileo, Maven are examples). Nancy shares her investment thesis that’s developed for years on going to where people are, through virtualization, onsite clinics and retail care.

• For example, Paladina Health is their portfolio company that provides on-site clinics near the employer. Moreover, she has worked with retailers such as Walmart, CVS, and Target about integrating care into people’s lives.
• As we have seen a huge surge in demand for telemedicine and changes in regulations, she is very interested in seeing what’s going to happen post-COVID. In light of the pandemic, it has made people realize that you can get care and get really good care remotely.
• Moving forward, Nancy believes that there’s a tremendous amount of work to be done about getting to the best approach and understanding the efficacy of these clinical processes. We are seeing a lot of opinions about the best approach, and the question now is, how do we get a clinical process to now millions and millions of people?

Mental health: This is another investment thesis that Oak HC/FT is focused on (their portfolio companies include Quartet Health, Emilio Health, Therapy Brands). Nancy shares that the surprising insight is that the resistance to delivering mental health services virtually is not with the patients, but with the providers. Providers don’t feel like they can have the same experience.

• Nancy believes mental health will be forever changed by COVID-19. It will be changed by the fact that the providers know that they can use it and that the patients know that it works.Now that providers need to rely on telemedicine, they are seeing a spectrum of when it’s optimal, or less optimal to need to physically be with the patient.
• In Boston, some of the providers and local health systems say they went from 1500 to 90,000 telemedicine visits. She believes that we’re not going to continue see the spike once physical access is back, but we’ll probably hold on a sizable portion of the share.

18:00–23:00: Healthcare technology companies serving the community during COVID-19

Oak HC/FT’s portfolio has great stories of healthcare technology companies making huge strides to address COVID-19 and support the community:

• Cricket Health (kidney care): The previous solution of putting people into dialysis chairs, three inches apart is not a good idea obviously in our current environment. Cricket Health is supporting the increase in the adoption and implementation of home dialysis care.
• Firefly Health and Galileo Health (virtual primary care): Both virtual primary care companies (Galileo focused on Medicaid populations) are providing COVID screening and using COVID-19 as an opportunity to serve patients who don’t have primary care providers.
• Maven Clinic (women’s health telemedicine network): Maven took the telemedicine network and made it available for MassHealth (the Medicaid program in Massachusetts) for women and children who needed to get questions answered. Maven helps mothers who are pregnant or about to deliver answer questions such as whether it’s safe to go to their appointment.
• Unite Us (social determinants of health): With their platform that’s used to connect supply and demand around social determinants, Unite Us is a conduit to any community-based services. We are seeing states sign record setting contracts with some states engaging similarly to the way Unite Us has partnered with North Carolina, to put rapid response networks and their platform in place to meet the needs of the most vulnerable populations.

23:00–27:00: COVID-19 impact on healthcare technology investing

• Supporting portfolio companies: Oak HC/FT has been all hands on deck and focused on supporting their portfolio companies. This includes everything from understanding different government programs to ways to best practices around remote employees.
• Business as usual: For healthcare entrepreneurs out there, the good news is that the funding is still being done and they are still meeting with companies. The obvious question is, what’s changed? If your solution is a nice-to-have, it will be more difficult to fund the business. Some companies are absolutely affected by COVID, because they’re not going to be able to get attention from their buyers. On the other hand, there are others that are either status quo or are seeing tailwinds.
• Making investment decisions remotely:

+ The positives: Nancy believes that her experience being a remote employee having been based in Boston and her company based in Greenwich, Connecticut that she believes the hybrid is really hard. She is usually the only one remote and everyone else’s physical, it’s difficult to get above the noise when you’re talking to a roomful of people. Having everyone virtual levels the playing field.

- The negatives: The only thing missing is the walk around of the company, in which you can get a feel for the culture of the company and the contagious buzz of energy.

27:00–33:00: Three key questions when evaluating early stage healthcare deals

1. Problem: What is the problem that people are trying to solve? Is the problem undeniable?
2. Addressable market: What is the addressable market? What is the potential to capture this market?
3. Team: “It’s all about the people”

• Second or third time founders: Oak HC/FT has historically invested in a lot experienced founders. Especially in the early stages, entrepreneurs they’ve worked with in the past come back to them for the second or third time.
• Combination of a great team and a great idea: Sometimes there’s a great idea, but not a team who can execute. Or, vice versa. They want to make sure there is the right combination of both.
• Founders or C-Suite who want to partner: It’s important to invest in teams who want to partner with investors. Teams like Unite Us work with Oak HC/FT on a weekly basis and really look for a mentor and partner and are willing to continuously listen and evolve.

“Humility is huge for us. We back the best and the brightest, and you’ll never hear them represent themselves as the best and brightest. So that is important and their commitment to their team.”

• The importance of all the right ingredients coming together: During COVID-19, Nancy shares how remarkable it is to see their CEOs’ reactions to protecting their teams, and making sure their teams are safe. If the team has the right ingredients, then any problem they face — and startups will face problems with the business idea or the execution or the assumption — the team will be able to get through anything.

Areas where some other investors don’t typically emphasize as much:

• Services and technology: Oak HC/FT is heavy into services and they fundamentally believe that the service and the tech have to be combined to get to the best outcome. A critical component is to ensure that the technology is being applied the right way to ensure you have buy-in from stakeholders and partners. Because healthcare in the U.S. is such a complex system, you need to work with all stakeholders.
• Team dynamics and culture: Nancy believes that there is not enough emphasis on the team dynamics and the team culture. Everything is about weathering the storm, and then sometimes it goes smoothly. But most of the time the founder journey is challenging, such as the crisis we are living through right now, and having incredibly seasoned, thoughtful CEOs is priceless. They also always ask about culture, because it’s always interesting to hear the sort of the different values each of the entrepreneurs have.

33:00–35:00: Crowdsourced question from a subscriber on solving misaligned incentives stemming from our third party payer system

• Misaligned incentives in U.S. Healthcare: In the last couple years, the U.S. healthcare system has been trying to move risk to providers, in a suboptimal way. She shares that the crux of the issue is that even though we give providers quality measures, only some of their patients are at risk, but not all. If patients have different incentive plans, then it’s difficult to manage them individually in an effective way.
• Solution: Nancy shares her experiences working in a staff model, HMO where 100% of the care and 100% of the premium dollar is managed by the same company — in this world, there are no misaligned incentives. She believes that the solution is to have fully delegated risk and a delivery system that operates fully at risk for all the care being delivered to the patient.
• Innovation today: She is excited about healthcare technology companies moving the needle in this space such as Village MD and Devoted Health. This story has not been fully written and her perspective is that the more that people can take on risk, who really understand how to think about populations, the better our healthcare system will be.

35:00 — End: Wrapping up with mentorship and championing women investors

• On championing women investors: When I asked her about how we can amplify female investors in a world where only 12% of investors who are decision makers are women. Nancy shares that what it comes down to is mentorship. Even though Oak HC/FT has a lot of women founders, they don’t view themselves as a women-led company. She emphasizes good mentorship and not only breeding an environment where people who join, feel like it’s a culture where they want to be in. What Nancy likes about her firm, has nothing to do with gender, is the way that Oak HC/FT runs things. She shares that at every single one of her boards, she has one of our staff members assigned to her, and they hear and learn it all. They have the assumption that everyone who comes to work at Oak HC/FT will eventually rise up and become a partner.
• On work life balance: Even though she’s on many boards and always partnering with her portfolio companies, she is able to create flexibility in her work and to adjust her working style to build a strong and inspiring bond with her daughter. She shares that her 18 year old daughter can tell us about every one of her companies, every one of the CEOs, their strengths and mission statements. She encourages working mothers to get their kids involved early in what you do, because they’ll be super proud and excited and want to learn more!
• On quarantine hobbies: In the theme of it’s time to build, Nancy shares something she’s created under quarantine: lemon squares! Nancy has been perfecting the recipe on weekends, and the good news is that she says it’s trending positive. She promises to share her recipe when it’s ready.

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Thank you so much for tuning in to the Pulse Podcast. We really enjoyed speaking with Nancy and hearing about her inspirational advice, impressive operating experiences and her thought leadership in healthcare technology innovation in a post-COVID-19 world.

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