Nita Sommers, Khosla Ventures, on digital health’s transformation across three decades

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Nita Sommers is an Operating Partner at Khosla Ventures focused on health care. Nita has spent over 20 years working in the health technology sector, with a passion for early-stage, high growth companies transforming health care. She was an early member of the R&D team at athenahealth, which went public in 2007. Additionally, she was one of the first executives at Castlight Health and later managed the company’s IPO in 2014. At Castlight Health, Nita led the company’s early sales efforts and later ran strategy, business development, corporate development and investor relations. Most recently, she was President of Honor, where she was responsible for all aspects of growth including sales, marketing, customer success, business development and corporate development. In addition to her work at start-ups, she also spent several years consulting with McKinsey’s health care practice and working across a number of healthcare industry sectors while with McKesson.

Nita enjoys working with early stage companies on growth strategy and execution, including product strategy, commercial strategy, sales management, business development and organizational development. Nita has an M.B.A. from Stanford Graduate School of Business and a B.A. from Harvard University.

In this episode we discussed:

• Nita’s experience leading, exiting, and advising first-wave (1990s: athenahealth), second wave (2000s: Castlight) and third+ wave (2010+: Honor, others) digital health companies spanning three decades of health tech
• What we can learn from these companies’ ascent, as history repeats itself: finding unmet need in a large market, narrowing in on a core set of business challenges, and proving value, not just scaling for scale’s sake
• What makes the Operating Partner role unique in venture capital, and why her position at Khosla Ventures is distinctive across the healthcare fundraising landscape
• Tactical advice to women on breaking the glass ceiling as an executive or venture partner

Start to 11:00: On pandemic and healthcare career reflections

• On parallels between healthcare and education: Nita and her partner have been juggling work and being the primary source of education for their children during distance learning. What’s been most interesting is spending a lot of time thinking about the diversity of how kids learn — how can we tailor education to their needs? Secondly, the pandemic has highlighted the obvious inequities that exist across school districts and learning environments, e.g., do you have working Internet? There will be major implications in the healthcare world, since health literacy is a major determinant of health. That compounds to professional career paths that might come about because of the education experience a child is having today.
• On rising health inequities despite a digital health boom: Certain people get access to technologies, no matter how innovative they are, for structural reasons. Having worked in healthcare for 20 years, Nita knows that change is very hard, can feel very piecemeal, but is important. When Nita was starting at athenahealth, they were just starting to shift from paper to electronic. It sounds like a very silly, easy transition, but this was transformative at the time. So on the topic of change, Nita believes it’s important to manage expectations and stay laser focused on a narrow problem. Change doesn’t happen overnight.
• Kicking off a career in digital health: In college, Nita realized she needed a summer internship, and her brother happened to know Ed Park, the CTO of a then-nascent athenahealth. At that point, Nita had never taken a computer science class. So she taught herself engineering and got a job with athenahealth — her early days were spent coding as the only woman amongst a group of 20 men. She then helped build out their product management function, and stayed at the company during its growth from 30 employees to 600+. She later transitioned to the then-15-employee Castlight, co-founded by Ed’s brother Todd Park, and there she helped take the company public. She loved getting the experience of product management, coding, and investor relations across the growth phases of these companies.

11:00–28:30: On working at athenahealth, Castlight, and Honor

• The original first digital health wave: athenahealth and Castlight were among the first wave, so to speak, of major successful digital health companies. Nita believes athenahealth was very unique — it was the first digital health company to use cloud-based and SaaS technology in the provider market. That took years to get to adoption. Doctors didn’t just embrace it overnight — they are one of the most conservative groups of people out there. It took years of sales and proving value to get adoption. That businesses like athenahealth did eventually go public and drove sustainable YoY growth opened up the investment market for future companies to take shape. athenahealth represented the first wave of investment that went into provider IT and pharma IT solutions. Then, we started seeing investment in newer areas, like Castlight. At its infancy, Castlight was revolutionary — it was one of the first successful companies developing employer- and payer-facing solutions, and we say insurance markets shifted towards HDHPs and self-insured plans. Now, we’re seeing even newer waves of investments on tech-enabled services.
• athenahealth in the 1990s: The original business plan for athenahealth was to be an OB-GYN, brick and mortar practice. Ed Park realized the software used at the practice was valuable, and the company narrowed in on that product. Nita believes what set athenahealth apart from the crowd was that in the market, there were several provider IT products that were massive installs on organizational mainframes with all data onsite. Everything was controlled by the provider. By focusing on the cloud, athenahealth brought the price point for provider IT significantly down, giving access to smaller providers who might not have otherwise been able to afford going electronic. Moreover, providers did billing mostly via paper. Athenahealth helped shift to digital transactions with electronic claims submissions. Once the data was electronic, that unlocked new functionalities around faster, easier revenue cycle management to improve physicians’ cash flow. Following the dotcom bubble, athenahealth was one of the few software companies to survive because they had a really clear and compelling product value proposition, and they were flexible about shifting business plans when they stumbled across a more compelling product in the early days. Even then, this took years to adopt.

“Let’s say you want to automate something that [providers] used to do, or you want to apply some sort of new technology into the workflow. I do think there’s just a pace of adoption you need to work through where you prove whether this new change is worth it to providers — do they believe it drives enough value that it’s worth changing their behaviors and patterns? There is risk aversion because any mistake could mean a life on the line.”

• Early Castlight days: Nita believes the company was really smart in picking up this unmet market: the employer market. It’s one of the biggest things an entrepreneur can look for. Over the years, a ton of different little subcategories have emerged into that marketplace, from digital therapeutics to administrative solutions to others. The employer market remains a really viable market as it dictates a large chunk of healthcare spend. But it’s becoming very crowded: a company might get one or two customers if they have something “glitzy”. But you can’t get to sustainable revenue. Unless you either move ROI really well, you’re really hitting a core administrative task. That’s really complicated. You’ll start to continue to see a whittling down to the smaller, best of breed solutions and a couple of big solutions in each space. Large employers don’t mind the cumbersome integration work required to support these solutions. On the other hand, smaller employers will struggle to work too many different vendors in this space. Nita thinks there will be continued, interesting strategic partnerships and M&A in the employer market that will shape the landscape for years to come.

“Twenty years ago, there were strong pushes for mass coverage, but this is hard to change. There may be stopgap solutions like mandating employer coverage or expanding Medicaid. But, it is more politically feasible to pass incremental system based innovations rather than ripping up the blueprint altogether at this point.”

• Honor: Honor is a non-medical home care provider. Separate from traditional home health (which falls into the realm of Medicare reimbursement), non-medical home care is caregiver focused. Caregivers are usually not clinically certified, and this market is about a $25–30B industry. Right now, the number of people aged 65+ is doubling over the next many years, and the number aged 80+ is going to triple. They are increasingly homebound with many comorbid conditions. 60%+ of these individuals often live alone. So clearly there is a strong need (seniors needing high levels of care without being able to provide it to themselves) and a large market. But, there are two challenges. First, it’s very difficult to manage logistics in the home-based services market — you’re not running a center. You’ve got to get caregivers to and from many different homes, and still also do that at a viable margin. This is why the home-based services market is so fragmented — you have lots of smaller companies serving a small geographic segment for these logistical reasons. It’s rare you see a large solution because managing those logistics at scale is complicated. The second challenge is that this is a hard market to reach: seniors in their home. You can’t mass market to them, and they may not be very familiar with digital. Honor spent a lot of time in its early years experimenting and figuring out which business model was viable. Rather than using all of its R&D, money and talent to create fancy apps for seniors, it went into hardcore logistics and workforce management technology.

28:30 — End— Being an Operating Partner in Venture

• Transitioning from operating within a company to being an Operating Partner at Khosla Ventures: Nita likes being deep in companies and building, but also like taking a step back and seeing the big picture. What was attractive to Nita about this opportunity was that so much in healthcare changed with COVID. There are markets that have really taken off, there’s others that have really slowed down. She was eager to have an opportunity to take a step back and see what was going on in the marketplace more broadly, rather than just in her sliver of business.
• What does an Operating Partner do?: Nita has come across two flavors of operating partners. The more traditional one that most firms have is having a small set of people that are deep functional experts in finance, recruiting, or communications. They maintain these staff because their startups recurrently need some help in those domains, like a financing round or a big PR push. The second is more of a strategic operating partner. The value of these latter roles is that there are some investment partners with an operating background, but it may just be a few years, if at all. If you’ve been operating for 20 years, like I have, there’s just a lot of things you’ve seen where you can plug in on certain priorities that an investment partner might not be as well suited. That could be strategic projects like how to structure compensation plans, or hire the first sales person, or negotiate a contract. You’ve been in their shoes before. That’s the value of an operating partner: being that close advisor, often even a Board member, that can provide a different and complementary expertise to the Investment Partner.
• So what does Nita’s life look like?: She has a set of companies that she works with, and speaks with them weekly or daily. They might be getting on the phone to brainstorm different problems at the company. Other times it’s to discuss mass trends happening in the marketplace to identify needs across the portfolio. From seed to late stage, one of the most common things Nita spends time on are core strategy questions. Leaders could be developing their initial strategy, thinking through pivots, or starting new business lines. All of those questions are a little complicated in their own way. The second big priority is major team changes: CEO swaps, building out teams, and so forth. Finally, anytime someone’s going through a financing event, she supports companies to make sure their round goes well. Khosla Ventures is unique as they invest across a lot of different sub-sectors of healthcare, so the variety of businesses and go-to-market models Nita works with is diverse. As Nita has gotten older in her career, it’s been refreshing to get more diverse in her views on healthcare — she’s still using her experience as an Operating Partner, but in a different way. After a couple years, Nita still has the option to go back to operating and running a P&L.

“From my own experience, if you’re a senior executive, you start to have very few people you can truly brainstorm with. You’re always having to feel confident and appear that you know everything and are in complete control.”

• The tension between staying one degree removed as an advisor vs. embedding into a company’s operations: Nita has to read the portfolio company to figure out the right level of engagement. Most companies are really receptive to it. She finds that many CEOs like a few people they can be vulnerable around, solution with, and talk to about some of the harder issues facing the business.
• On balancing being a working mom with a demanding career: Nita thinks when you’re young, you have goals and compare yourself to your peers all the time and are trying to achieve your aims. At some point, you start to realize that your children are your number one priorities and biggest things in the world. There is so much opportunity in the healthcare world, so if Nita or any of her portfolio leaders need to take some time for family reasons — especially in the pandemic — it’s just a matter of finding balance and taking time off when you need it.
• Tactical advice to women on breaking the glass ceiling: Nita advises women to look for companies where there are other senior women, or other leaders with families. They will understand that you have competing priorities in your life (like if your kid is sick, your nanny is out, and you just have to skip a bunch of meetings to be at home). There will be people that react that say, “That happened to me last week!” Others might say, “Oh my God, I can’t believe she’s doing this.” You want to be in supportive environments like the former. The second piece of advice Nita has is figuring out what you love doing. Once you have children and a family, you will love your kids more than anything. Having a career that you love will make work-life balance that much easier, because it will feel more natural (and less anxious) switching between work and home. Finally, having a great group of friends that you can just be honest with all the issues you’re facing.

“Don’t sweat it too much. Don’t stress too much. If it’s, like, I lost three months of my career, it’s small in the grand scheme of things, especially if it meant those three months were just the thing that your family needed from you at the time.”