Latest / StartUp Health NOW Podcast / Inside General Catalyst's health assurance transformation playbook, with Holly Maloney and Unity Stoakes

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Inside General Catalyst's health assurance transformation playbook, with Holly Maloney and Unity Stoakes · StartUp Health NOW Podcast

• 0:00
  [on-hold music] The platforms that are building today have an incredible opportunity to endure and compound for a really long time, just given how all the incumbents are leaning in.
• 0:15
  And then also just, like, the mind shift of healthcare and sort of the consumer zeitgeist moment that we're seeing right now of people really wanting to be in control of their health, and so the system has to meet that moment and give people the experience and the quality as expected.
• 0:32
  Welcome back to "Startup Health NOW." My name's Unity Stoakes, co-founder at Startup Health.
• 0:37
  This is the podcast where we get to have deep and meaningful conversations so we can get to know the change makers, the entrepreneurs and innovators who are transforming health. Stick around.
• 0:49
  It's gonna be another great show. [on-hold music] So without further ado, Holly, welcome. How are you? It's great to have you here. Yeah, it's great to be here. I'm doing well, thanks.
• 1:02
  I thought we'd kick things off with both learning a bit about you and your background, and also within the context of General Catalyst. General Catalyst, I think it's not a traditional venture capital firm.
• 1:15
  It's so many things. And thought it'd be helpful for you to share with the group how you describe General Catalyst. I think it's obviously one of the most important investors today.
• 1:26
  You've, as an organization, invested in great companies like Anthropic and Stripe and Airbnb, but also so many of the most important digital health and AI healthcare companies today, many of which you're on the board of or have led those investments for.
• 1:43
  But you also invest at all stages, and you have HatCo, and we'd love to dig into all of that. So just to kick things off, tell us a bit about you, and, and then how you frame General Catalyst.
• 1:55
  No, absolutely, and again, thanks for having me. So my background, so I've been with General Catalyst now coming up on nine years this fall, which is amazing. It has both flown by and feels like I've been here forever.
• 2:07
  Prior to General Catalyst, I was with another investment firm for about seven and a half years and did a few years of advising, always working with sort of high-growth technology companies. Did that out of undergrad.
• 2:18
  I studied economics at Bowdoin College. I spent most of my life in Boston. Actually, when I first joined GC, I was still in Boston.
• 2:26
  I moved out to the Bay Area about six and a half years ago, right as the world was shutting down with COVID.
• 2:31
  My now husband had been here and, and we knew we were gonna be on the, the same coast eventually, and as the world was shutting down Friday, March 13th of 2020, that felt like a good day to, to make the- Wow.
• 2:42
  But I, you know, the whole reason why I joined General Catalyst coming up on nine years ago is because I felt like the organization was at a real... really approaching a significant inflection in i- in its business.
• 2:55
  And I felt like the next wave of investing was going to really require a creativity that had always been in the DNA of GC.
• 3:05
  And I guess all I can say is that both the inflection and the creativity have wildly exceeded my expectations. But that is the whole reason why I joined, and I'm so grateful that I did.
• 3:15
  General Catalyst as an organization has been around for 26 years.
• 3:20
  We were started in Cambridge, Massachusetts by a couple of former entrepreneurs who had built and scaled companies very successfully without venture funding because they felt like they could never actually find
• 3:34
  people that really understood the nuances of operating and scaling.
• 3:38
  And so they wanted to spend the next phase of their careers building just that, so the partner that could meet founders where they are and truly be a transformation partner to them.
• 3:48
  And so now as we sit here, you know, General Catalyst today, uh, 26 years later, is how we describe it. It's a global investment and transformation company with venture at its core.
• 4:00
  So we're still meeting, you know, the most ambitious founders where they are from creation stage to growth and beyond. And we're really driving core themes of global resilience and applied AI.
• 4:13
  And we have offices in many locations, so I'm here today in San Francisco. But we also have offices in New York, Boston, Berlin, Bangalore, and London.
• 4:24
  And we've grown to over 40 billion of, of assets under management and have supported some of those iconic companies that you mentioned.
• 4:31
  But over 800 businesses since inception, which we're really privileged to have worked with all of these exceptional people, and it still feels like we're just getting started.
• 4:41
  Our core domains are the innovation economy, so AI applications, AI infrastructure, the theme of global resilience, which we would include sort of defense, energy, infrastructure, and manufacturing, and of course, health assurance, where I spend all of my time, and we include our life sciences work in that.
• 4:59
  But you're the managing director focused exclusively on healthcare and health assurance? So I am responsible for our investment team and strategy as it relates to our healthcare work here at GC.
• 5:10
  Now how we're structured as a company is we have GC Capital, which is where we do all of our investing work, so that's where we do our venture investing from seed to growth.
• 5:19
  It's where we have what we call our customer value fund, which is a really innovative product that team members of mine invented and is now a fully securitized product that can fund sales and marketing spend really effectively once companies reach a certain scale.
• 5:36
  So it's funding sales and marketing, and therefore the sort of funding of that ties, and the payback ties really nicely to the cash flow dynamics of a business.
• 5:45
  So we have venture, we have customer value fund, we have a wealth management business, and then we have operating subsidiaries.
• 5:51
  So we have Percepta, which is our for deploy AI engineering business, which is helping to transform large industry players, both within healthcare and outside of healthcare as it relates to AI- their AI transformation.
• 6:03
  So you'll have AI engineers in the health systems, for example? That's right. Percepta is very much on the ground at Summa, bringing our transformation stack to life.
• 6:13
  So it's really changing the way that institutions operate and make decisions. In order to thrive, they're really gonna have to modernize in this AI era.
• 6:21
  And so Percepta and its team of leading engineers is working with many established institutions, embedding directly in implementing groundbreaking technologies to solve their hardest problems.
• 6:32
  And you mentioned Summa Health. We gotta talk about this one. Yeah, so- You, you have HatCo...
• 6:37
  so it's another operating company [laughs] I think this is one of the most extraordinary things that you're doing because it really does signal to me how transformation can happen, not just from an investing perspective, but maybe share what the Summa Health acquisition is and HatCo and how you're thinking about that strategy.
• 6:55
  Over six, seven years ago, we became very intentional around our healthcare investing.
• 7:00
  We felt like there was a many decades long transformation opportunity that had really been underserved by venture, and we wanted to have a leadership position in that transformation, and we knew if we were going to focus so intentionally on this health assurance thesis, we wanted to do it in partnership with the existing incumbents.
• 7:18
  We didn't wanna go out and invest in and build companies that were sort of working around the system.
• 7:24
  Partner deeply with our health systems, with our payers, with pharma, understand their challenges and priorities, and figure out how can we have a solutions mindset and help solve those problems faster, more effectively, and more efficiently.
• 7:40
  And so the first wave of that work was through our partnership strategy. So we now have over 27 partnerships with health systems, largely in the US, but a few that are global.
• 7:50
  Represents close to 15% of care delivery in this country, and had spent a lot of time really understanding again what were their challenges, their priorities, how could we help them become better run businesses to free up resource to do what they're here to do, which is to deliver the highest quality of care at the lowest possible cost of unit of care delivery, to underwrite that care most effectively and to, you know, to create and bring to market life-saving drugs.
• 8:15
  And it was really through that work that we started to create a view of what a transformation stack could look like across the core pillars of a healthcare system, and we really wanted to be able to put that into practice more directly.
• 8:29
  And so that is what led to our idea of a- of acquiring a health system, and so we created as an operating sy- subsidiary our health assurance transformation company.
• 8:39
  And through HatCo, we made the acquisition of, of Summa Health in, in Akron, Ohio, and, you know, really to embark on this long-term vision to create new, more proactive, accessible, and affordable system of community-based lifelong healthcare, and so that we could really
• 8:57
  own the transformation from the inside.
• 8:59
  You know, as we think about healthcare and its durability and a critical public service for our country, you know, healthcare itself and healthcare delivery are something that will not be fully replaced by AI, but certainly needs to be modernized to meet community members and deliver the highest quality and, and lowest cost care.
• 9:19
  And this is a major system. There's over 8,000 employees. It's a multi-billion dollar system, millions of patients. Do you see this as a template where
• 9:30
  almost like a testing ground to put all the innovations you're building, either through your hatchery or investing in at scale into the real world, and then it becomes a template for what can get rolled out to other systems?
• 9:46
  Or what-- how do you think about that part of the strategy? Yeah. So we again have been developing a view of, of our transformation stack, which we are in the early innings of, of implementing.
• 9:58
  And so, you know, our, with our long term, you know, strategic transformation of, you know, connecting, supporting, and empowering patients, providers, and staff. And so we intentionally partnered with Summa.
• 10:11
  It's because it's a comprehensive, integrated system, and it also has Summa Care, which is an insurance plan, and a proven track record of, of understanding and adapting to a regularly changing industry.
• 10:23
  And so the fact that Summa Care is a part of the system, we can have sort of insights into, you know, what is working with the idea that, yeah, I mean, w- once we have fully deployed, you know, the first wave of our transformation stack and then continue to expand from there, we hope to sort of package those learnings and take them to other, other systems, you know, other of our partners.
• 10:46
  As we think about the other partnerships that we have with health systems, I'd say there's kind of a, a tiered approach.
• 10:52
  We do have a handful of systems where we have signed multi-year contracts that, you know, obviously it's not going as far as being fully owned systems by General Catalyst, but there is a deep commitment to transformation where, yes, we are gonna be taking learnings from Summa and providing those insights and to some of our other system partners and, and, you know, as, as, as soon as possible.
• 11:15
  I mean, every, every system is different and has their own nuances, own, own communities they need to be serving, but there certainly will be many lessons and kind of repeatable processes, technologies, implementations that we hope to carry forward to many other members of the ecosystem.
• 11:32
  So one of the things I wanted to dig into is so many of the great companies, healthcare companies you've invested in are AI first for what it is that they do, their area of specialty.
• 11:47
  And you have-- You're also operating within the real world of these health systems and plans.
• 11:53
  You set this up before kind of the modern world of AI we're in today, so six, seven years ago, and now here we are at this epic moment that is changing by the week, if not the day. You're also
• 12:07
  investors in some of the most important just pure AI... platforms like Anthropic. What are you learning? What are you seeing?
• 12:15
  What's going on that you're seeing either from the AI healthcare companies that are now coming into the real world? Two, three years ago, it just didn't seem to have made that jump yet, but here we are today.
• 12:29
  What are you seeing?
• 12:31
  What's actually happening in terms of integrations, transformation, real world kind of deployment of the innovations you're investing in with the real world, and how that's getting deployed out into everyday people's lives or clinicians' lives?
• 12:49
  Yeah. No, it's a great question. And, you know, we, we definitely are starting to see the real world impact and the promise of thinking about healthcare as a market of abundance, right?
• 13:01
  I think forever healthcare was viewed as a sort of a, a scarce resource, hard to access, hard to navigate.
• 13:07
  But in the world of AI we can think of abundance as we think about healthcare, and companies like Hippocratic are, you know, on the ground doing that work, implementing their service to create sort of an abundant healthcare workforce that can supercharge the existing infrastructure that's in place, but also drive the lowest possible cost of patient e- engagement and high satisfaction that is, is really tremendous financial impact.
• 13:36
  So we are absolutely starting to see these things come to life, which is really exciting, and just the rate of change of the technology and how quickly some of these companies are able to adapt to the really wide-ranging dynamic situations of patient interactions, and h- how quickly some voice models in particular are advancing has really exceeded our expectations, so we're- Yeah.
• 14:00
  It just seems extraordinary. It's like what I'm seeing, and I'm sure you're seeing this too, it's happening on the administrative side of healthcare- Yeah...
• 14:08
  it's happening on the clinical, even care delivery side, and the discovery side of new innovation or even around drug discovery or diagnostics.
• 14:18
  It's just, you know, I would say a couple years ago it was all just on the administrative, you know, and things like scribing and, you know, better billing cycles and things like that.
• 14:29
  Now we're just really seeing it at the point of care. I just think it's moving so quickly and in so many exciting ways.
• 14:36
  We got a bunch of questions stacking up here we'll get to in a second, but one more question and then I'll start to weave these in. There's a lot of early stage companies here.
• 14:45
  I know at General Catalyst y- you invest at all stages up the stack. What are you seeing at the earliest stages? How do investors get involved with General Catalyst at the earliest stages?
• 14:57
  What should CEOs and founders be thinking about in order to kind of pique your firm's interest? What do these founders and CEOs need to be thinking about? I'm glad you're asking because we do...
• 15:09
  while we do invest at every stage and can scale with companies for a long period of time, we are incredibly active at the seed stage. And so we really view our seed stage business as our core.
• 15:22
  And then we will sort of make more concentrated investments at the growth stage.
• 15:27
  But yeah, I mean, we have global presence and we have a very active seed investing strategy here in the US, but also in Europe and in India.
• 15:34
  My partners, Yuri, Jeanette, have been incredible leaders, all having built their own seed stage funds prior to joining us here at GC, and so we have really sort of operationalized this work and built incredible founder experience for every really early stage company that we invest in.
• 15:52
  But in terms of like how to be engaged with us, we're looking for people that have incredible ambition and are going after solving some of the hardest problems in healthcare.
• 16:04
  To your point earlier, where a couple of years ago it felt like everything was focused on AI automation at the administrative level, and so we have made, you know, a really, a portfolio of investments across many of the pillars of health system infrastructure.
• 16:19
  So we're really looking for the next wave of innovation to take what are now some core platform transformation opportunities and taking them forward and thinking about net new problems that we haven't even yet, you know, put on of opportunities.
• 16:34
  But, you know, a lot happening in AI and drug discovery. You know, we're increasingly super interested in the intersection of healthcare and hardware and robotics.
• 16:43
  You know, a lot still focused on aging and home care, health at home. You know, there's a lot of work being done in that space.
• 16:51
  But overall, we just really want ambitious people that can architect a big and important thesis and why they might have the w- right to win in building in that area, and we will always be excited to have that conversation.
• 17:02
  I love that you're doing stuff even at the seed stage. I think that's really important, and it adds so much value to these emerging companies.
• 17:10
  And we really are at this, I think, very dynamic moment, seminal moment really, it's moving very rapidly.
• 17:18
  It's not clear exactly even week to week or month to month where it all goes, but it's very clear we're in a transformation window moment that may go on for many, many years. What are you most optimistic about?
• 17:35
  Take us out I think maybe a few years into the future and how we all could or should be thinking, what should we be thinking about as we all re-architect our businesses, our business models, our teams? I think one of the
• 17:52
  lessons learned we have is in these moments of transformation, if you're not reinventing your whole stack for everything that's really changed, we did this I guess the last time would've been COVID, for example, where it was just this seismic shock where you had to really recalibrate every aspect of your business.
• 18:12
  I feel like we're in that again, but- I guess two parts. What, how should, how do you think about the future? What are you optimistic about? And how should businesses really be re-architecting for the future?
• 18:28
  So I guess, I mean, why I'm incredibly excited and have hope is healthcare is the largest and most durable market in the US economy.
• 18:40
  So regardless of what is happening in the public markets, the work that we are doing is non-cyclical, and the incumbents are really leaning in, and so that's pushed by cost policy and AI disruption.
• 18:52
  But the platforms that are building today have an incredible opportunity to endure and compound for a really long time, just given how all the incumbents are, are leaning in.
• 19:04
  And then also just, like, the mind shift of healthcare and sort of the consumer zeitgeist moment we're seeing right now of people really wanting to be in control of their health.
• 19:11
  And so the system has to meet that moment and give people the experience and the quality that is expected.
• 19:19
  In terms of re- the re-architect of a business, I mean, it really, again, at the end of the day always comes down to people and making sure you have the right talent that asks the hard questions to take you into the next phase of scale and AI innovation.
• 19:34
  And I think the hardest questions will be should we take what we have and just try to make it native, or should we actually start from scratch, right? Because oftentimes, like, trying to make a current system
• 19:49
  different or AI native, that could end up taking a lot more money and time and end up in a potentially worse off place than just starting from scratch.
• 19:58
  And so if you're still an early stage business where you've been marching down the path of a platform that maybe now feels like a generation ago, you know, starting from scratch might be the right answer.
• 20:08
  That's a hard decision. Now you can just fire up Anthropic and have it code a lot of it with you, so it's very exciting. Holly, thank you so, so much for sharing your wisdom.
• 20:18
  Any last thoughts, things we didn't cover that you wanna make sure we share with the group?
• 20:23
  I mean, healthcare at the end of the day, I know we've talked a lot about sort of disruption and innovation and regulatory dynamics.
• 20:29
  Healthcare is what it is, which is such an exciting place to build because you have moats that really can go beyond the core technology platform.
• 20:37
  And so figuring out that distribution moat and potentially a regulatory moat alongside your technology can go a really long way. So I just, I thank you all for building in this space because we need the big minds.
• 20:50
  And, and thank, thank you for investing in it and, and General Catalyst had just, as I mentioned at the outset, such an important non-traditional investor that I think is really pushing transformation in, in meaningful ways and, and love what you're bringing to that, so thank you.
• 21:06
  So thanks everyone. Have a great day. Holly, uh, hope to see you soon. Thank you so much. Thank you again. Yep, bye.
• 21:12
  [upbeat music] And finally, an invitation to all of the extraordinary health transformers, whether you are a startup, someone building the future of health, or whether you are an investor, funder, or buyer of the solutions out there in the marketplace, this is an invitation to you to join the Startup Health member community.
• 21:35
  Learn more at startuphealth.com. Look forward to hopefully seeing you soon.