SamaCare is joined by Vive Collective partner and digital health investor Cheryl Cheng for a candid discussion on the opportunities – and challenges — for digital health companies in today’s venture climate. Tune in for valuable advice for startup founders and technologists, and an inside-look for practices into what goes into building healthcare technology.
You’ll learn:
Whether you're a medical provider working with health technology partners, or an entrepreneur thinking of building your own health technology company, this episode has great behind-the-curtains insights into the process of building technology to solve healthcare problems.
[00:00:00] Kip Theno: Welcome to the Road to Care podcast hosted by SamaCare, where we will talk with key opinion leaders, physicians, administrators, manufacturers, venture capitalists, and legislators to get their insights on the state of health care today and where we see it evolving. SamaCare's prior authorization platform is free to clinics, ensuring patients get on the right therapy at the right time.
[00:00:20] Together, we can simply make things right.
[00:00:26] Hey everybody.Thanks again for joining The Road to Care Podcast hosted by SamaCare. And today our special guest is Cheryl Cheng founder Vive Collective. Cheryl is the founder of Vive Collective and was most recently a general partner at BlueRunVentures, one of Silicon Valley's premier VC firms, where she led rounds and works closely with digital health and wellness companies.
[00:00:47] Cheryl currently sits on the board of Kiddo, a pediatric remote patient monitoring company and on the board at SamaCare.Cheryl is an advisor to Stanford's Biodesign program where she teaches go-to-market strategies and mentors faculty and student teams. She is also on the board at the Ronald McDonald House at Stanford, a nonprofit dedicated to supporting families with sick children in their time of need.
[00:01:10] Hey, Cheryl, thanks for joining. How are you today?
[00:01:12] Cheryl Cheng: I'm great. Thanks for having me.
[00:01:14] Kip Theno: It's our pleasure. And, you know, knowing your background a little bit, I know you've had the scenic route in getting to the world of VC at Vive. Why don't you tell us about your road to healthcare, Cheryl?
[00:01:25] Cheryl Cheng: Yeah. So I think everybody has a pretty personal journey, uh, to healthcare.
[00:01:30] And mine definitely was, my background is more finance, new products, operations, and marketing. But I grew up with the privilege of having my grandmother live with us. And asI got into my twenties, really got to experience what care looked like for her as she developed Dementia and Alzheimer's.
[00:01:52] And then when I had my children, my daughter, when she was very young, I had a little health episode as well, that required some surgery. And so, I think for me, having the two bookends of health care with my grandmother and then also with a really young child really brought to light a lot of the areas where health care in theU.S. was inefficient or even for those who were pretty health literate and had resources, still struggled to find the level of care or the expediency of care that we wanted. So that's what brought me into health care investing and thinking about ways where we could use technology, particularly software to remove some of those obstacles.
[00:02:37] Kip Theno: It's so interesting, Cheryl. I mean, I hear all the time that most folks in healthcare that I know, and may be that you know, are in it for a personal reason, right? And, and even me and my family from an oncology and a cancer perspective, my sister as an example, and, what I do know is folks that get into healthcare, they typically don't get in to it to deal with legislation necessarily, or, the complexities that prevent folks from getting on the right medicine at the right time, and you've got a unique point of view working with SamaCare and in the space, and I'd love to hear your approach and Vive's approach to your investment thesis and what you look for in a digital healthcare startup with the patient in mind.
[00:03:15] Cheryl Cheng: Yeah. So in, in college, I actually have a public policy major and I remember sitting in classes, in some of them touched healthcare policy, just being confused and really not understanding how you could even move policy or influence policy, particularly with regard to healthcare.
[00:03:31] And so I have a healthy respect for the fact that for us as investors and for startups, we cannot invest or create innovation banking on policy to change. And that being the tailwind for the success of a company or our investment strategy. It's just too complex. So instead, we really think about investing in areas where we believe software can improve workflows, but still operating under the status quo of public policy today, and that can be frustrating. But when we think of businesses like SamaCare or many others, we don't think, prior authorization is just going togo away entirely and we're going to bank on that. That would be a fool's errand. Instead, we think, all right, let's operate under the pretense that we will need prior authorization. We will continue to need benefits verification, but it is unacceptable that a patient takes anywhere between six to nine months to get on a critical life saving therapy, after the doctor has deemed that this is the clinically right thing for them to be on. And so therein lies the opportunity to say, let's go deconstruct the workflow for a provider, or let's go look at what becomes valuable to a pharmaceutical company or to the payer and use software to fill in the areas where there is inherent institutional inefficiency.
[00:05:03] And that's where I think it's really exciting. In our thesis in general is around that, but that was also very much the thesis around our investment in SamaCare
[00:05:13] Kip Theno: yeah. And it seems like legislation in a way is kind of behind the time. And, and you just brought up some great points on that. You're looking for, you know, health tech companies that can maybe move the needle, but how do we do that? How do we move the needle with new startups and new technologies and innovations when our own legislators are kind of behind the eight ball on what's happening in science?
[00:05:35] Cheryl Cheng: There's multiple streams of work that have to happen simultaneously, right? So I think it is important to constantly educate as well as listen to legislators about what is possible and what is feasible and everything in public policy, there are trade offs or there's analysis that has to be done.
[00:05:56] But then on the other end, I spent a few years, you know, it took a little detour from my finance career and was working in new products and innovation in consumer packaged goods companies. I worked atClorox and spent some time in a joint venture with Procter & Gamble. And in that world, we do a lot of needs assessment.
[00:06:15] And when we do new product innovation, we would go into people's homes. We would watch them cook food. We watch them scoop cat litter. We watch them do all these things to really understand all of the steps that they took and how they thought about each step. And when I think about, provider workflow, payer workflow.
[00:06:34] When I think about the data that life sciences company really wants to be able to receive so that they can make changes in their workflow. Like it is going back to those very, almost anthropological, work to understand where is the work breaking down for you or where is it inefficient?
[00:06:54] And is it because the technology tools are not there. Is it because the culture of your organization or, your subsector just embraces certain types of workflows and we're not going to be able to change it? And I think one of the fallacies of Silicon Valley is often "build it and they will come".
[00:07:15] And yes, you can build incredible software and it is objectively better, but that doesn't mean you can change user behavior. And so I think as a innovator in this space, there needs to be more time and effort looking at the needs assessment and what can really be changed from a user behavior perspective first.
[00:07:37] And then figure out what that wedge is in your product and sell and introduce that.
[00:07:43] Kip Theno: Yeah, absolutely. And I won't bore you, Cheryl with, or maybe shock you with how long I've been doing this as well, but, a statistic that I've heard throughout the decades, which is 40, 50,60 percent of all med tech startups fail, regardless of how revolutionary their technology might be. And maybe change is a part of that because change is not always easy. There's probably some things in the graveyard of wonderful ideas that didn't make it, and you probably have seen this many times in your career.When does a med tech startup with a wonderful idea fail to launch? What are some reasons why that you've seen?
[00:08:17] Cheryl Cheng: Well, in healthcare, definitely, there's the policy in the regulatory side and there are companies that don't make it because of that.
[00:08:24] And that's sort of technology risk and regulatory risk. But aside from that, I actually think of startups as an archipelago of terrible probabilities. The first little island being did you find a problem that people really want solved? And then you have a chance that you did or you didn't.
[00:08:47] And then the next little island is, did you actually create the right product to solve that problem? And then it's did you find the right customer and not all customers are the same. You can't say, "Oh, I'm going after life sciences companies.". Well, they're not all the same. And there are some that are going to be early adopters and some that their organization is set up with different incentives and like, is what you sell into them, match their internal incentives. And then there's the archipelago that's, you know, island of, did somebody else build it better? And then you get down to a certain level and there's even like, do you have a good culture? Did you attract the right talent?
[00:09:28] And when you multiply the probabilities of, actually getting it right on each one of these islands of the archipelago. You can see that your probability of success is actually not that high, to put it diplomatically and that's where I think having good partners attracting the right talent.
[00:09:48] Really actually figuring out who are the right first customers. I remember when I first came back to venture in marketing tech was a hot area. And everyone said, I'm so excited. We're going to sign a contract with Procter & Gamble. And I actually would cringe a little bit inside because I thought, "you are this teeny, tiny startup and you're really excited that you've sold into this likeFortune 100 company, but your processes and their processes just don't matchup. And you are gonna be suffocated by the process of selling in even the procurement system of selling into such a large company."
[00:10:27] And is that really the first place to start? And so I think a lot of times startups will fail for.A plethora of these reasons it's not just one thing. And then in the backdrop of all of that, which is what we're experiencing right now is the ebbs and flows of the venture cycle. And so if your timing for starting a company doesn't match up with the investment cycle of venture or private equity, you may just be working really against the grain.
[00:11:01] And that's unfortunate, even if you had a really good idea or a really good initial piece of technology.
[00:11:10] Kip Theno: Right. Yeah. And, well, it goes right back to the change. I mean, if you think of what any new manufacturer is trying to do with a new drug or a new device, as an example, and I spent 20years on the interventional side of cardiology, you're impacting clinical behavior.
[00:11:24] But I also hear a lot "well, if we just had the money, if we just had the money that we could make this happen,"
[00:11:31] when do you really vet and look at, well, maybe you do need the money and yes, it will happen because you have X, Y, and Z, or actually you don't need it. How do you make that decision?
[00:11:42] Cheryl Cheng: Well, we always do ask what are the use of proceeds and definitely, startups will go what we call like deep into the J curve, where they're not going to be profitable for a while.
[00:11:53] But I actually think in the early, early stages of a company being capital constrained is actually a good thing. It may not feel that way to the founder, but it is a good thing because it forces you to make some important trade offs in what you're going to build, when you're going to build it. And really sharpen the spear and figure out who's your real customer, right?
[00:12:15] All of that segmentation, positioning, targeting, all of that work needs to be done. If you are flooded with money, you don't have to make those tradeoffs because you can just put different product teams and engineering teams on a bunch of different initiatives.
[00:12:30] And in the end, you may not have as clear of a signal on do you have product market fit. So in the early stages, I actually think capital constraint could create, a better product and better outcome in the long run. And then the second gate will be how efficient is your selling motion and your go to market motion.
[00:12:52] And so here, this is actually tricky because you could say, well, I need lots and lots of sales people. I'm going to canvas the market and we're going to own it. But if you don't really know that you have product market fit, then you have all of these expensive salespeople out there trying to sell something and you're selling a, and the buyer wants to buy a prime or B.
[00:13:13] And so you're actually making a very inefficient sales process for yourself. And then the other is, I think it takes time to get the sales operations piece down. And so if you, again, are overfunded. then, you may be building bad habits for your organization. But there is a point where you do realize you're leaving money on the table or competition is pushing you to move faster or more aggressively and you are going to have to step up your funding.
[00:13:46] And that is, a reality. And I think it's good for founders to have investors who have deep pockets and ones where they really do understand not just the segment that they're operating in, but the operations of their business and spending a lot of time with their investors on those pieces so that when those inflection points come or as you're approaching them, everybody has the right signal to know that more investment dollars should go in.
[00:14:15] Kip Theno: Right. I mean, if you look at the life cycle of a company, you got inception, conception, momentum, stability, you know, transformation and right there's that kind of that valley of insight where you can succeed or fail. And from your perspective and your organization's perspective, does product market fit change over time? And I guess what I'm really asking is when do you all run out of patience and say, you know what? We think this is probably not going to work.
[00:14:40] What are the indicators?
[00:14:42] Cheryl Cheng: They're quite different for different kinds of companies, right? And that has a little bit to do with the business model and the type of customer that you're selling into. If you're selling into, let's say the longtail of providers, it looks a little bit more like selling into small business.
[00:15:00] And so you're looking for shorter velocity cycles where, you shouldn't be spending 18 months nurturing a small provider practice to, to buy, right? That the loop should be a little bit tighter, but then the contract values are going to be less. If you're going after, top 20 large pharma, that's your whale hunting.
[00:15:23] And that is a very different motion. So I think there is no one right answer. I do think that everything should be tracked. Understanding time from reach out to demo, demo to contracting contracting to close, all of those gates in the funnel should be evaluated quantitatively.
[00:15:48] And then if it just doesn't seem to be in line with the market, i. e. competitors or other companies that have the same go to market motion, you have a problem. And then obviously there are macro issues always at play. And I think that founders and investors have to be very open with each other about that.
[00:16:12] Like right now it's, a tough selling market. So there needs to be some patience, but then there also needs to be an appetite for creativity of what else do we need? And you see in every down cycle, there are companies that pull through and they just do really, really well.
[00:16:29] But they do have to get scrappy and they have to get creative. So I don't think there's a, at 12 months or at 18 months, like, everybody loses patience. I don't think it's that black and white, it isn't for me.
[00:16:42] Kip Theno: No, sure. That makes sense.
[00:16:43] It's interesting just to dovetail on that. Cheryl, I've heard you discuss a term called"tech debt". Just for our listeners, can you explain not only what that is, but look, is it a byproduct or is it a necessity? What are your thoughts?
[00:16:55] Cheryl Cheng: So I think of tech debt as two things. Actually just to revisit your previous question a little bit around, when do we say, Hey, this is not going to work. There are occasions where I would say there are technology platform dislocations. Moving from analog to digital, right, moving from, yourPC to the cloud and the Internet.
[00:17:19] And then now, like your internet to mobile and, you know, today moving from that to, AI and generative AI platform. So there are computing dislocations that happen. They don't happen constantly, but they do happen every X number of years. And when that happens, it could wipeout entire swaths of companies.
[00:17:41] And when you see that you may have to call it, right? Like as a team, as an investor, be like,y ou know what, you're not there. So you either adapt or you're going to die. So those happen as well that have nothing to do with, do you have the right sales motion and your sales ops and all of those things. Tech debt is kind of interesting because at the early stage, we see companies that are cobbling together their solutions through, sometimes they are using vendors of other pieces of software, et cetera, to pull together their value proposition.
[00:18:16] And over time they need to decide, are we going to engineer ourselves, Oh, out of our vendors that we use or will we just continue to use them because they're not mission critical. And so like, nobody needs to build their own CRM system. Right. And so like, we will continue to license Salesforce or Affinity or whatever.It's not core to our business. Whatever's core to our value proposition, we either need to own that, or we know that we're always going to be beholden to someone. And so if you go too far, down the path without making those critical calls, you could develop tech debt.
[00:18:53] Or you could be building on a certain computing paradigm, like cloud or whatever it is, and now we're all shifting to generative AI. And are you set up to do that if you don't have the infrastructure for it, then suddenly the new, younger, faster, nimbler player is going to come up on a new computing platform that could displace you and you may have that tech debt that you either need to overhaul your engineering stack your tech stack to go and modernize or you're gonna buy your way into it through acquisitions.
[00:19:32] We always see a lot of tech acquisitions that generally get done. And some of it is to address some of this tech debt.
[00:19:39] Kip Theno: Thank you for the clarity on that.And by the way, Cheryl, you brought it up, so I am going to go down this rabbit hole on AI. I'll just give you my perspective. I think AI can help us unlock maybe the keys to the universe and gravity and black holes and mathematics and possibly healthcare, but I don't really use it myself because I want to write the content and I want to learn it and I want to do the work.
[00:20:01] And by the way, I don't let my kids do it either now. So with that said, where do you see the applications of AI in healthcare, in med tech startups? Do they lean on it immediately? Is it a must have? Will they fall behind if they don't have it?
[00:20:16] Where do you see the importance of AI today and going forward?
[00:20:20] Cheryl Cheng: So I think that AI is very important in that we cannot put our blinders on and say it isn't going to happen, we're not going to use it.So we need to be aware that it's there and we need to be thinking strategically about, our own jobs, the competitive landscape and how we want to use it.
[00:20:42] Now, there are certain areas, let's say like drug discovery, molecule discovery, where it is going to be able to help us do things that humans can't do. And, just the the incredible amount of data that it can process simultaneously is something that we just can't do. And we have to acknowledge that.
[00:21:04] Do I think that we're going to go to a world in health care where everyone's going to interact with a generative AI doctor instead of a real doctor? No. But what I do think is that it is this incredible leveler and at some point, and I think businesses need to And people need to acknowledge that.
[00:21:27] I'll give you the example of my son. He recently had some questions in his economics class aroundWACC weighted average cost of capital. And we had this whole discussion and he had the benefit of having two parents who work in finance. So, you know, we gave examples.
[00:21:44] It was dinner table conversation, this whole thing. And I had to tell him that like, you know, you're really not at an advantage because you have us as your parents, because there's somebody else out there who doesn't have us as parents or anybody in finance, but they have access to ChatGPT. And you can ask all of those questions and get answers.
[00:22:06] And 20 years ago, that person was at a serious disadvantage, but now they're not. And you're really not that special because you have us as parents who could happen to answer this question, and you need to be aware of that. The speed and alacrity of information that's available because of generative AI, and if used properly as a tool, is an incredible leveler, and it creates another higher gear of competitiveness thatI think businesses, individuals need to know how to embrace and when to use it.
[00:22:43] Now, let's put the ethics of AI aside for a moment. I'm not saying, kids should be using it to write their English literature papers. But you have to acknowledge it as a tool. And when I think of businesses, it's the same thing, it's like back when we were going into the modern day of manufacturing, we started thinking about division of labor.
[00:23:02] And it's the same thing with AI. AI is another worker in our toolkit that we should be leveraging to do tasks either with more accuracy, higher speed, processing more, but humans should stay in the loop and AI should maybe be a little bit more invisible in the background. But it's there and I have to challenge myself all the time that maybe I shouldn't just be doing a Google search. Maybe I should remind myself that there are these other tools out there and how can I use them and where will I use them? So, we have to change our behavior as humans and as users of technology. I'm hyper aware of it because I also don't want to get leapfrogged out there.
[00:23:49] And so I think we, we all have to empower all of our employees to think about how they would best use AI to improve their work product or experience and then evaluate how and if that makes sense.
[00:24:07] Kip Theno: No, that's great. And yes, Cheryl, there's definitely a balance. And by the way, I was being a little bit salty talking about AI. Of course, I definitely see the benefits and it's here to stay. I'm just a little bitter because I can't win at my digital chess game anymore. Something's changed within that AI used the Fibonacci attack and I can't win even on the moderate level.
[00:24:27] Anyway, one of the questions, I've got even before the call is just what are some advice to young budding startups out there with a great idea...
[00:24:35] what are some advice do you have out there for the folks?
[00:24:38] Cheryl Cheng: I think that It's a hard time to be a founder right now. Sitting in end of 2024 were, potentially not even fully out of a contracting cycle. So money is not flowing freely. And that's not just from venture, right?
[00:24:55] Like I think that customers are tightening their belts. The exuberance of 2021 spending is now, all those contracts are at their three year end point and all of that. So I think that is hard. I think that if you are a founder today and you raise money for, let's call it the next 18 to 24 months.
[00:25:20] You should be so energized and excited because, this is a great time to just be building product. So if you're an early stage company, I actually think that's the most exciting place to be right now. If you can get the funding for the idea, because you are getting to develop your product, for a buyer that is highly critical right now.
[00:25:44] And if you can do that, you can sell during the frothy times. What's hard is building your organization only outfitted for growth and overlooking a lot of the very fundamental lumps that, you didn't have to pay attention to in 2021. So having a clean piece of paper to work off of right now is super, super exciting.
[00:26:09] So I think that's great. I also think that founders have to keep in the back of their mind, am I building a painkiller or a vitamin? And nobody's got time for vitamins right now, especially in healthcare.
[00:26:24] And then also, am I building a feature that ultimately belongs on a platform? Or am I actually building the platform? And that's important because if you're an early stage startup, you can build a feature and it could be a really, really good feature and somebody is going to buy your company. But that means that you need to be capital efficient and always keep in mind the end game is I know I'm going to be acquired. I know I'm going to be acquired for some value between X and Y.
[00:26:58] And I want to make sure that I don't over capitalize my business so that both me as a founder and my investors are going to have a really good financial outcome.
[00:27:08] Kip Theno: Wow. That's encouraging. And great insight, Cheryl. Thank you so much for joining us today, Cheryl. It's been a blast and how can people reach you out there?
[00:27:15] Cheryl Cheng: Uh, so always, available onLinkedIn. I think our email addresses are on our website, but it's just cheryl@vivecollective and always happy to talk to founders who are trying to think about hard problems. And also, we love working with executives as well from large companies in the healthcare ecosystem because ultimately innovation is not only in startups.
[00:27:41] And so we also spent a lot of time working with large ecosystem players to think about where are their roll up opportunities? Where are their spin out opportunities? What are they buying? What do they wish they could buy? And we use a lot of that to help inform how we guide founders. To their roadmap, their selling motion, etc.
[00:28:04] So, we love doing that. We love bringing together thought leaders, between pharma and payers, for example, and figuring out where innovation can exist in that interstitial layer. And we're always happy to facilitate those conversations and look for ideas that we can co-invest in, in those areas.
[00:28:23] Kip Theno: Well, thanks, Cheryl. We will get the word out for sure and appreciate the partnership and you being on. By the way, one last question before I let you go.
[00:28:31] Cheryl Cheng: Vive
[00:28:31] Kip Theno: what's the story behind the name? What does that mean?
[00:28:34] Cheryl Cheng: So, Vive is a, I guess,Americanized version of Vivre, which is to live in French.
[00:28:42] Our goal is to invest in companies that can improve access and quality of care. And that doesn't necessarily mean we're going after value based care, or, Medicaid,Medicare. We just think of really the whole person all the time. And of course, businesses like SamaCare that are focused on really life saving critical medications is a part of it.
[00:29:05] But it's other things as well. I had made an investment in a menopause company, a while back because I just felt like women at that time in their life were never included in the healthcare conversation and med school students get like about 30minutes in their entire four years of med school learning about menopause when.
[00:29:24] Every single woman's going to go through it. And so for us, innovation in healthcare is really thinking about the whole person, and just helping them live better. So that's what Vive stands for.
[00:29:36] Kip Theno: Oh, thanks, Cheryl. That's great.And you know, our tagline here at the podcast is "together we can make things right."
[00:29:41] So Cheryl, thank you so much for being on The Road to Care Podcast, appreciate your time.
[00:29:46] Cheryl Cheng: Yes, absolutely. Thanks for having me
[00:29:49] Kip Theno: Thank you for joining the Road toCare podcast hosted by SamaCare, the leader in prior authorization technology and services. Where through a script to therapy operating system, we enable connectivity with clinics, payers, and manufacturers focused on optimizing patient care. Tune in next time as together we can make things right.
[00:30:08] Enjoy the music written, produced and recorded by Jamestown.
Together, we can make healthcare right. Here are some of the outstanding
healthcare organizations and associations championing patient health mentioned in
this episode:
SamaCare is joined by Vive Collective partner and digital health investor Cheryl Cheng for a candid discussion on the opportunities – and challenges — for digital health companies in today’s venture climate. Tune in for valuable advice for startup founders and technologists, and an inside-look for practices into what goes into building healthcare technology.
You’ll learn:
Whether you're a medical provider working with health technology partners, or an entrepreneur thinking of building your own health technology company, this episode has great behind-the-curtains insights into the process of building technology to solve healthcare problems.
[00:00:00] Kip Theno: Welcome to the Road to Care podcast hosted by SamaCare, where we will talk with key opinion leaders, physicians, administrators, manufacturers, venture capitalists, and legislators to get their insights on the state of health care today and where we see it evolving. SamaCare's prior authorization platform is free to clinics, ensuring patients get on the right therapy at the right time.
[00:00:20] Together, we can simply make things right.
[00:00:26] Hey everybody.Thanks again for joining The Road to Care Podcast hosted by SamaCare. And today our special guest is Cheryl Cheng founder Vive Collective. Cheryl is the founder of Vive Collective and was most recently a general partner at BlueRunVentures, one of Silicon Valley's premier VC firms, where she led rounds and works closely with digital health and wellness companies.
[00:00:47] Cheryl currently sits on the board of Kiddo, a pediatric remote patient monitoring company and on the board at SamaCare.Cheryl is an advisor to Stanford's Biodesign program where she teaches go-to-market strategies and mentors faculty and student teams. She is also on the board at the Ronald McDonald House at Stanford, a nonprofit dedicated to supporting families with sick children in their time of need.
[00:01:10] Hey, Cheryl, thanks for joining. How are you today?
[00:01:12] Cheryl Cheng: I'm great. Thanks for having me.
[00:01:14] Kip Theno: It's our pleasure. And, you know, knowing your background a little bit, I know you've had the scenic route in getting to the world of VC at Vive. Why don't you tell us about your road to healthcare, Cheryl?
[00:01:25] Cheryl Cheng: Yeah. So I think everybody has a pretty personal journey, uh, to healthcare.
[00:01:30] And mine definitely was, my background is more finance, new products, operations, and marketing. But I grew up with the privilege of having my grandmother live with us. And asI got into my twenties, really got to experience what care looked like for her as she developed Dementia and Alzheimer's.
[00:01:52] And then when I had my children, my daughter, when she was very young, I had a little health episode as well, that required some surgery. And so, I think for me, having the two bookends of health care with my grandmother and then also with a really young child really brought to light a lot of the areas where health care in theU.S. was inefficient or even for those who were pretty health literate and had resources, still struggled to find the level of care or the expediency of care that we wanted. So that's what brought me into health care investing and thinking about ways where we could use technology, particularly software to remove some of those obstacles.
[00:02:37] Kip Theno: It's so interesting, Cheryl. I mean, I hear all the time that most folks in healthcare that I know, and may be that you know, are in it for a personal reason, right? And, and even me and my family from an oncology and a cancer perspective, my sister as an example, and, what I do know is folks that get into healthcare, they typically don't get in to it to deal with legislation necessarily, or, the complexities that prevent folks from getting on the right medicine at the right time, and you've got a unique point of view working with SamaCare and in the space, and I'd love to hear your approach and Vive's approach to your investment thesis and what you look for in a digital healthcare startup with the patient in mind.
[00:03:15] Cheryl Cheng: Yeah. So in, in college, I actually have a public policy major and I remember sitting in classes, in some of them touched healthcare policy, just being confused and really not understanding how you could even move policy or influence policy, particularly with regard to healthcare.
[00:03:31] And so I have a healthy respect for the fact that for us as investors and for startups, we cannot invest or create innovation banking on policy to change. And that being the tailwind for the success of a company or our investment strategy. It's just too complex. So instead, we really think about investing in areas where we believe software can improve workflows, but still operating under the status quo of public policy today, and that can be frustrating. But when we think of businesses like SamaCare or many others, we don't think, prior authorization is just going togo away entirely and we're going to bank on that. That would be a fool's errand. Instead, we think, all right, let's operate under the pretense that we will need prior authorization. We will continue to need benefits verification, but it is unacceptable that a patient takes anywhere between six to nine months to get on a critical life saving therapy, after the doctor has deemed that this is the clinically right thing for them to be on. And so therein lies the opportunity to say, let's go deconstruct the workflow for a provider, or let's go look at what becomes valuable to a pharmaceutical company or to the payer and use software to fill in the areas where there is inherent institutional inefficiency.
[00:05:03] And that's where I think it's really exciting. In our thesis in general is around that, but that was also very much the thesis around our investment in SamaCare
[00:05:13] Kip Theno: yeah. And it seems like legislation in a way is kind of behind the time. And, and you just brought up some great points on that. You're looking for, you know, health tech companies that can maybe move the needle, but how do we do that? How do we move the needle with new startups and new technologies and innovations when our own legislators are kind of behind the eight ball on what's happening in science?
[00:05:35] Cheryl Cheng: There's multiple streams of work that have to happen simultaneously, right? So I think it is important to constantly educate as well as listen to legislators about what is possible and what is feasible and everything in public policy, there are trade offs or there's analysis that has to be done.
[00:05:56] But then on the other end, I spent a few years, you know, it took a little detour from my finance career and was working in new products and innovation in consumer packaged goods companies. I worked atClorox and spent some time in a joint venture with Procter & Gamble. And in that world, we do a lot of needs assessment.
[00:06:15] And when we do new product innovation, we would go into people's homes. We would watch them cook food. We watch them scoop cat litter. We watch them do all these things to really understand all of the steps that they took and how they thought about each step. And when I think about, provider workflow, payer workflow.
[00:06:34] When I think about the data that life sciences company really wants to be able to receive so that they can make changes in their workflow. Like it is going back to those very, almost anthropological, work to understand where is the work breaking down for you or where is it inefficient?
[00:06:54] And is it because the technology tools are not there. Is it because the culture of your organization or, your subsector just embraces certain types of workflows and we're not going to be able to change it? And I think one of the fallacies of Silicon Valley is often "build it and they will come".
[00:07:15] And yes, you can build incredible software and it is objectively better, but that doesn't mean you can change user behavior. And so I think as a innovator in this space, there needs to be more time and effort looking at the needs assessment and what can really be changed from a user behavior perspective first.
[00:07:37] And then figure out what that wedge is in your product and sell and introduce that.
[00:07:43] Kip Theno: Yeah, absolutely. And I won't bore you, Cheryl with, or maybe shock you with how long I've been doing this as well, but, a statistic that I've heard throughout the decades, which is 40, 50,60 percent of all med tech startups fail, regardless of how revolutionary their technology might be. And maybe change is a part of that because change is not always easy. There's probably some things in the graveyard of wonderful ideas that didn't make it, and you probably have seen this many times in your career.When does a med tech startup with a wonderful idea fail to launch? What are some reasons why that you've seen?
[00:08:17] Cheryl Cheng: Well, in healthcare, definitely, there's the policy in the regulatory side and there are companies that don't make it because of that.
[00:08:24] And that's sort of technology risk and regulatory risk. But aside from that, I actually think of startups as an archipelago of terrible probabilities. The first little island being did you find a problem that people really want solved? And then you have a chance that you did or you didn't.
[00:08:47] And then the next little island is, did you actually create the right product to solve that problem? And then it's did you find the right customer and not all customers are the same. You can't say, "Oh, I'm going after life sciences companies.". Well, they're not all the same. And there are some that are going to be early adopters and some that their organization is set up with different incentives and like, is what you sell into them, match their internal incentives. And then there's the archipelago that's, you know, island of, did somebody else build it better? And then you get down to a certain level and there's even like, do you have a good culture? Did you attract the right talent?
[00:09:28] And when you multiply the probabilities of, actually getting it right on each one of these islands of the archipelago. You can see that your probability of success is actually not that high, to put it diplomatically and that's where I think having good partners attracting the right talent.
[00:09:48] Really actually figuring out who are the right first customers. I remember when I first came back to venture in marketing tech was a hot area. And everyone said, I'm so excited. We're going to sign a contract with Procter & Gamble. And I actually would cringe a little bit inside because I thought, "you are this teeny, tiny startup and you're really excited that you've sold into this likeFortune 100 company, but your processes and their processes just don't matchup. And you are gonna be suffocated by the process of selling in even the procurement system of selling into such a large company."
[00:10:27] And is that really the first place to start? And so I think a lot of times startups will fail for.A plethora of these reasons it's not just one thing. And then in the backdrop of all of that, which is what we're experiencing right now is the ebbs and flows of the venture cycle. And so if your timing for starting a company doesn't match up with the investment cycle of venture or private equity, you may just be working really against the grain.
[00:11:01] And that's unfortunate, even if you had a really good idea or a really good initial piece of technology.
[00:11:10] Kip Theno: Right. Yeah. And, well, it goes right back to the change. I mean, if you think of what any new manufacturer is trying to do with a new drug or a new device, as an example, and I spent 20years on the interventional side of cardiology, you're impacting clinical behavior.
[00:11:24] But I also hear a lot "well, if we just had the money, if we just had the money that we could make this happen,"
[00:11:31] when do you really vet and look at, well, maybe you do need the money and yes, it will happen because you have X, Y, and Z, or actually you don't need it. How do you make that decision?
[00:11:42] Cheryl Cheng: Well, we always do ask what are the use of proceeds and definitely, startups will go what we call like deep into the J curve, where they're not going to be profitable for a while.
[00:11:53] But I actually think in the early, early stages of a company being capital constrained is actually a good thing. It may not feel that way to the founder, but it is a good thing because it forces you to make some important trade offs in what you're going to build, when you're going to build it. And really sharpen the spear and figure out who's your real customer, right?
[00:12:15] All of that segmentation, positioning, targeting, all of that work needs to be done. If you are flooded with money, you don't have to make those tradeoffs because you can just put different product teams and engineering teams on a bunch of different initiatives.
[00:12:30] And in the end, you may not have as clear of a signal on do you have product market fit. So in the early stages, I actually think capital constraint could create, a better product and better outcome in the long run. And then the second gate will be how efficient is your selling motion and your go to market motion.
[00:12:52] And so here, this is actually tricky because you could say, well, I need lots and lots of sales people. I'm going to canvas the market and we're going to own it. But if you don't really know that you have product market fit, then you have all of these expensive salespeople out there trying to sell something and you're selling a, and the buyer wants to buy a prime or B.
[00:13:13] And so you're actually making a very inefficient sales process for yourself. And then the other is, I think it takes time to get the sales operations piece down. And so if you, again, are overfunded. then, you may be building bad habits for your organization. But there is a point where you do realize you're leaving money on the table or competition is pushing you to move faster or more aggressively and you are going to have to step up your funding.
[00:13:46] And that is, a reality. And I think it's good for founders to have investors who have deep pockets and ones where they really do understand not just the segment that they're operating in, but the operations of their business and spending a lot of time with their investors on those pieces so that when those inflection points come or as you're approaching them, everybody has the right signal to know that more investment dollars should go in.
[00:14:15] Kip Theno: Right. I mean, if you look at the life cycle of a company, you got inception, conception, momentum, stability, you know, transformation and right there's that kind of that valley of insight where you can succeed or fail. And from your perspective and your organization's perspective, does product market fit change over time? And I guess what I'm really asking is when do you all run out of patience and say, you know what? We think this is probably not going to work.
[00:14:40] What are the indicators?
[00:14:42] Cheryl Cheng: They're quite different for different kinds of companies, right? And that has a little bit to do with the business model and the type of customer that you're selling into. If you're selling into, let's say the longtail of providers, it looks a little bit more like selling into small business.
[00:15:00] And so you're looking for shorter velocity cycles where, you shouldn't be spending 18 months nurturing a small provider practice to, to buy, right? That the loop should be a little bit tighter, but then the contract values are going to be less. If you're going after, top 20 large pharma, that's your whale hunting.
[00:15:23] And that is a very different motion. So I think there is no one right answer. I do think that everything should be tracked. Understanding time from reach out to demo, demo to contracting contracting to close, all of those gates in the funnel should be evaluated quantitatively.
[00:15:48] And then if it just doesn't seem to be in line with the market, i. e. competitors or other companies that have the same go to market motion, you have a problem. And then obviously there are macro issues always at play. And I think that founders and investors have to be very open with each other about that.
[00:16:12] Like right now it's, a tough selling market. So there needs to be some patience, but then there also needs to be an appetite for creativity of what else do we need? And you see in every down cycle, there are companies that pull through and they just do really, really well.
[00:16:29] But they do have to get scrappy and they have to get creative. So I don't think there's a, at 12 months or at 18 months, like, everybody loses patience. I don't think it's that black and white, it isn't for me.
[00:16:42] Kip Theno: No, sure. That makes sense.
[00:16:43] It's interesting just to dovetail on that. Cheryl, I've heard you discuss a term called"tech debt". Just for our listeners, can you explain not only what that is, but look, is it a byproduct or is it a necessity? What are your thoughts?
[00:16:55] Cheryl Cheng: So I think of tech debt as two things. Actually just to revisit your previous question a little bit around, when do we say, Hey, this is not going to work. There are occasions where I would say there are technology platform dislocations. Moving from analog to digital, right, moving from, yourPC to the cloud and the Internet.
[00:17:19] And then now, like your internet to mobile and, you know, today moving from that to, AI and generative AI platform. So there are computing dislocations that happen. They don't happen constantly, but they do happen every X number of years. And when that happens, it could wipeout entire swaths of companies.
[00:17:41] And when you see that you may have to call it, right? Like as a team, as an investor, be like,y ou know what, you're not there. So you either adapt or you're going to die. So those happen as well that have nothing to do with, do you have the right sales motion and your sales ops and all of those things. Tech debt is kind of interesting because at the early stage, we see companies that are cobbling together their solutions through, sometimes they are using vendors of other pieces of software, et cetera, to pull together their value proposition.
[00:18:16] And over time they need to decide, are we going to engineer ourselves, Oh, out of our vendors that we use or will we just continue to use them because they're not mission critical. And so like, nobody needs to build their own CRM system. Right. And so like, we will continue to license Salesforce or Affinity or whatever.It's not core to our business. Whatever's core to our value proposition, we either need to own that, or we know that we're always going to be beholden to someone. And so if you go too far, down the path without making those critical calls, you could develop tech debt.
[00:18:53] Or you could be building on a certain computing paradigm, like cloud or whatever it is, and now we're all shifting to generative AI. And are you set up to do that if you don't have the infrastructure for it, then suddenly the new, younger, faster, nimbler player is going to come up on a new computing platform that could displace you and you may have that tech debt that you either need to overhaul your engineering stack your tech stack to go and modernize or you're gonna buy your way into it through acquisitions.
[00:19:32] We always see a lot of tech acquisitions that generally get done. And some of it is to address some of this tech debt.
[00:19:39] Kip Theno: Thank you for the clarity on that.And by the way, Cheryl, you brought it up, so I am going to go down this rabbit hole on AI. I'll just give you my perspective. I think AI can help us unlock maybe the keys to the universe and gravity and black holes and mathematics and possibly healthcare, but I don't really use it myself because I want to write the content and I want to learn it and I want to do the work.
[00:20:01] And by the way, I don't let my kids do it either now. So with that said, where do you see the applications of AI in healthcare, in med tech startups? Do they lean on it immediately? Is it a must have? Will they fall behind if they don't have it?
[00:20:16] Where do you see the importance of AI today and going forward?
[00:20:20] Cheryl Cheng: So I think that AI is very important in that we cannot put our blinders on and say it isn't going to happen, we're not going to use it.So we need to be aware that it's there and we need to be thinking strategically about, our own jobs, the competitive landscape and how we want to use it.
[00:20:42] Now, there are certain areas, let's say like drug discovery, molecule discovery, where it is going to be able to help us do things that humans can't do. And, just the the incredible amount of data that it can process simultaneously is something that we just can't do. And we have to acknowledge that.
[00:21:04] Do I think that we're going to go to a world in health care where everyone's going to interact with a generative AI doctor instead of a real doctor? No. But what I do think is that it is this incredible leveler and at some point, and I think businesses need to And people need to acknowledge that.
[00:21:27] I'll give you the example of my son. He recently had some questions in his economics class aroundWACC weighted average cost of capital. And we had this whole discussion and he had the benefit of having two parents who work in finance. So, you know, we gave examples.
[00:21:44] It was dinner table conversation, this whole thing. And I had to tell him that like, you know, you're really not at an advantage because you have us as your parents, because there's somebody else out there who doesn't have us as parents or anybody in finance, but they have access to ChatGPT. And you can ask all of those questions and get answers.
[00:22:06] And 20 years ago, that person was at a serious disadvantage, but now they're not. And you're really not that special because you have us as parents who could happen to answer this question, and you need to be aware of that. The speed and alacrity of information that's available because of generative AI, and if used properly as a tool, is an incredible leveler, and it creates another higher gear of competitiveness thatI think businesses, individuals need to know how to embrace and when to use it.
[00:22:43] Now, let's put the ethics of AI aside for a moment. I'm not saying, kids should be using it to write their English literature papers. But you have to acknowledge it as a tool. And when I think of businesses, it's the same thing, it's like back when we were going into the modern day of manufacturing, we started thinking about division of labor.
[00:23:02] And it's the same thing with AI. AI is another worker in our toolkit that we should be leveraging to do tasks either with more accuracy, higher speed, processing more, but humans should stay in the loop and AI should maybe be a little bit more invisible in the background. But it's there and I have to challenge myself all the time that maybe I shouldn't just be doing a Google search. Maybe I should remind myself that there are these other tools out there and how can I use them and where will I use them? So, we have to change our behavior as humans and as users of technology. I'm hyper aware of it because I also don't want to get leapfrogged out there.
[00:23:49] And so I think we, we all have to empower all of our employees to think about how they would best use AI to improve their work product or experience and then evaluate how and if that makes sense.
[00:24:07] Kip Theno: No, that's great. And yes, Cheryl, there's definitely a balance. And by the way, I was being a little bit salty talking about AI. Of course, I definitely see the benefits and it's here to stay. I'm just a little bitter because I can't win at my digital chess game anymore. Something's changed within that AI used the Fibonacci attack and I can't win even on the moderate level.
[00:24:27] Anyway, one of the questions, I've got even before the call is just what are some advice to young budding startups out there with a great idea...
[00:24:35] what are some advice do you have out there for the folks?
[00:24:38] Cheryl Cheng: I think that It's a hard time to be a founder right now. Sitting in end of 2024 were, potentially not even fully out of a contracting cycle. So money is not flowing freely. And that's not just from venture, right?
[00:24:55] Like I think that customers are tightening their belts. The exuberance of 2021 spending is now, all those contracts are at their three year end point and all of that. So I think that is hard. I think that if you are a founder today and you raise money for, let's call it the next 18 to 24 months.
[00:25:20] You should be so energized and excited because, this is a great time to just be building product. So if you're an early stage company, I actually think that's the most exciting place to be right now. If you can get the funding for the idea, because you are getting to develop your product, for a buyer that is highly critical right now.
[00:25:44] And if you can do that, you can sell during the frothy times. What's hard is building your organization only outfitted for growth and overlooking a lot of the very fundamental lumps that, you didn't have to pay attention to in 2021. So having a clean piece of paper to work off of right now is super, super exciting.
[00:26:09] So I think that's great. I also think that founders have to keep in the back of their mind, am I building a painkiller or a vitamin? And nobody's got time for vitamins right now, especially in healthcare.
[00:26:24] And then also, am I building a feature that ultimately belongs on a platform? Or am I actually building the platform? And that's important because if you're an early stage startup, you can build a feature and it could be a really, really good feature and somebody is going to buy your company. But that means that you need to be capital efficient and always keep in mind the end game is I know I'm going to be acquired. I know I'm going to be acquired for some value between X and Y.
[00:26:58] And I want to make sure that I don't over capitalize my business so that both me as a founder and my investors are going to have a really good financial outcome.
[00:27:08] Kip Theno: Wow. That's encouraging. And great insight, Cheryl. Thank you so much for joining us today, Cheryl. It's been a blast and how can people reach you out there?
[00:27:15] Cheryl Cheng: Uh, so always, available onLinkedIn. I think our email addresses are on our website, but it's just cheryl@vivecollective and always happy to talk to founders who are trying to think about hard problems. And also, we love working with executives as well from large companies in the healthcare ecosystem because ultimately innovation is not only in startups.
[00:27:41] And so we also spent a lot of time working with large ecosystem players to think about where are their roll up opportunities? Where are their spin out opportunities? What are they buying? What do they wish they could buy? And we use a lot of that to help inform how we guide founders. To their roadmap, their selling motion, etc.
[00:28:04] So, we love doing that. We love bringing together thought leaders, between pharma and payers, for example, and figuring out where innovation can exist in that interstitial layer. And we're always happy to facilitate those conversations and look for ideas that we can co-invest in, in those areas.
[00:28:23] Kip Theno: Well, thanks, Cheryl. We will get the word out for sure and appreciate the partnership and you being on. By the way, one last question before I let you go.
[00:28:31] Cheryl Cheng: Vive
[00:28:31] Kip Theno: what's the story behind the name? What does that mean?
[00:28:34] Cheryl Cheng: So, Vive is a, I guess,Americanized version of Vivre, which is to live in French.
[00:28:42] Our goal is to invest in companies that can improve access and quality of care. And that doesn't necessarily mean we're going after value based care, or, Medicaid,Medicare. We just think of really the whole person all the time. And of course, businesses like SamaCare that are focused on really life saving critical medications is a part of it.
[00:29:05] But it's other things as well. I had made an investment in a menopause company, a while back because I just felt like women at that time in their life were never included in the healthcare conversation and med school students get like about 30minutes in their entire four years of med school learning about menopause when.
[00:29:24] Every single woman's going to go through it. And so for us, innovation in healthcare is really thinking about the whole person, and just helping them live better. So that's what Vive stands for.
[00:29:36] Kip Theno: Oh, thanks, Cheryl. That's great.And you know, our tagline here at the podcast is "together we can make things right."
[00:29:41] So Cheryl, thank you so much for being on The Road to Care Podcast, appreciate your time.
[00:29:46] Cheryl Cheng: Yes, absolutely. Thanks for having me
[00:29:49] Kip Theno: Thank you for joining the Road toCare podcast hosted by SamaCare, the leader in prior authorization technology and services. Where through a script to therapy operating system, we enable connectivity with clinics, payers, and manufacturers focused on optimizing patient care. Tune in next time as together we can make things right.
[00:30:08] Enjoy the music written, produced and recorded by Jamestown.
Together, we can make healthcare right. Here are some of the outstanding
healthcare organizations and associations championing patient health mentioned in
this episode:
SamaCare is joined by Vive Collective partner and digital health investor Cheryl Cheng for a candid discussion on the opportunities – and challenges — for digital health companies in today’s venture climate. Tune in for valuable advice for startup founders and technologists, and an inside-look for practices into what goes into building healthcare technology.
You’ll learn:
Whether you're a medical provider working with health technology partners, or an entrepreneur thinking of building your own health technology company, this episode has great behind-the-curtains insights into the process of building technology to solve healthcare problems.
[00:00:00] Kip Theno: Welcome to the Road to Care podcast hosted by SamaCare, where we will talk with key opinion leaders, physicians, administrators, manufacturers, venture capitalists, and legislators to get their insights on the state of health care today and where we see it evolving. SamaCare's prior authorization platform is free to clinics, ensuring patients get on the right therapy at the right time.
[00:00:20] Together, we can simply make things right.
[00:00:26] Hey everybody.Thanks again for joining The Road to Care Podcast hosted by SamaCare. And today our special guest is Cheryl Cheng founder Vive Collective. Cheryl is the founder of Vive Collective and was most recently a general partner at BlueRunVentures, one of Silicon Valley's premier VC firms, where she led rounds and works closely with digital health and wellness companies.
[00:00:47] Cheryl currently sits on the board of Kiddo, a pediatric remote patient monitoring company and on the board at SamaCare.Cheryl is an advisor to Stanford's Biodesign program where she teaches go-to-market strategies and mentors faculty and student teams. She is also on the board at the Ronald McDonald House at Stanford, a nonprofit dedicated to supporting families with sick children in their time of need.
[00:01:10] Hey, Cheryl, thanks for joining. How are you today?
[00:01:12] Cheryl Cheng: I'm great. Thanks for having me.
[00:01:14] Kip Theno: It's our pleasure. And, you know, knowing your background a little bit, I know you've had the scenic route in getting to the world of VC at Vive. Why don't you tell us about your road to healthcare, Cheryl?
[00:01:25] Cheryl Cheng: Yeah. So I think everybody has a pretty personal journey, uh, to healthcare.
[00:01:30] And mine definitely was, my background is more finance, new products, operations, and marketing. But I grew up with the privilege of having my grandmother live with us. And asI got into my twenties, really got to experience what care looked like for her as she developed Dementia and Alzheimer's.
[00:01:52] And then when I had my children, my daughter, when she was very young, I had a little health episode as well, that required some surgery. And so, I think for me, having the two bookends of health care with my grandmother and then also with a really young child really brought to light a lot of the areas where health care in theU.S. was inefficient or even for those who were pretty health literate and had resources, still struggled to find the level of care or the expediency of care that we wanted. So that's what brought me into health care investing and thinking about ways where we could use technology, particularly software to remove some of those obstacles.
[00:02:37] Kip Theno: It's so interesting, Cheryl. I mean, I hear all the time that most folks in healthcare that I know, and may be that you know, are in it for a personal reason, right? And, and even me and my family from an oncology and a cancer perspective, my sister as an example, and, what I do know is folks that get into healthcare, they typically don't get in to it to deal with legislation necessarily, or, the complexities that prevent folks from getting on the right medicine at the right time, and you've got a unique point of view working with SamaCare and in the space, and I'd love to hear your approach and Vive's approach to your investment thesis and what you look for in a digital healthcare startup with the patient in mind.
[00:03:15] Cheryl Cheng: Yeah. So in, in college, I actually have a public policy major and I remember sitting in classes, in some of them touched healthcare policy, just being confused and really not understanding how you could even move policy or influence policy, particularly with regard to healthcare.
[00:03:31] And so I have a healthy respect for the fact that for us as investors and for startups, we cannot invest or create innovation banking on policy to change. And that being the tailwind for the success of a company or our investment strategy. It's just too complex. So instead, we really think about investing in areas where we believe software can improve workflows, but still operating under the status quo of public policy today, and that can be frustrating. But when we think of businesses like SamaCare or many others, we don't think, prior authorization is just going togo away entirely and we're going to bank on that. That would be a fool's errand. Instead, we think, all right, let's operate under the pretense that we will need prior authorization. We will continue to need benefits verification, but it is unacceptable that a patient takes anywhere between six to nine months to get on a critical life saving therapy, after the doctor has deemed that this is the clinically right thing for them to be on. And so therein lies the opportunity to say, let's go deconstruct the workflow for a provider, or let's go look at what becomes valuable to a pharmaceutical company or to the payer and use software to fill in the areas where there is inherent institutional inefficiency.
[00:05:03] And that's where I think it's really exciting. In our thesis in general is around that, but that was also very much the thesis around our investment in SamaCare
[00:05:13] Kip Theno: yeah. And it seems like legislation in a way is kind of behind the time. And, and you just brought up some great points on that. You're looking for, you know, health tech companies that can maybe move the needle, but how do we do that? How do we move the needle with new startups and new technologies and innovations when our own legislators are kind of behind the eight ball on what's happening in science?
[00:05:35] Cheryl Cheng: There's multiple streams of work that have to happen simultaneously, right? So I think it is important to constantly educate as well as listen to legislators about what is possible and what is feasible and everything in public policy, there are trade offs or there's analysis that has to be done.
[00:05:56] But then on the other end, I spent a few years, you know, it took a little detour from my finance career and was working in new products and innovation in consumer packaged goods companies. I worked atClorox and spent some time in a joint venture with Procter & Gamble. And in that world, we do a lot of needs assessment.
[00:06:15] And when we do new product innovation, we would go into people's homes. We would watch them cook food. We watch them scoop cat litter. We watch them do all these things to really understand all of the steps that they took and how they thought about each step. And when I think about, provider workflow, payer workflow.
[00:06:34] When I think about the data that life sciences company really wants to be able to receive so that they can make changes in their workflow. Like it is going back to those very, almost anthropological, work to understand where is the work breaking down for you or where is it inefficient?
[00:06:54] And is it because the technology tools are not there. Is it because the culture of your organization or, your subsector just embraces certain types of workflows and we're not going to be able to change it? And I think one of the fallacies of Silicon Valley is often "build it and they will come".
[00:07:15] And yes, you can build incredible software and it is objectively better, but that doesn't mean you can change user behavior. And so I think as a innovator in this space, there needs to be more time and effort looking at the needs assessment and what can really be changed from a user behavior perspective first.
[00:07:37] And then figure out what that wedge is in your product and sell and introduce that.
[00:07:43] Kip Theno: Yeah, absolutely. And I won't bore you, Cheryl with, or maybe shock you with how long I've been doing this as well, but, a statistic that I've heard throughout the decades, which is 40, 50,60 percent of all med tech startups fail, regardless of how revolutionary their technology might be. And maybe change is a part of that because change is not always easy. There's probably some things in the graveyard of wonderful ideas that didn't make it, and you probably have seen this many times in your career.When does a med tech startup with a wonderful idea fail to launch? What are some reasons why that you've seen?
[00:08:17] Cheryl Cheng: Well, in healthcare, definitely, there's the policy in the regulatory side and there are companies that don't make it because of that.
[00:08:24] And that's sort of technology risk and regulatory risk. But aside from that, I actually think of startups as an archipelago of terrible probabilities. The first little island being did you find a problem that people really want solved? And then you have a chance that you did or you didn't.
[00:08:47] And then the next little island is, did you actually create the right product to solve that problem? And then it's did you find the right customer and not all customers are the same. You can't say, "Oh, I'm going after life sciences companies.". Well, they're not all the same. And there are some that are going to be early adopters and some that their organization is set up with different incentives and like, is what you sell into them, match their internal incentives. And then there's the archipelago that's, you know, island of, did somebody else build it better? And then you get down to a certain level and there's even like, do you have a good culture? Did you attract the right talent?
[00:09:28] And when you multiply the probabilities of, actually getting it right on each one of these islands of the archipelago. You can see that your probability of success is actually not that high, to put it diplomatically and that's where I think having good partners attracting the right talent.
[00:09:48] Really actually figuring out who are the right first customers. I remember when I first came back to venture in marketing tech was a hot area. And everyone said, I'm so excited. We're going to sign a contract with Procter & Gamble. And I actually would cringe a little bit inside because I thought, "you are this teeny, tiny startup and you're really excited that you've sold into this likeFortune 100 company, but your processes and their processes just don't matchup. And you are gonna be suffocated by the process of selling in even the procurement system of selling into such a large company."
[00:10:27] And is that really the first place to start? And so I think a lot of times startups will fail for.A plethora of these reasons it's not just one thing. And then in the backdrop of all of that, which is what we're experiencing right now is the ebbs and flows of the venture cycle. And so if your timing for starting a company doesn't match up with the investment cycle of venture or private equity, you may just be working really against the grain.
[00:11:01] And that's unfortunate, even if you had a really good idea or a really good initial piece of technology.
[00:11:10] Kip Theno: Right. Yeah. And, well, it goes right back to the change. I mean, if you think of what any new manufacturer is trying to do with a new drug or a new device, as an example, and I spent 20years on the interventional side of cardiology, you're impacting clinical behavior.
[00:11:24] But I also hear a lot "well, if we just had the money, if we just had the money that we could make this happen,"
[00:11:31] when do you really vet and look at, well, maybe you do need the money and yes, it will happen because you have X, Y, and Z, or actually you don't need it. How do you make that decision?
[00:11:42] Cheryl Cheng: Well, we always do ask what are the use of proceeds and definitely, startups will go what we call like deep into the J curve, where they're not going to be profitable for a while.
[00:11:53] But I actually think in the early, early stages of a company being capital constrained is actually a good thing. It may not feel that way to the founder, but it is a good thing because it forces you to make some important trade offs in what you're going to build, when you're going to build it. And really sharpen the spear and figure out who's your real customer, right?
[00:12:15] All of that segmentation, positioning, targeting, all of that work needs to be done. If you are flooded with money, you don't have to make those tradeoffs because you can just put different product teams and engineering teams on a bunch of different initiatives.
[00:12:30] And in the end, you may not have as clear of a signal on do you have product market fit. So in the early stages, I actually think capital constraint could create, a better product and better outcome in the long run. And then the second gate will be how efficient is your selling motion and your go to market motion.
[00:12:52] And so here, this is actually tricky because you could say, well, I need lots and lots of sales people. I'm going to canvas the market and we're going to own it. But if you don't really know that you have product market fit, then you have all of these expensive salespeople out there trying to sell something and you're selling a, and the buyer wants to buy a prime or B.
[00:13:13] And so you're actually making a very inefficient sales process for yourself. And then the other is, I think it takes time to get the sales operations piece down. And so if you, again, are overfunded. then, you may be building bad habits for your organization. But there is a point where you do realize you're leaving money on the table or competition is pushing you to move faster or more aggressively and you are going to have to step up your funding.
[00:13:46] And that is, a reality. And I think it's good for founders to have investors who have deep pockets and ones where they really do understand not just the segment that they're operating in, but the operations of their business and spending a lot of time with their investors on those pieces so that when those inflection points come or as you're approaching them, everybody has the right signal to know that more investment dollars should go in.
[00:14:15] Kip Theno: Right. I mean, if you look at the life cycle of a company, you got inception, conception, momentum, stability, you know, transformation and right there's that kind of that valley of insight where you can succeed or fail. And from your perspective and your organization's perspective, does product market fit change over time? And I guess what I'm really asking is when do you all run out of patience and say, you know what? We think this is probably not going to work.
[00:14:40] What are the indicators?
[00:14:42] Cheryl Cheng: They're quite different for different kinds of companies, right? And that has a little bit to do with the business model and the type of customer that you're selling into. If you're selling into, let's say the longtail of providers, it looks a little bit more like selling into small business.
[00:15:00] And so you're looking for shorter velocity cycles where, you shouldn't be spending 18 months nurturing a small provider practice to, to buy, right? That the loop should be a little bit tighter, but then the contract values are going to be less. If you're going after, top 20 large pharma, that's your whale hunting.
[00:15:23] And that is a very different motion. So I think there is no one right answer. I do think that everything should be tracked. Understanding time from reach out to demo, demo to contracting contracting to close, all of those gates in the funnel should be evaluated quantitatively.
[00:15:48] And then if it just doesn't seem to be in line with the market, i. e. competitors or other companies that have the same go to market motion, you have a problem. And then obviously there are macro issues always at play. And I think that founders and investors have to be very open with each other about that.
[00:16:12] Like right now it's, a tough selling market. So there needs to be some patience, but then there also needs to be an appetite for creativity of what else do we need? And you see in every down cycle, there are companies that pull through and they just do really, really well.
[00:16:29] But they do have to get scrappy and they have to get creative. So I don't think there's a, at 12 months or at 18 months, like, everybody loses patience. I don't think it's that black and white, it isn't for me.
[00:16:42] Kip Theno: No, sure. That makes sense.
[00:16:43] It's interesting just to dovetail on that. Cheryl, I've heard you discuss a term called"tech debt". Just for our listeners, can you explain not only what that is, but look, is it a byproduct or is it a necessity? What are your thoughts?
[00:16:55] Cheryl Cheng: So I think of tech debt as two things. Actually just to revisit your previous question a little bit around, when do we say, Hey, this is not going to work. There are occasions where I would say there are technology platform dislocations. Moving from analog to digital, right, moving from, yourPC to the cloud and the Internet.
[00:17:19] And then now, like your internet to mobile and, you know, today moving from that to, AI and generative AI platform. So there are computing dislocations that happen. They don't happen constantly, but they do happen every X number of years. And when that happens, it could wipeout entire swaths of companies.
[00:17:41] And when you see that you may have to call it, right? Like as a team, as an investor, be like,y ou know what, you're not there. So you either adapt or you're going to die. So those happen as well that have nothing to do with, do you have the right sales motion and your sales ops and all of those things. Tech debt is kind of interesting because at the early stage, we see companies that are cobbling together their solutions through, sometimes they are using vendors of other pieces of software, et cetera, to pull together their value proposition.
[00:18:16] And over time they need to decide, are we going to engineer ourselves, Oh, out of our vendors that we use or will we just continue to use them because they're not mission critical. And so like, nobody needs to build their own CRM system. Right. And so like, we will continue to license Salesforce or Affinity or whatever.It's not core to our business. Whatever's core to our value proposition, we either need to own that, or we know that we're always going to be beholden to someone. And so if you go too far, down the path without making those critical calls, you could develop tech debt.
[00:18:53] Or you could be building on a certain computing paradigm, like cloud or whatever it is, and now we're all shifting to generative AI. And are you set up to do that if you don't have the infrastructure for it, then suddenly the new, younger, faster, nimbler player is going to come up on a new computing platform that could displace you and you may have that tech debt that you either need to overhaul your engineering stack your tech stack to go and modernize or you're gonna buy your way into it through acquisitions.
[00:19:32] We always see a lot of tech acquisitions that generally get done. And some of it is to address some of this tech debt.
[00:19:39] Kip Theno: Thank you for the clarity on that.And by the way, Cheryl, you brought it up, so I am going to go down this rabbit hole on AI. I'll just give you my perspective. I think AI can help us unlock maybe the keys to the universe and gravity and black holes and mathematics and possibly healthcare, but I don't really use it myself because I want to write the content and I want to learn it and I want to do the work.
[00:20:01] And by the way, I don't let my kids do it either now. So with that said, where do you see the applications of AI in healthcare, in med tech startups? Do they lean on it immediately? Is it a must have? Will they fall behind if they don't have it?
[00:20:16] Where do you see the importance of AI today and going forward?
[00:20:20] Cheryl Cheng: So I think that AI is very important in that we cannot put our blinders on and say it isn't going to happen, we're not going to use it.So we need to be aware that it's there and we need to be thinking strategically about, our own jobs, the competitive landscape and how we want to use it.
[00:20:42] Now, there are certain areas, let's say like drug discovery, molecule discovery, where it is going to be able to help us do things that humans can't do. And, just the the incredible amount of data that it can process simultaneously is something that we just can't do. And we have to acknowledge that.
[00:21:04] Do I think that we're going to go to a world in health care where everyone's going to interact with a generative AI doctor instead of a real doctor? No. But what I do think is that it is this incredible leveler and at some point, and I think businesses need to And people need to acknowledge that.
[00:21:27] I'll give you the example of my son. He recently had some questions in his economics class aroundWACC weighted average cost of capital. And we had this whole discussion and he had the benefit of having two parents who work in finance. So, you know, we gave examples.
[00:21:44] It was dinner table conversation, this whole thing. And I had to tell him that like, you know, you're really not at an advantage because you have us as your parents, because there's somebody else out there who doesn't have us as parents or anybody in finance, but they have access to ChatGPT. And you can ask all of those questions and get answers.
[00:22:06] And 20 years ago, that person was at a serious disadvantage, but now they're not. And you're really not that special because you have us as parents who could happen to answer this question, and you need to be aware of that. The speed and alacrity of information that's available because of generative AI, and if used properly as a tool, is an incredible leveler, and it creates another higher gear of competitiveness thatI think businesses, individuals need to know how to embrace and when to use it.
[00:22:43] Now, let's put the ethics of AI aside for a moment. I'm not saying, kids should be using it to write their English literature papers. But you have to acknowledge it as a tool. And when I think of businesses, it's the same thing, it's like back when we were going into the modern day of manufacturing, we started thinking about division of labor.
[00:23:02] And it's the same thing with AI. AI is another worker in our toolkit that we should be leveraging to do tasks either with more accuracy, higher speed, processing more, but humans should stay in the loop and AI should maybe be a little bit more invisible in the background. But it's there and I have to challenge myself all the time that maybe I shouldn't just be doing a Google search. Maybe I should remind myself that there are these other tools out there and how can I use them and where will I use them? So, we have to change our behavior as humans and as users of technology. I'm hyper aware of it because I also don't want to get leapfrogged out there.
[00:23:49] And so I think we, we all have to empower all of our employees to think about how they would best use AI to improve their work product or experience and then evaluate how and if that makes sense.
[00:24:07] Kip Theno: No, that's great. And yes, Cheryl, there's definitely a balance. And by the way, I was being a little bit salty talking about AI. Of course, I definitely see the benefits and it's here to stay. I'm just a little bitter because I can't win at my digital chess game anymore. Something's changed within that AI used the Fibonacci attack and I can't win even on the moderate level.
[00:24:27] Anyway, one of the questions, I've got even before the call is just what are some advice to young budding startups out there with a great idea...
[00:24:35] what are some advice do you have out there for the folks?
[00:24:38] Cheryl Cheng: I think that It's a hard time to be a founder right now. Sitting in end of 2024 were, potentially not even fully out of a contracting cycle. So money is not flowing freely. And that's not just from venture, right?
[00:24:55] Like I think that customers are tightening their belts. The exuberance of 2021 spending is now, all those contracts are at their three year end point and all of that. So I think that is hard. I think that if you are a founder today and you raise money for, let's call it the next 18 to 24 months.
[00:25:20] You should be so energized and excited because, this is a great time to just be building product. So if you're an early stage company, I actually think that's the most exciting place to be right now. If you can get the funding for the idea, because you are getting to develop your product, for a buyer that is highly critical right now.
[00:25:44] And if you can do that, you can sell during the frothy times. What's hard is building your organization only outfitted for growth and overlooking a lot of the very fundamental lumps that, you didn't have to pay attention to in 2021. So having a clean piece of paper to work off of right now is super, super exciting.
[00:26:09] So I think that's great. I also think that founders have to keep in the back of their mind, am I building a painkiller or a vitamin? And nobody's got time for vitamins right now, especially in healthcare.
[00:26:24] And then also, am I building a feature that ultimately belongs on a platform? Or am I actually building the platform? And that's important because if you're an early stage startup, you can build a feature and it could be a really, really good feature and somebody is going to buy your company. But that means that you need to be capital efficient and always keep in mind the end game is I know I'm going to be acquired. I know I'm going to be acquired for some value between X and Y.
[00:26:58] And I want to make sure that I don't over capitalize my business so that both me as a founder and my investors are going to have a really good financial outcome.
[00:27:08] Kip Theno: Wow. That's encouraging. And great insight, Cheryl. Thank you so much for joining us today, Cheryl. It's been a blast and how can people reach you out there?
[00:27:15] Cheryl Cheng: Uh, so always, available onLinkedIn. I think our email addresses are on our website, but it's just cheryl@vivecollective and always happy to talk to founders who are trying to think about hard problems. And also, we love working with executives as well from large companies in the healthcare ecosystem because ultimately innovation is not only in startups.
[00:27:41] And so we also spent a lot of time working with large ecosystem players to think about where are their roll up opportunities? Where are their spin out opportunities? What are they buying? What do they wish they could buy? And we use a lot of that to help inform how we guide founders. To their roadmap, their selling motion, etc.
[00:28:04] So, we love doing that. We love bringing together thought leaders, between pharma and payers, for example, and figuring out where innovation can exist in that interstitial layer. And we're always happy to facilitate those conversations and look for ideas that we can co-invest in, in those areas.
[00:28:23] Kip Theno: Well, thanks, Cheryl. We will get the word out for sure and appreciate the partnership and you being on. By the way, one last question before I let you go.
[00:28:31] Cheryl Cheng: Vive
[00:28:31] Kip Theno: what's the story behind the name? What does that mean?
[00:28:34] Cheryl Cheng: So, Vive is a, I guess,Americanized version of Vivre, which is to live in French.
[00:28:42] Our goal is to invest in companies that can improve access and quality of care. And that doesn't necessarily mean we're going after value based care, or, Medicaid,Medicare. We just think of really the whole person all the time. And of course, businesses like SamaCare that are focused on really life saving critical medications is a part of it.
[00:29:05] But it's other things as well. I had made an investment in a menopause company, a while back because I just felt like women at that time in their life were never included in the healthcare conversation and med school students get like about 30minutes in their entire four years of med school learning about menopause when.
[00:29:24] Every single woman's going to go through it. And so for us, innovation in healthcare is really thinking about the whole person, and just helping them live better. So that's what Vive stands for.
[00:29:36] Kip Theno: Oh, thanks, Cheryl. That's great.And you know, our tagline here at the podcast is "together we can make things right."
[00:29:41] So Cheryl, thank you so much for being on The Road to Care Podcast, appreciate your time.
[00:29:46] Cheryl Cheng: Yes, absolutely. Thanks for having me
[00:29:49] Kip Theno: Thank you for joining the Road toCare podcast hosted by SamaCare, the leader in prior authorization technology and services. Where through a script to therapy operating system, we enable connectivity with clinics, payers, and manufacturers focused on optimizing patient care. Tune in next time as together we can make things right.
[00:30:08] Enjoy the music written, produced and recorded by Jamestown.
Together, we can make healthcare right. Here are some of the outstanding
healthcare organizations and associations championing patient health mentioned in
this episode:
SamaCare is joined by Vive Collective partner and digital health investor Cheryl Cheng for a candid discussion on the opportunities – and challenges — for digital health companies in today’s venture climate. Tune in for valuable advice for startup founders and technologists, and an inside-look for practices into what goes into building healthcare technology.
You’ll learn:
Whether you're a medical provider working with health technology partners, or an entrepreneur thinking of building your own health technology company, this episode has great behind-the-curtains insights into the process of building technology to solve healthcare problems.
[00:00:00] Kip Theno: Welcome to the Road to Care podcast hosted by SamaCare, where we will talk with key opinion leaders, physicians, administrators, manufacturers, venture capitalists, and legislators to get their insights on the state of health care today and where we see it evolving. SamaCare's prior authorization platform is free to clinics, ensuring patients get on the right therapy at the right time.
[00:00:20] Together, we can simply make things right.
[00:00:26] Hey everybody.Thanks again for joining The Road to Care Podcast hosted by SamaCare. And today our special guest is Cheryl Cheng founder Vive Collective. Cheryl is the founder of Vive Collective and was most recently a general partner at BlueRunVentures, one of Silicon Valley's premier VC firms, where she led rounds and works closely with digital health and wellness companies.
[00:00:47] Cheryl currently sits on the board of Kiddo, a pediatric remote patient monitoring company and on the board at SamaCare.Cheryl is an advisor to Stanford's Biodesign program where she teaches go-to-market strategies and mentors faculty and student teams. She is also on the board at the Ronald McDonald House at Stanford, a nonprofit dedicated to supporting families with sick children in their time of need.
[00:01:10] Hey, Cheryl, thanks for joining. How are you today?
[00:01:12] Cheryl Cheng: I'm great. Thanks for having me.
[00:01:14] Kip Theno: It's our pleasure. And, you know, knowing your background a little bit, I know you've had the scenic route in getting to the world of VC at Vive. Why don't you tell us about your road to healthcare, Cheryl?
[00:01:25] Cheryl Cheng: Yeah. So I think everybody has a pretty personal journey, uh, to healthcare.
[00:01:30] And mine definitely was, my background is more finance, new products, operations, and marketing. But I grew up with the privilege of having my grandmother live with us. And asI got into my twenties, really got to experience what care looked like for her as she developed Dementia and Alzheimer's.
[00:01:52] And then when I had my children, my daughter, when she was very young, I had a little health episode as well, that required some surgery. And so, I think for me, having the two bookends of health care with my grandmother and then also with a really young child really brought to light a lot of the areas where health care in theU.S. was inefficient or even for those who were pretty health literate and had resources, still struggled to find the level of care or the expediency of care that we wanted. So that's what brought me into health care investing and thinking about ways where we could use technology, particularly software to remove some of those obstacles.
[00:02:37] Kip Theno: It's so interesting, Cheryl. I mean, I hear all the time that most folks in healthcare that I know, and may be that you know, are in it for a personal reason, right? And, and even me and my family from an oncology and a cancer perspective, my sister as an example, and, what I do know is folks that get into healthcare, they typically don't get in to it to deal with legislation necessarily, or, the complexities that prevent folks from getting on the right medicine at the right time, and you've got a unique point of view working with SamaCare and in the space, and I'd love to hear your approach and Vive's approach to your investment thesis and what you look for in a digital healthcare startup with the patient in mind.
[00:03:15] Cheryl Cheng: Yeah. So in, in college, I actually have a public policy major and I remember sitting in classes, in some of them touched healthcare policy, just being confused and really not understanding how you could even move policy or influence policy, particularly with regard to healthcare.
[00:03:31] And so I have a healthy respect for the fact that for us as investors and for startups, we cannot invest or create innovation banking on policy to change. And that being the tailwind for the success of a company or our investment strategy. It's just too complex. So instead, we really think about investing in areas where we believe software can improve workflows, but still operating under the status quo of public policy today, and that can be frustrating. But when we think of businesses like SamaCare or many others, we don't think, prior authorization is just going togo away entirely and we're going to bank on that. That would be a fool's errand. Instead, we think, all right, let's operate under the pretense that we will need prior authorization. We will continue to need benefits verification, but it is unacceptable that a patient takes anywhere between six to nine months to get on a critical life saving therapy, after the doctor has deemed that this is the clinically right thing for them to be on. And so therein lies the opportunity to say, let's go deconstruct the workflow for a provider, or let's go look at what becomes valuable to a pharmaceutical company or to the payer and use software to fill in the areas where there is inherent institutional inefficiency.
[00:05:03] And that's where I think it's really exciting. In our thesis in general is around that, but that was also very much the thesis around our investment in SamaCare
[00:05:13] Kip Theno: yeah. And it seems like legislation in a way is kind of behind the time. And, and you just brought up some great points on that. You're looking for, you know, health tech companies that can maybe move the needle, but how do we do that? How do we move the needle with new startups and new technologies and innovations when our own legislators are kind of behind the eight ball on what's happening in science?
[00:05:35] Cheryl Cheng: There's multiple streams of work that have to happen simultaneously, right? So I think it is important to constantly educate as well as listen to legislators about what is possible and what is feasible and everything in public policy, there are trade offs or there's analysis that has to be done.
[00:05:56] But then on the other end, I spent a few years, you know, it took a little detour from my finance career and was working in new products and innovation in consumer packaged goods companies. I worked atClorox and spent some time in a joint venture with Procter & Gamble. And in that world, we do a lot of needs assessment.
[00:06:15] And when we do new product innovation, we would go into people's homes. We would watch them cook food. We watch them scoop cat litter. We watch them do all these things to really understand all of the steps that they took and how they thought about each step. And when I think about, provider workflow, payer workflow.
[00:06:34] When I think about the data that life sciences company really wants to be able to receive so that they can make changes in their workflow. Like it is going back to those very, almost anthropological, work to understand where is the work breaking down for you or where is it inefficient?
[00:06:54] And is it because the technology tools are not there. Is it because the culture of your organization or, your subsector just embraces certain types of workflows and we're not going to be able to change it? And I think one of the fallacies of Silicon Valley is often "build it and they will come".
[00:07:15] And yes, you can build incredible software and it is objectively better, but that doesn't mean you can change user behavior. And so I think as a innovator in this space, there needs to be more time and effort looking at the needs assessment and what can really be changed from a user behavior perspective first.
[00:07:37] And then figure out what that wedge is in your product and sell and introduce that.
[00:07:43] Kip Theno: Yeah, absolutely. And I won't bore you, Cheryl with, or maybe shock you with how long I've been doing this as well, but, a statistic that I've heard throughout the decades, which is 40, 50,60 percent of all med tech startups fail, regardless of how revolutionary their technology might be. And maybe change is a part of that because change is not always easy. There's probably some things in the graveyard of wonderful ideas that didn't make it, and you probably have seen this many times in your career.When does a med tech startup with a wonderful idea fail to launch? What are some reasons why that you've seen?
[00:08:17] Cheryl Cheng: Well, in healthcare, definitely, there's the policy in the regulatory side and there are companies that don't make it because of that.
[00:08:24] And that's sort of technology risk and regulatory risk. But aside from that, I actually think of startups as an archipelago of terrible probabilities. The first little island being did you find a problem that people really want solved? And then you have a chance that you did or you didn't.
[00:08:47] And then the next little island is, did you actually create the right product to solve that problem? And then it's did you find the right customer and not all customers are the same. You can't say, "Oh, I'm going after life sciences companies.". Well, they're not all the same. And there are some that are going to be early adopters and some that their organization is set up with different incentives and like, is what you sell into them, match their internal incentives. And then there's the archipelago that's, you know, island of, did somebody else build it better? And then you get down to a certain level and there's even like, do you have a good culture? Did you attract the right talent?
[00:09:28] And when you multiply the probabilities of, actually getting it right on each one of these islands of the archipelago. You can see that your probability of success is actually not that high, to put it diplomatically and that's where I think having good partners attracting the right talent.
[00:09:48] Really actually figuring out who are the right first customers. I remember when I first came back to venture in marketing tech was a hot area. And everyone said, I'm so excited. We're going to sign a contract with Procter & Gamble. And I actually would cringe a little bit inside because I thought, "you are this teeny, tiny startup and you're really excited that you've sold into this likeFortune 100 company, but your processes and their processes just don't matchup. And you are gonna be suffocated by the process of selling in even the procurement system of selling into such a large company."
[00:10:27] And is that really the first place to start? And so I think a lot of times startups will fail for.A plethora of these reasons it's not just one thing. And then in the backdrop of all of that, which is what we're experiencing right now is the ebbs and flows of the venture cycle. And so if your timing for starting a company doesn't match up with the investment cycle of venture or private equity, you may just be working really against the grain.
[00:11:01] And that's unfortunate, even if you had a really good idea or a really good initial piece of technology.
[00:11:10] Kip Theno: Right. Yeah. And, well, it goes right back to the change. I mean, if you think of what any new manufacturer is trying to do with a new drug or a new device, as an example, and I spent 20years on the interventional side of cardiology, you're impacting clinical behavior.
[00:11:24] But I also hear a lot "well, if we just had the money, if we just had the money that we could make this happen,"
[00:11:31] when do you really vet and look at, well, maybe you do need the money and yes, it will happen because you have X, Y, and Z, or actually you don't need it. How do you make that decision?
[00:11:42] Cheryl Cheng: Well, we always do ask what are the use of proceeds and definitely, startups will go what we call like deep into the J curve, where they're not going to be profitable for a while.
[00:11:53] But I actually think in the early, early stages of a company being capital constrained is actually a good thing. It may not feel that way to the founder, but it is a good thing because it forces you to make some important trade offs in what you're going to build, when you're going to build it. And really sharpen the spear and figure out who's your real customer, right?
[00:12:15] All of that segmentation, positioning, targeting, all of that work needs to be done. If you are flooded with money, you don't have to make those tradeoffs because you can just put different product teams and engineering teams on a bunch of different initiatives.
[00:12:30] And in the end, you may not have as clear of a signal on do you have product market fit. So in the early stages, I actually think capital constraint could create, a better product and better outcome in the long run. And then the second gate will be how efficient is your selling motion and your go to market motion.
[00:12:52] And so here, this is actually tricky because you could say, well, I need lots and lots of sales people. I'm going to canvas the market and we're going to own it. But if you don't really know that you have product market fit, then you have all of these expensive salespeople out there trying to sell something and you're selling a, and the buyer wants to buy a prime or B.
[00:13:13] And so you're actually making a very inefficient sales process for yourself. And then the other is, I think it takes time to get the sales operations piece down. And so if you, again, are overfunded. then, you may be building bad habits for your organization. But there is a point where you do realize you're leaving money on the table or competition is pushing you to move faster or more aggressively and you are going to have to step up your funding.
[00:13:46] And that is, a reality. And I think it's good for founders to have investors who have deep pockets and ones where they really do understand not just the segment that they're operating in, but the operations of their business and spending a lot of time with their investors on those pieces so that when those inflection points come or as you're approaching them, everybody has the right signal to know that more investment dollars should go in.
[00:14:15] Kip Theno: Right. I mean, if you look at the life cycle of a company, you got inception, conception, momentum, stability, you know, transformation and right there's that kind of that valley of insight where you can succeed or fail. And from your perspective and your organization's perspective, does product market fit change over time? And I guess what I'm really asking is when do you all run out of patience and say, you know what? We think this is probably not going to work.
[00:14:40] What are the indicators?
[00:14:42] Cheryl Cheng: They're quite different for different kinds of companies, right? And that has a little bit to do with the business model and the type of customer that you're selling into. If you're selling into, let's say the longtail of providers, it looks a little bit more like selling into small business.
[00:15:00] And so you're looking for shorter velocity cycles where, you shouldn't be spending 18 months nurturing a small provider practice to, to buy, right? That the loop should be a little bit tighter, but then the contract values are going to be less. If you're going after, top 20 large pharma, that's your whale hunting.
[00:15:23] And that is a very different motion. So I think there is no one right answer. I do think that everything should be tracked. Understanding time from reach out to demo, demo to contracting contracting to close, all of those gates in the funnel should be evaluated quantitatively.
[00:15:48] And then if it just doesn't seem to be in line with the market, i. e. competitors or other companies that have the same go to market motion, you have a problem. And then obviously there are macro issues always at play. And I think that founders and investors have to be very open with each other about that.
[00:16:12] Like right now it's, a tough selling market. So there needs to be some patience, but then there also needs to be an appetite for creativity of what else do we need? And you see in every down cycle, there are companies that pull through and they just do really, really well.
[00:16:29] But they do have to get scrappy and they have to get creative. So I don't think there's a, at 12 months or at 18 months, like, everybody loses patience. I don't think it's that black and white, it isn't for me.
[00:16:42] Kip Theno: No, sure. That makes sense.
[00:16:43] It's interesting just to dovetail on that. Cheryl, I've heard you discuss a term called"tech debt". Just for our listeners, can you explain not only what that is, but look, is it a byproduct or is it a necessity? What are your thoughts?
[00:16:55] Cheryl Cheng: So I think of tech debt as two things. Actually just to revisit your previous question a little bit around, when do we say, Hey, this is not going to work. There are occasions where I would say there are technology platform dislocations. Moving from analog to digital, right, moving from, yourPC to the cloud and the Internet.
[00:17:19] And then now, like your internet to mobile and, you know, today moving from that to, AI and generative AI platform. So there are computing dislocations that happen. They don't happen constantly, but they do happen every X number of years. And when that happens, it could wipeout entire swaths of companies.
[00:17:41] And when you see that you may have to call it, right? Like as a team, as an investor, be like,y ou know what, you're not there. So you either adapt or you're going to die. So those happen as well that have nothing to do with, do you have the right sales motion and your sales ops and all of those things. Tech debt is kind of interesting because at the early stage, we see companies that are cobbling together their solutions through, sometimes they are using vendors of other pieces of software, et cetera, to pull together their value proposition.
[00:18:16] And over time they need to decide, are we going to engineer ourselves, Oh, out of our vendors that we use or will we just continue to use them because they're not mission critical. And so like, nobody needs to build their own CRM system. Right. And so like, we will continue to license Salesforce or Affinity or whatever.It's not core to our business. Whatever's core to our value proposition, we either need to own that, or we know that we're always going to be beholden to someone. And so if you go too far, down the path without making those critical calls, you could develop tech debt.
[00:18:53] Or you could be building on a certain computing paradigm, like cloud or whatever it is, and now we're all shifting to generative AI. And are you set up to do that if you don't have the infrastructure for it, then suddenly the new, younger, faster, nimbler player is going to come up on a new computing platform that could displace you and you may have that tech debt that you either need to overhaul your engineering stack your tech stack to go and modernize or you're gonna buy your way into it through acquisitions.
[00:19:32] We always see a lot of tech acquisitions that generally get done. And some of it is to address some of this tech debt.
[00:19:39] Kip Theno: Thank you for the clarity on that.And by the way, Cheryl, you brought it up, so I am going to go down this rabbit hole on AI. I'll just give you my perspective. I think AI can help us unlock maybe the keys to the universe and gravity and black holes and mathematics and possibly healthcare, but I don't really use it myself because I want to write the content and I want to learn it and I want to do the work.
[00:20:01] And by the way, I don't let my kids do it either now. So with that said, where do you see the applications of AI in healthcare, in med tech startups? Do they lean on it immediately? Is it a must have? Will they fall behind if they don't have it?
[00:20:16] Where do you see the importance of AI today and going forward?
[00:20:20] Cheryl Cheng: So I think that AI is very important in that we cannot put our blinders on and say it isn't going to happen, we're not going to use it.So we need to be aware that it's there and we need to be thinking strategically about, our own jobs, the competitive landscape and how we want to use it.
[00:20:42] Now, there are certain areas, let's say like drug discovery, molecule discovery, where it is going to be able to help us do things that humans can't do. And, just the the incredible amount of data that it can process simultaneously is something that we just can't do. And we have to acknowledge that.
[00:21:04] Do I think that we're going to go to a world in health care where everyone's going to interact with a generative AI doctor instead of a real doctor? No. But what I do think is that it is this incredible leveler and at some point, and I think businesses need to And people need to acknowledge that.
[00:21:27] I'll give you the example of my son. He recently had some questions in his economics class aroundWACC weighted average cost of capital. And we had this whole discussion and he had the benefit of having two parents who work in finance. So, you know, we gave examples.
[00:21:44] It was dinner table conversation, this whole thing. And I had to tell him that like, you know, you're really not at an advantage because you have us as your parents, because there's somebody else out there who doesn't have us as parents or anybody in finance, but they have access to ChatGPT. And you can ask all of those questions and get answers.
[00:22:06] And 20 years ago, that person was at a serious disadvantage, but now they're not. And you're really not that special because you have us as parents who could happen to answer this question, and you need to be aware of that. The speed and alacrity of information that's available because of generative AI, and if used properly as a tool, is an incredible leveler, and it creates another higher gear of competitiveness thatI think businesses, individuals need to know how to embrace and when to use it.
[00:22:43] Now, let's put the ethics of AI aside for a moment. I'm not saying, kids should be using it to write their English literature papers. But you have to acknowledge it as a tool. And when I think of businesses, it's the same thing, it's like back when we were going into the modern day of manufacturing, we started thinking about division of labor.
[00:23:02] And it's the same thing with AI. AI is another worker in our toolkit that we should be leveraging to do tasks either with more accuracy, higher speed, processing more, but humans should stay in the loop and AI should maybe be a little bit more invisible in the background. But it's there and I have to challenge myself all the time that maybe I shouldn't just be doing a Google search. Maybe I should remind myself that there are these other tools out there and how can I use them and where will I use them? So, we have to change our behavior as humans and as users of technology. I'm hyper aware of it because I also don't want to get leapfrogged out there.
[00:23:49] And so I think we, we all have to empower all of our employees to think about how they would best use AI to improve their work product or experience and then evaluate how and if that makes sense.
[00:24:07] Kip Theno: No, that's great. And yes, Cheryl, there's definitely a balance. And by the way, I was being a little bit salty talking about AI. Of course, I definitely see the benefits and it's here to stay. I'm just a little bitter because I can't win at my digital chess game anymore. Something's changed within that AI used the Fibonacci attack and I can't win even on the moderate level.
[00:24:27] Anyway, one of the questions, I've got even before the call is just what are some advice to young budding startups out there with a great idea...
[00:24:35] what are some advice do you have out there for the folks?
[00:24:38] Cheryl Cheng: I think that It's a hard time to be a founder right now. Sitting in end of 2024 were, potentially not even fully out of a contracting cycle. So money is not flowing freely. And that's not just from venture, right?
[00:24:55] Like I think that customers are tightening their belts. The exuberance of 2021 spending is now, all those contracts are at their three year end point and all of that. So I think that is hard. I think that if you are a founder today and you raise money for, let's call it the next 18 to 24 months.
[00:25:20] You should be so energized and excited because, this is a great time to just be building product. So if you're an early stage company, I actually think that's the most exciting place to be right now. If you can get the funding for the idea, because you are getting to develop your product, for a buyer that is highly critical right now.
[00:25:44] And if you can do that, you can sell during the frothy times. What's hard is building your organization only outfitted for growth and overlooking a lot of the very fundamental lumps that, you didn't have to pay attention to in 2021. So having a clean piece of paper to work off of right now is super, super exciting.
[00:26:09] So I think that's great. I also think that founders have to keep in the back of their mind, am I building a painkiller or a vitamin? And nobody's got time for vitamins right now, especially in healthcare.
[00:26:24] And then also, am I building a feature that ultimately belongs on a platform? Or am I actually building the platform? And that's important because if you're an early stage startup, you can build a feature and it could be a really, really good feature and somebody is going to buy your company. But that means that you need to be capital efficient and always keep in mind the end game is I know I'm going to be acquired. I know I'm going to be acquired for some value between X and Y.
[00:26:58] And I want to make sure that I don't over capitalize my business so that both me as a founder and my investors are going to have a really good financial outcome.
[00:27:08] Kip Theno: Wow. That's encouraging. And great insight, Cheryl. Thank you so much for joining us today, Cheryl. It's been a blast and how can people reach you out there?
[00:27:15] Cheryl Cheng: Uh, so always, available onLinkedIn. I think our email addresses are on our website, but it's just cheryl@vivecollective and always happy to talk to founders who are trying to think about hard problems. And also, we love working with executives as well from large companies in the healthcare ecosystem because ultimately innovation is not only in startups.
[00:27:41] And so we also spent a lot of time working with large ecosystem players to think about where are their roll up opportunities? Where are their spin out opportunities? What are they buying? What do they wish they could buy? And we use a lot of that to help inform how we guide founders. To their roadmap, their selling motion, etc.
[00:28:04] So, we love doing that. We love bringing together thought leaders, between pharma and payers, for example, and figuring out where innovation can exist in that interstitial layer. And we're always happy to facilitate those conversations and look for ideas that we can co-invest in, in those areas.
[00:28:23] Kip Theno: Well, thanks, Cheryl. We will get the word out for sure and appreciate the partnership and you being on. By the way, one last question before I let you go.
[00:28:31] Cheryl Cheng: Vive
[00:28:31] Kip Theno: what's the story behind the name? What does that mean?
[00:28:34] Cheryl Cheng: So, Vive is a, I guess,Americanized version of Vivre, which is to live in French.
[00:28:42] Our goal is to invest in companies that can improve access and quality of care. And that doesn't necessarily mean we're going after value based care, or, Medicaid,Medicare. We just think of really the whole person all the time. And of course, businesses like SamaCare that are focused on really life saving critical medications is a part of it.
[00:29:05] But it's other things as well. I had made an investment in a menopause company, a while back because I just felt like women at that time in their life were never included in the healthcare conversation and med school students get like about 30minutes in their entire four years of med school learning about menopause when.
[00:29:24] Every single woman's going to go through it. And so for us, innovation in healthcare is really thinking about the whole person, and just helping them live better. So that's what Vive stands for.
[00:29:36] Kip Theno: Oh, thanks, Cheryl. That's great.And you know, our tagline here at the podcast is "together we can make things right."
[00:29:41] So Cheryl, thank you so much for being on The Road to Care Podcast, appreciate your time.
[00:29:46] Cheryl Cheng: Yes, absolutely. Thanks for having me
[00:29:49] Kip Theno: Thank you for joining the Road toCare podcast hosted by SamaCare, the leader in prior authorization technology and services. Where through a script to therapy operating system, we enable connectivity with clinics, payers, and manufacturers focused on optimizing patient care. Tune in next time as together we can make things right.
[00:30:08] Enjoy the music written, produced and recorded by Jamestown.
Together, we can make healthcare right. Here are some of the outstanding
healthcare organizations and associations championing patient health mentioned in
this episode:
