Having been a healthcare investor for nearly a decade, General Catalyst Principal Candace Richardson has had hundreds of conversations with startup founders seeking capital from her.

During an interview this week at HLTH in Las Vegas, Richardson shared some important questions she finds herself frequently asking startups when they have these talks. Below are three of the questions she spoke about.

What does success look like to you?

The answer to this open-ended question is “very telling” because it gives investors a window into what a founder’s motivations are, Richardson said.

“We’re interested in investing in companies that are going to be at the intersection of financial and societal returns — one without the other isn’t particularly interesting to us. I love to ask that question because more often than not in healthcare, given the nature of the industry, their eyes light up. We realize they want to generate a really successful business financially, but they’re also very focused on how many lives they can positively impact. If that part doesn’t come along with it, that’s usually a bit of a red flag for me,” she explained.

In her experience, the companies that “tend to be breakouts” aren’t the ones that are focused solely on financial return, Richardson added.

She pointed out that it’s “not rocket science” to figure out how to make money in an industry with a $4 trillion annual spend. What’s more challenging is finding a way to make money while also pushing the healthcare industry “in the right direction for our society,” Richardson asserted. 

Is Medicaid on your roadmap?

There’s a documented lack of innovation in the Medicaid space. One of the biggest reasons for this is that Medicaid regulations exist on a state-by-state basis — if a Medicaid-focused startup wants to move beyond one state, there are a lot of regulatory concerns and different budgets it would need to consider, Richardson explained.

Another reason for the lack of innovation is that Medicaid has much lower reimbursement rates on a per-member basis. The Medicaid rate can be half of the amount providers are paid to provide the same care for someone covered by Medicare or commercial insurance, Richardson pointed out.

But this doesn’t mean innovation at scale in the Medicaid space is impossible. General Catalyst was an early investor in Cityblock Health, which has been a pioneer in delivering value-based care for both Medicaid and dual-eligible populations, Richardson noted.

“They’re pretty scaled at this point, and they’re showing attractive margins in their more mature markets. It’s really fun to see them go on that journey and prove that you can actually serve these populations, improve their health outcomes, and operate a business that can generate a profit,” she said.

When she is investing in companies that don’t solely serve the Medicaid population, Richardson always asks them if Medicaid is on their roadmap. She believes it is “very important” to ensure that startups don’t simply ignore this segment of the population because they think they won’t be able to make money serving them.

Does your model work for everyone?

If a startup has data on patient outcomes or engagement, Richardson likes to ask if it has stratified that data by different populations. Doing so helps startups see if they are able to deliver the same quality of care to different segments of the population, which is an important consideration to have when it comes to health equity, she noted.

“Even if your company has the best mission in the world and has health equity at its core, you need the data to track it. When you start to look at data that way, it can actually be a really powerful tool for a lot of your customers as well because employers care about that, payers care about that and health systems care about that,” Richardson declared.

Photo: SDI Productions, Getty Images


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