Ramp Up: An Interview With Early Stage Digital Health VC Robert Greenglass

Robert Greenglass is the founder of Waterline Ventures, investing in early stage healthcare technology and technology-enabled services companies.

Tell me about yourself. How did you become a VC?

When I was in college, I thought I wanted to be a physician. After one year of biology and neurology courses, I quickly shifted my focus to the business side of things. However, medicine continued to peak my interest. So I started my career as an investment banker in New York covering the healthcare space. It was a great mix of business, finance, and medicine. From there, I moved to Boston to join Highland Capital Partners’ healthcare team, which was led by Bob Higgins. Bob and I worked together for several years at Highland in companies ranging from biotech, to devices, to healthcare IT and services. Last year, I decided to dig in deep into the healthcare technology space and start Waterline Ventures. We focus on healthcare technology and technology enabled services companies.

What drew you to the digital health industry?

There are so many reasons why digital health technology is an exciting space right now. First of all, the payment of $4 trillion of healthcare spend is shifting from the traditional payers to providers in an ACO-centric world. The technology infrastructure in these organizations is going to need massive improvements in order to handle this shift. Existing healthcare technology solutions are 20 years behind the curve. That means we are just approaching the “healthcare” .com boom. The healthcare industry is projected to grow to about 50 percent of GDP over the next 20 years, if you believe the Congressional Budget Office estimates. If that is true, then half of all investment dollars should be directed at healthcare. I personally don’t think this is sustainable. Technology solutions are what will drive cost reductions, quality improvements, and massive shifts in how care is delivered.

From the VC’s perspective, what is driving the huge increases we are seeing in digital health investments?

As the development costs for technology solutions continue to decline, hospitals and other healthcare stakeholders can deploy lightweight solutions that don’t take hundreds of millions of dollars to integrate into their existing systems. At the same time, healthcare providers are realizing that they need to find new ways to take care of their patients outside of the emergency room. Fifteen to 20 years ago, every hospital system was trying to drive care into their downtown city hospital. Now hospital systems are looking at ways to broaden their network, and encourage patients to visit urgent care centers, use telemedicine, or stay on their medications so they don’t need to come to the ER. All of this requires new technology solutions. 

What are your thoughts on the role accelerators play in the digital health space? Is the value they add worth the equity they cost?

I love the accelerator model. I have been a mentor at Blueprint Health since they rolled out their first class. The healthcare industry is attracting amazing talent from the technology space, which is very much needed. However, healthcare is a much different beast than any other industry. Regulations, compliance, security, payments, reimbursement… the list goes on, are all very different in healthcare than other industries. Accelerators help companies and entrepreneurs learn the system and get a better understanding of how to work and build businesses within the healthcare industry.

You’re an early-stage digital health investor. How much traction do the digital health startups you meet with typically have when they raise their seed round? What about their Series A?

At Waterline, we focus on companies in what I call the “late Seed, early Series A” stage. These are companies that may have completed an accelerator program. They have early revenues either through pilot customers or early commercial contracts. And they are looking to raise a smaller amount of capital to get to the next stage. These companies are not looking to raise a $10 or $20 million round at this point, and may never have to. The beauty of decreasing costs to develop technology means that the development costs for these companies will stay low. Obviously some companies will need to take on more capital to push on the gas even harder. And we are OK with that. But I would much rather see someone hone in on product-market-fit, and have a few customers who buy into it, before spending a lot of capital on a product or service that the market does not want or need.

What’s more important to you as a VC, the team or the idea?

The three most important criteria are, TEAM, TEAM, and TEAM. An A+ entrepreneur can fix or pivot a C+ idea. And a C+ entrepreneur can screw up an A+ idea. These are hard problems to solve, and they are going to take a lot of smart people to solve them. Companies need to be able to recruit rock star talent. And the healthcare space is a hot space to work in today. Companies with a great team will be able to recruit the talent needed to be successful.

Thus far, health IT has had a difficult time generating a positive ROI for the providers and payers that largely makeup the industry’s customer base. What kinds of technology are on the horizon that you think have the potential to change that?

This is one of the key issues in my mind. How do you get ROI? I think the answer is services. The last five to 10 years in healthcare has been all about analytics and Big Data, which we definitely need. However, the next five to 10 years is going to be about how can we apply those analytics and insights from Big Data in a service model to enable better patient care. Healthcare technology companies need a services component to be successful. At the same time, healthcare services companies need technology to be successful. At Waterline, we are looking at a lot of companies that not only identify issues within the system, but can help solve them using a services model.  

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