Hi. Welcome to Paving the Path. I'm your host, Shiva Saini. People know me as a customer experience champion and a digital executive at Fortune 50 companies. I plan on paving the path in my show with women game changers, thought leaders and executives touching the entire spectrum of digital transformation in healthcare. Join me in exploring the digital renaissance that's shaping healthcare today and forever changing the future of wellness care and health. Welcome to another episode of Paving the Path. Today, my guest is Sophia Guerra, a Bessemer Venture Partners investor here in Cambridge offices in Boston, Massachusetts. She focuses on healthcare and biotech and is the co-author of Benchmark's Growing and Scaling Healthtech Businesses, a study of 100 plus best in class companies to understand key metrics relevant to scalability in healthcare, software and tech enabled services. Sophia began her career as a consultant at Bain and Company, where she worked on strategy, operations and due diligence projects across healthcare and technology. Prior to joining Bessemer, she was an investor at Box Group Ventures and co-founder and president of Nucleate, a national life sciences entrepreneurship program helping PhD postdocs and students commercialize scientific projects. She earned her MBA from HBS and her BA with high honors in chemistry from Harvard University. She has a very special story that I let her speak to. Sophia. Welcome. Welcome to the podcast. Thank you so much for making time for our audience. It's lovely to have you. You have such an incredible story. Tell us a little bit about yourself, something that gets you out of the bed in the morning. You have a pretty busy schedule, I'm sure, but just so that our audience gets to know you a little bit.

Hi. Welcome to Paving the Path. I'm your host, Shiva Saini. People know me as a customer experience champion and a digital executive at Fortune 50 companies. I plan on paving the path in my show with women game changers, thought leaders and executives touching the entire spectrum of digital transformation in healthcare. Join me in exploring the digital renaissance that's shaping healthcare today and forever changing the future of wellness care and health. Welcome to another episode of Paving the Path. Today, my guest is Sophia Guerra, a Bessemer Venture Partners investor here in Cambridge offices in Boston, Massachusetts. She focuses on healthcare and biotech and is the co-author of Benchmark's Growing and Scaling Healthtech Businesses, a study of 100 plus best in class companies to understand key metrics relevant to scalability in healthcare, software and tech enabled services. Sophia began her career as a consultant at Bain and Company, where she worked on strategy, operations and due diligence projects across healthcare and technology. Prior to joining Bessemer, she was an investor at Box Group Ventures and co-founder and president of Nucleate, a national life sciences entrepreneurship program helping PhD postdocs and students commercialize scientific projects. She earned her MBA from HBS and her BA with high honors in chemistry from Harvard University. She has a very special story that I let her speak to. Sophia. Welcome. Welcome to the podcast. Thank you so much for making time for our audience. It's lovely to have you. You have such an incredible story. Tell us a little bit about yourself, something that gets you out of the bed in the morning. You have a pretty busy schedule, I'm sure, but just so that our audience gets to know you a little bit.

Yeah. Thank you so much for having me. It's really a pleasure to be sharing some of the work that I've been doing so we can spread the word and help entrepreneurs everywhere. What do I get out of bed every morning? So like you said, I grew up in Guatemala until I was about 17. Both of my parents are dentists and my mom works in in a poor area of of the city and where she grew up and kind of is her community. And she always told me that she got out of bed every morning because she would put smile on people's faces. That was that was her job. And that really stuck with me since I was very little of I want to strive to have a job that makes me get out of bed every morning to to help others and and really make an impact in my community And that my community has changed over the years is, you know, I've lived in Guatemala, then I lived in Singapore and now in the US. But I've always been very committed to finding ways to to make those around me better. And I think health care is one of those areas that that really need a lot of help in improving. And that's kind of why I love working in health care and specifically as an ambassador, because I get to partner with entrepreneurs that are really trying to solve the hardest problems in the world. And I think entrepreneurship and technology are their best way to to really drive that change.

Yeah. Thank you so much for having me. It's really a pleasure to be sharing some of the work that I've been doing so we can spread the word and help entrepreneurs everywhere. What do I get out of bed every morning? So like you said, I grew up in Guatemala until I was about 17. Both of my parents are dentists and my mom works in in a poor area of of the city and where she grew up and kind of is her community. And she always told me that she got out of bed every morning because she would put smile on people's faces. That was that was her job. And that really stuck with me since I was very little of I want to strive to have a job that makes me get out of bed every morning to to help others and and really make an impact in my community And that my community has changed over the years is, you know, I've lived in Guatemala, then I lived in Singapore and now in the US. But I've always been very committed to finding ways to to make those around me better. And I think health care is one of those areas that that really need a lot of help in improving. And that's kind of why I love working in health care and specifically as an ambassador, because I get to partner with entrepreneurs that are really trying to solve the hardest problems in the world. And I think entrepreneurship and technology are their best way to to really drive that change.

That's an incredible story. So can you tell us a little bit more about Bessemer Ventures for our audience, Surely a venture capital firm specializing in health care, amongst other verticals. But tell us about your role in particular and why is it different?

That's an incredible story. So can you tell us a little bit more about Bessemer Ventures for our audience, Surely a venture capital firm specializing in health care, amongst other verticals. But tell us about your role in particular and why is it different?

Yeah, absolutely. You know, Bessemer is the oldest venture capital firm. You say we're more than 100 years old. It actually got started as the family office for for the Phipps family. Henry Phipps was the CFO of Carnegie Steel. And when I think that was like the first kind of billion dollar outcome type of business and he took all of that wealth and he wanted to reinvest it in other entrepreneurs like himself, instead of donating it to nonprofits and foundations. The Bessemer Trust was created and Bessemer for a really long time, I think up to maybe 40 years ago, was investing out of that kind of sole limited partner capital. And then we started taking on other money and then investing it in in that same mission. Right. Entrepreneurs are really trying to build enduring businesses that will redefine and change industries. We're really well known on kind of our cloud and software practice, but we've actually been investing in healthcare for a really long time, over 40 years. My partner, Steve Kraus, leads the health tech practice. And we've been kind of investing in both healthcare, software, technical services and life sciences for for a really long time. And then in my role, I particularly focus in kind of both healthcare software and tech enabled services and been focused in understanding and studying how companies scale over time. So what are the milestones that are required to prove product market fit that series? Or as you grow for a series B, what does the business look like and kind of the subsequent growth stages and really thinking about how do we quantify some of that growth and how do we share some of those learnings to being kind of the finding the top performers in our industry? And I think we are at a very particularly important point in time to be able to do that because our colleagues in kind of cloud and other industries and software have been doing this for, I think, over 20 years. But I think the health tech industry is in a in its teenage years for for lack of a better word. And I think it wasn't until I guess 2019, 2020, where we had a whole host of IPOs and really successful companies go to the public market and perhaps they're not doing as well in the public market today. But there's still kind of a lot of success stories coming out of the last few years. And subsequently a bunch of different health and companies are raising a lot of capital and passing on stages of growth. So now we have like this whole host of assets or companies that we can study longitudinally to really understand how they got there and what particularly nuances of their business models or what I call like the business model machine, like really make make those companies scale successfully. Yeah.

Yeah, absolutely. You know, Bessemer is the oldest venture capital firm. You say we're more than 100 years old. It actually got started as the family office for for the Phipps family. Henry Phipps was the CFO of Carnegie Steel. And when I think that was like the first kind of billion dollar outcome type of business and he took all of that wealth and he wanted to reinvest it in other entrepreneurs like himself, instead of donating it to nonprofits and foundations. The Bessemer Trust was created and Bessemer for a really long time, I think up to maybe 40 years ago, was investing out of that kind of sole limited partner capital. And then we started taking on other money and then investing it in in that same mission. Right. Entrepreneurs are really trying to build enduring businesses that will redefine and change industries. We're really well known on kind of our cloud and software practice, but we've actually been investing in healthcare for a really long time, over 40 years. My partner, Steve Kraus, leads the health tech practice. And we've been kind of investing in both healthcare, software, technical services and life sciences for for a really long time. And then in my role, I particularly focus in kind of both healthcare software and tech enabled services and been focused in understanding and studying how companies scale over time. So what are the milestones that are required to prove product market fit that series? Or as you grow for a series B, what does the business look like and kind of the subsequent growth stages and really thinking about how do we quantify some of that growth and how do we share some of those learnings to being kind of the finding the top performers in our industry? And I think we are at a very particularly important point in time to be able to do that because our colleagues in kind of cloud and other industries and software have been doing this for, I think, over 20 years. But I think the health tech industry is in a in its teenage years for for lack of a better word. And I think it wasn't until I guess 2019, 2020, where we had a whole host of IPOs and really successful companies go to the public market and perhaps they're not doing as well in the public market today. But there's still kind of a lot of success stories coming out of the last few years. And subsequently a bunch of different health and companies are raising a lot of capital and passing on stages of growth. So now we have like this whole host of assets or companies that we can study longitudinally to really understand how they got there and what particularly nuances of their business models or what I call like the business model machine, like really make make those companies scale successfully. Yeah.

You pointed out something quite special that I'm seeing a lot of as well, which is the convergence of different industries. Just given the advancements we are seeing in technology now, different aspects of technology, whether it's software as a service, whether it's AI, whether it's platforms creeping into healthcare in ways we have never seen before. And so I think Bessemer in a way, has an advantage having had that long history of healthcare investment, but also being very much in tuned with technology and now being witnessed to such massive convergence, which is giving birth to, as you mentioned, and a whole new generation of technology enabled or SaaS enabled, you know, healthcare companies that are changing the face of the industry as a whole. And we may be at early stages. You know, you said teenage years, but it's just moving very, very fast. I can I can't help but notice how much reading one has to do in order to just stay up to date, which is why I'm interested in this conversation. You know, the work you have done, the body of work, the research is extremely rich. And so let's dive into that because the other macro issue that we are seeing is a different economic environment, right? Is shifting from growth and putting money into health care. From a VC perspective, especially during and right after the pandemic to now, you know, shifting the mindset to putting more emphasis on efficient growth and profitability, which in healthcare is quite difficult. What does it mean for you and in your role in investment and what have you learned through your research about building and scaling health tech businesses?

You pointed out something quite special that I'm seeing a lot of as well, which is the convergence of different industries. Just given the advancements we are seeing in technology now, different aspects of technology, whether it's software as a service, whether it's AI, whether it's platforms creeping into healthcare in ways we have never seen before. And so I think Bessemer in a way, has an advantage having had that long history of healthcare investment, but also being very much in tuned with technology and now being witnessed to such massive convergence, which is giving birth to, as you mentioned, and a whole new generation of technology enabled or SaaS enabled, you know, healthcare companies that are changing the face of the industry as a whole. And we may be at early stages. You know, you said teenage years, but it's just moving very, very fast. I can I can't help but notice how much reading one has to do in order to just stay up to date, which is why I'm interested in this conversation. You know, the work you have done, the body of work, the research is extremely rich. And so let's dive into that because the other macro issue that we are seeing is a different economic environment, right? Is shifting from growth and putting money into health care. From a VC perspective, especially during and right after the pandemic to now, you know, shifting the mindset to putting more emphasis on efficient growth and profitability, which in healthcare is quite difficult. What does it mean for you and in your role in investment and what have you learned through your research about building and scaling health tech businesses?

Yeah, you mentioned something or made a comment that is really interesting, right? Like health care is at that point where it really needs to be disrupted. I think a lot of health care is still done on facts and not using technology, and it's just really ballooning in terms of administrative costs and what's really causing a lot of complexity for for for how to deliver best care. So at Bessemer, we we like to think about kind of the areas we investing in kind of three Big North stars. There's digitization, there's consumerization, there's foundation. And we look at those North Stars to kind of look at all the themes that we're looking at. And I think there is the ability to impact the way care is delivered, right? And there is or the services of health care and how consumers experience that health care. And then how do we engage those consumers either through B2B to see business models through payer and employer or directly to consumer and value based care businesses? That's the validation piece, and that's what I generally call on my research kind of tech enabled services. It generally is kind of a care delivery model or navigation that includes a human in the loop to deliver. A service or engagement. Great examples of that are Livongo, the darling of Healthtech, as we call it. They were tech enabled services. Businesses that were engaging consumers to that had diabetes to better manage their their diabetes. And then on the software side, where we really think about like the back Office of Health of Health tech, what is all the administration, how do we digitize that stock? How do we connect payers and providers and make data more interoperable? How does pharma engage patients in their clinical trials to develop better drugs? Like all of the software side, these are software businesses like in any other industry, right? They tend to be B2B in nature. You either sell to pay or a provider or pharma, and they have kind of cloud hosting costs in their gross margins, but they tend to be like much higher gross margin than traditional tech enabled services businesses in degree. The best example in that industry is Veeva. As you probably have come across them. They are a CRM for pharma companies and how they manage their relationships in sales and marketing. But since then they've grown to to other areas, but they are multibillion dollar business that has 70% gross margins and it's been very successful.

Yeah, you mentioned something or made a comment that is really interesting, right? Like health care is at that point where it really needs to be disrupted. I think a lot of health care is still done on facts and not using technology, and it's just really ballooning in terms of administrative costs and what's really causing a lot of complexity for for for how to deliver best care. So at Bessemer, we we like to think about kind of the areas we investing in kind of three Big North stars. There's digitization, there's consumerization, there's foundation. And we look at those North Stars to kind of look at all the themes that we're looking at. And I think there is the ability to impact the way care is delivered, right? And there is or the services of health care and how consumers experience that health care. And then how do we engage those consumers either through B2B to see business models through payer and employer or directly to consumer and value based care businesses? That's the validation piece, and that's what I generally call on my research kind of tech enabled services. It generally is kind of a care delivery model or navigation that includes a human in the loop to deliver. A service or engagement. Great examples of that are Livongo, the darling of Healthtech, as we call it. They were tech enabled services. Businesses that were engaging consumers to that had diabetes to better manage their their diabetes. And then on the software side, where we really think about like the back Office of Health of Health tech, what is all the administration, how do we digitize that stock? How do we connect payers and providers and make data more interoperable? How does pharma engage patients in their clinical trials to develop better drugs? Like all of the software side, these are software businesses like in any other industry, right? They tend to be B2B in nature. You either sell to pay or a provider or pharma, and they have kind of cloud hosting costs in their gross margins, but they tend to be like much higher gross margin than traditional tech enabled services businesses in degree. The best example in that industry is Veeva. As you probably have come across them. They are a CRM for pharma companies and how they manage their relationships in sales and marketing. But since then they've grown to to other areas, but they are multibillion dollar business that has 70% gross margins and it's been very successful.

That's amazing. I like how you have divided kind of the categories very simply, right? Tech enabled where there is just still that human factor in the mix. Not that it's completely gone in the SaaS model, but it's more of a B2B. It's it's driven by technology all the way to automation all across. Give us a reality check, Sophia. What kind of progress can we realistically expect in the health care industry in the next 1 to 2 years considering some of these headwinds that we are witnessing on the macro side and just the mindset shift and some of the banking short term issues, but nevertheless, some of these banking issues we are seeing on the surface, before.

That's amazing. I like how you have divided kind of the categories very simply, right? Tech enabled where there is just still that human factor in the mix. Not that it's completely gone in the SaaS model, but it's more of a B2B. It's it's driven by technology all the way to automation all across. Give us a reality check, Sophia. What kind of progress can we realistically expect in the health care industry in the next 1 to 2 years considering some of these headwinds that we are witnessing on the macro side and just the mindset shift and some of the banking short term issues, but nevertheless, some of these banking issues we are seeing on the surface, before.

I answer the 1 to 10 year review, I also want to say like that was a watershed moment for the industry. I think it became relevant to every human in the planet, right, and how we access healthcare, some of the gaps that existed in our system and the need to really evolve, how we were engaging consumers even to just access patients in the home to keep them safe or via telemedicine. So I think we've made incredible progress over the past five years. And despite the market corrections and the macroeconomic environment of 20, the second half of 2022 and I guess now 2023, I'm still very bullish that the market in health tech and a number of investments in capital that's going into it and the need for innovation is going to continue. So kind of very positive and kind of what the outlook for our industry is. I think the reality that we need to understand and be better armed for kind of with the best information is building in healthcare is really hard and it takes longer than what it would take to adopt and sell technology in any other industry. The report that we're posting in a week from today, and I hope we can share it with everyone who's listening, is we took a look at how long does it take to grow to $10 Billion in revenue or $100 Billion in revenue? If you're a health care software and a tech enabled services businesses business, comparing it to cloud or software and any other industry that are your colleagues in Bessemer look at in other spaces and it takes like roughly 3 to 4 years longer to get to those milestones. And I think it has to do with kind of regulatory complexity that exists in the industry. The longer sales cycles and candidly, the more complex go to market strategies, or either you get a contract in a tech enabled services business through, say, an employer or a payer, but then you still have to go engage the consumer and that there is delays and learnings and a lot of that. So we're still bullish on what the industry is going to do in kind of the five, ten year horizon. But I think we need to be understanding on kind of some of the the differences that exist in this industry to to scale. I'm definitely optimistic. And what's yeah.

I answer the 1 to 10 year review, I also want to say like that was a watershed moment for the industry. I think it became relevant to every human in the planet, right, and how we access healthcare, some of the gaps that existed in our system and the need to really evolve, how we were engaging consumers even to just access patients in the home to keep them safe or via telemedicine. So I think we've made incredible progress over the past five years. And despite the market corrections and the macroeconomic environment of 20, the second half of 2022 and I guess now 2023, I'm still very bullish that the market in health tech and a number of investments in capital that's going into it and the need for innovation is going to continue. So kind of very positive and kind of what the outlook for our industry is. I think the reality that we need to understand and be better armed for kind of with the best information is building in healthcare is really hard and it takes longer than what it would take to adopt and sell technology in any other industry. The report that we're posting in a week from today, and I hope we can share it with everyone who's listening, is we took a look at how long does it take to grow to $10 Billion in revenue or $100 Billion in revenue? If you're a health care software and a tech enabled services businesses business, comparing it to cloud or software and any other industry that are your colleagues in Bessemer look at in other spaces and it takes like roughly 3 to 4 years longer to get to those milestones. And I think it has to do with kind of regulatory complexity that exists in the industry. The longer sales cycles and candidly, the more complex go to market strategies, or either you get a contract in a tech enabled services business through, say, an employer or a payer, but then you still have to go engage the consumer and that there is delays and learnings and a lot of that. So we're still bullish on what the industry is going to do in kind of the five, ten year horizon. But I think we need to be understanding on kind of some of the the differences that exist in this industry to to scale. I'm definitely optimistic. And what's yeah.

No, that's that's a very good point. And I'm seeing even within my clients or my network of startups that patience both on the side of, you know, the operators but sometimes even on the VC side tends to run thin and it does take just a different approach and mindset. And perhaps Bessemer, because you guys have been in the health care investment for quite some time, just play a little bit differently. It's very important not to starve the startups, especially when they need that kind of partnership with the VC is the most And I always say, you know, you got to show up and you got to kind of pave the path together because it is tough in. Health care. And, you know, not only it's from a regulatory perspective, but also the incentives are just not very much aligned across the different players. And that's actually a great segue to my next question. I got very much into your research and the body of work you guys have been doing from the perspective of an entrepreneur, whether on the tech enabled side or the SaaS side, what could we take away and how can we utilize your research in a way that can shape both from a business model, go to market perspective or just strategies from the other side? From that entrepreneurs perspective, how can we utilize your research?

No, that's that's a very good point. And I'm seeing even within my clients or my network of startups that patience both on the side of, you know, the operators but sometimes even on the VC side tends to run thin and it does take just a different approach and mindset. And perhaps Bessemer, because you guys have been in the health care investment for quite some time, just play a little bit differently. It's very important not to starve the startups, especially when they need that kind of partnership with the VC is the most And I always say, you know, you got to show up and you got to kind of pave the path together because it is tough in. Health care. And, you know, not only it's from a regulatory perspective, but also the incentives are just not very much aligned across the different players. And that's actually a great segue to my next question. I got very much into your research and the body of work you guys have been doing from the perspective of an entrepreneur, whether on the tech enabled side or the SaaS side, what could we take away and how can we utilize your research in a way that can shape both from a business model, go to market perspective or just strategies from the other side? From that entrepreneurs perspective, how can we utilize your research?

Yeah, no, absolutely. I mean, that's the main purpose of this, is to kind of help founders, CEOs and also board members, right? Take the knowledge or the learnings that we have from the many investments that we've made and companies that we've seen over the years and how do we kind of strive to be best in class? But what does it mean to be best in class? We get a lot of entrepreneurs that come to us and say like, Hey, how fast should I be growing? How much should I be spending in R&D? What should my gross margins be if I'm a technical services business? And that question obviously depends right on the business model. I think that's a step number one. I think that's why we took this like two business model kind of break out. But then there's also nuances within that. So understanding how like what stage of growth you're in. So if you were like a 1 to $10 million business, what do we see as the average growth of a venture back business and what's top quartile growth? And should you should strive to be in that top quartile? But then there's also what investments you're making to reach that top quartile growth category. I think you mentioned about like the shift from growing at all costs and throwing everything into kind of what sticks in the wall versus efficient growth. And I mean, it's no news, right? Everyone's been talking about efficient growth. So I don't want to sound like a broken record, but it's about how are you making that paced improvement in your gross margins to kind of bring more of that kind of revenue into gross profit? And then what investments you're making in your operating expenses, either new product and research and development you're making versus what you're investing in sales and marketing and what is that kind of payback on your sales and marketing invested dollars to bring more revenue, right? So like, yeah. So it's important for you to understand all of the different pieces of your business model and kind of how money flows in your PNL or your profit and loss and what investments you're making. But it's not just kind of what the return on investment is of those investments, but what are the trade offs, right? Are you investing a dollar in sales and marketing versus you're investing a dollar on R&D? And then what are the decisions and trade offs that you're making in what timelines you're making those decisions? And then ultimately, what are the outcomes that you're providing to your customers? Because I think a really important learning that we've had across investing over the years in health care is proving your worth early on may require more capital and take longer. So getting to that $1 million in revenue kind of milestone may take longer because you're going to have to prove to your customers your return on investment on a clinical outcomes basis or financial return on investment from the customer perspective. And that requires more time and research pilots. ET cetera. But then how do you leverage those outcomes to kind of improve your sales and marketing and kind of this flywheel that we call it on the social marketing side?

Yeah, no, absolutely. I mean, that's the main purpose of this, is to kind of help founders, CEOs and also board members, right? Take the knowledge or the learnings that we have from the many investments that we've made and companies that we've seen over the years and how do we kind of strive to be best in class? But what does it mean to be best in class? We get a lot of entrepreneurs that come to us and say like, Hey, how fast should I be growing? How much should I be spending in R&D? What should my gross margins be if I'm a technical services business? And that question obviously depends right on the business model. I think that's a step number one. I think that's why we took this like two business model kind of break out. But then there's also nuances within that. So understanding how like what stage of growth you're in. So if you were like a 1 to $10 million business, what do we see as the average growth of a venture back business and what's top quartile growth? And should you should strive to be in that top quartile? But then there's also what investments you're making to reach that top quartile growth category. I think you mentioned about like the shift from growing at all costs and throwing everything into kind of what sticks in the wall versus efficient growth. And I mean, it's no news, right? Everyone's been talking about efficient growth. So I don't want to sound like a broken record, but it's about how are you making that paced improvement in your gross margins to kind of bring more of that kind of revenue into gross profit? And then what investments you're making in your operating expenses, either new product and research and development you're making versus what you're investing in sales and marketing and what is that kind of payback on your sales and marketing invested dollars to bring more revenue, right? So like, yeah. So it's important for you to understand all of the different pieces of your business model and kind of how money flows in your PNL or your profit and loss and what investments you're making. But it's not just kind of what the return on investment is of those investments, but what are the trade offs, right? Are you investing a dollar in sales and marketing versus you're investing a dollar on R&D? And then what are the decisions and trade offs that you're making in what timelines you're making those decisions? And then ultimately, what are the outcomes that you're providing to your customers? Because I think a really important learning that we've had across investing over the years in health care is proving your worth early on may require more capital and take longer. So getting to that $1 million in revenue kind of milestone may take longer because you're going to have to prove to your customers your return on investment on a clinical outcomes basis or financial return on investment from the customer perspective. And that requires more time and research pilots. ET cetera. But then how do you leverage those outcomes to kind of improve your sales and marketing and kind of this flywheel that we call it on the social marketing side?

Yeah, I couldn't agree more. In fact, this gives me another thought that I'm seeing or another evidence of what I'm seeing across the healthcare startups. It's one thing to really just focus on how to run an efficient business. It's another thing to look at the broader perspective of all these other complementary solutions that are coming to the marketplace and the partnerships and the ecosystem that as a whole is shifting, right? So you can't like I'm seeing a lot of point solutions, for lack of a better word. But holistically, if you want to see a major shift and change in healthcare, it takes a lot of point solutions. And the earlier you can identify opportunities to partner and kind of be associated with a with an ecosystem that shifts, for example, the in-home health care movements that we are seeing, the better off you are. And some companies are doing fabulous work just creating marketplaces, for example, and helping organizations connect. I'm sure you have examples like that as well, but it's worth noticing that while it's difficult to sell into healthcare and it does take time and it's costly, especially getting to that first million dollar, there are opportunities for partnership even within the sort of ecosystem in order to kind of accelerate your pathway to have a bigger, more sustainable momentum when you get to the buyers.

Yeah, I couldn't agree more. In fact, this gives me another thought that I'm seeing or another evidence of what I'm seeing across the healthcare startups. It's one thing to really just focus on how to run an efficient business. It's another thing to look at the broader perspective of all these other complementary solutions that are coming to the marketplace and the partnerships and the ecosystem that as a whole is shifting, right? So you can't like I'm seeing a lot of point solutions, for lack of a better word. But holistically, if you want to see a major shift and change in healthcare, it takes a lot of point solutions. And the earlier you can identify opportunities to partner and kind of be associated with a with an ecosystem that shifts, for example, the in-home health care movements that we are seeing, the better off you are. And some companies are doing fabulous work just creating marketplaces, for example, and helping organizations connect. I'm sure you have examples like that as well, but it's worth noticing that while it's difficult to sell into healthcare and it does take time and it's costly, especially getting to that first million dollar, there are opportunities for partnership even within the sort of ecosystem in order to kind of accelerate your pathway to have a bigger, more sustainable momentum when you get to the buyers.

No, it's a great point. We mean, in any industry, take fintech, take healthcare, you see different waves, right, of unbundling, of solutions. So take like the unbundling of a hospitals big hospital system and how are you going to deliver best of breed solutions for each category? And we've seen that over the past three years. Say we have big winners in MSK, we have big winners in mental health, we have big winners on maternal health. And there's still I mean, when I say big winners, there's like companies that have raised a lot of capital and that have reached 50, 100 million, $200 million in recurring revenue reoccurring. Guys in Healthtech in tech enabled services is not truly recurring. But we can we can get into that later. But you've seen kind of a lots of names going to get ahead of the pack in those kind of what we call point solutions. And I think we're going to see the next wave of re bundling a lot of that. And some of those there's a lot of benefit to having a particular solution that focuses in a particular condition. It's better to prove what your outcomes are for a specific population. How do you better communicate and engage a patient? And we've seen best in class companies, say, MSC, like our portfolio company, hinge or in mental health with Headspace to really drive that and kind of take advantage of better engaging members through the payer. The employer channels to have best in class or best of breed solutions. And then we're going to see the wave of consolidation on what you're saying, either through partnerships or through acquisitions and mergers and acquisitions to get to that like re bundling stage. I think that there are certain companies that are better positioned to do that connectivity there depends on how early you're engaged in the member, how wide your condition is and potentially comorbidities of your patient population and the such. But those are totally normal kind of waves of innovation that we've seen over many years in different industries.

No, it's a great point. We mean, in any industry, take fintech, take healthcare, you see different waves, right, of unbundling, of solutions. So take like the unbundling of a hospitals big hospital system and how are you going to deliver best of breed solutions for each category? And we've seen that over the past three years. Say we have big winners in MSK, we have big winners in mental health, we have big winners on maternal health. And there's still I mean, when I say big winners, there's like companies that have raised a lot of capital and that have reached 50, 100 million, $200 million in recurring revenue reoccurring. Guys in Healthtech in tech enabled services is not truly recurring. But we can we can get into that later. But you've seen kind of a lots of names going to get ahead of the pack in those kind of what we call point solutions. And I think we're going to see the next wave of re bundling a lot of that. And some of those there's a lot of benefit to having a particular solution that focuses in a particular condition. It's better to prove what your outcomes are for a specific population. How do you better communicate and engage a patient? And we've seen best in class companies, say, MSC, like our portfolio company, hinge or in mental health with Headspace to really drive that and kind of take advantage of better engaging members through the payer. The employer channels to have best in class or best of breed solutions. And then we're going to see the wave of consolidation on what you're saying, either through partnerships or through acquisitions and mergers and acquisitions to get to that like re bundling stage. I think that there are certain companies that are better positioned to do that connectivity there depends on how early you're engaged in the member, how wide your condition is and potentially comorbidities of your patient population and the such. But those are totally normal kind of waves of innovation that we've seen over many years in different industries.

Absolutely, Sophia. And you call it normal, But, you know, for healthcare, it's such a new phenomenon. And I love how you put into unbundling and re bundling. And it may take not just a few years, but decades because it is a highly regulated, very, very complex industry. But in doing so and certainly taking the time to do it well and let the kind of the the best of breed, even from the bundling side, that we kind of come from the come to the other or appear on the other side is very, very exciting. Although I'm sure again, like we said earlier, it does require a ton of patience. I mean, it just takes very thick skin, I think, to be an entrepreneur in healthcare and probably even more so on a on an investment side of the house because you just have to sit with and hold hands for a long time to see the evidence of return and the scalability of it.

Absolutely, Sophia. And you call it normal, But, you know, for healthcare, it's such a new phenomenon. And I love how you put into unbundling and re bundling. And it may take not just a few years, but decades because it is a highly regulated, very, very complex industry. But in doing so and certainly taking the time to do it well and let the kind of the the best of breed, even from the bundling side, that we kind of come from the come to the other or appear on the other side is very, very exciting. Although I'm sure again, like we said earlier, it does require a ton of patience. I mean, it just takes very thick skin, I think, to be an entrepreneur in healthcare and probably even more so on a on an investment side of the house because you just have to sit with and hold hands for a long time to see the evidence of return and the scalability of it.

I'll give you a great example. I mean, we've seen recently Oak Street Health announce a partnership with Inter and for kidney care, and we're seeing that they're kind of in a really interesting position because they have this kind of primary care population of patients that they're taking care of and taking risk on, but then they're going to start finding who are the best of breed partners for for specific conditions so they can kind of share that risk with. That's one example of kind of an aggregator in a way and the value based care side. And we can also think on, say, like the commercial employer channel, there's likely going to be a lot of consolidation because we're hearing from a lot of benefit managers that they don't want to be contracting with a lot of point solutions or even a patient doesn't want to be accessing a bunch of these apps on their phone. So we're going to see kind of that wave take place in different ways depending on the market and the business models.

I'll give you a great example. I mean, we've seen recently Oak Street Health announce a partnership with Inter and for kidney care, and we're seeing that they're kind of in a really interesting position because they have this kind of primary care population of patients that they're taking care of and taking risk on, but then they're going to start finding who are the best of breed partners for for specific conditions so they can kind of share that risk with. That's one example of kind of an aggregator in a way and the value based care side. And we can also think on, say, like the commercial employer channel, there's likely going to be a lot of consolidation because we're hearing from a lot of benefit managers that they don't want to be contracting with a lot of point solutions or even a patient doesn't want to be accessing a bunch of these apps on their phone. So we're going to see kind of that wave take place in different ways depending on the market and the business models.

So a lot of work, a lot of work changes. Yeah.

So a lot of work, a lot of work changes. Yeah.

You also make a point on the scalability side. And I think one of the things that our research has shown is, you know, it may take longer to get to that $10 million in kind of run rate revenue milestone or. But those businesses are Healthtech businesses are incredibly attractive at scale because mean scalability drives modes and economies of scale like our modes and health tech. It really hard to to get to scale. So once you're there, it's a it's a really interesting business from kind of a free cash flow perspective. There's also your ability and how you kind of get there and the improvements that you're making are definitely just as attractive in terms of metrics as what we would expect in other business, in other industries.

You also make a point on the scalability side. And I think one of the things that our research has shown is, you know, it may take longer to get to that $10 million in kind of run rate revenue milestone or. But those businesses are Healthtech businesses are incredibly attractive at scale because mean scalability drives modes and economies of scale like our modes and health tech. It really hard to to get to scale. So once you're there, it's a it's a really interesting business from kind of a free cash flow perspective. There's also your ability and how you kind of get there and the improvements that you're making are definitely just as attractive in terms of metrics as what we would expect in other business, in other industries.

So when you look at software as a service or these health tech enabled companies, I have to believe that you're you're looking or getting inspiration from other trends or other industries outside of healthcare as well. For instance, it's re bundling or unbundling. We have seen it happen elsewhere. You know, whether it's financial services, consumer goods, etcetera. What are some of the other trends that that inspire you? And they may not be a complete kind of representation of what may happen in healthcare, but give you a sense of direction as to what to expect.

So when you look at software as a service or these health tech enabled companies, I have to believe that you're you're looking or getting inspiration from other trends or other industries outside of healthcare as well. For instance, it's re bundling or unbundling. We have seen it happen elsewhere. You know, whether it's financial services, consumer goods, etcetera. What are some of the other trends that that inspire you? And they may not be a complete kind of representation of what may happen in healthcare, but give you a sense of direction as to what to expect.

We have the privilege of working with incredible investors and others that have deep experience in other industries at Bessemer, and I try to work with as many partners as possible and kind of have learned from kind of the investments they've made and what they've seen in shift in their industries. One example and near that, I've been spending a lot of timing is in kind of this health healthcare payment space or what we call like this, like health care and fintech intersection. And that's because in financial services over the past, say, ten years, we've seen kind of a huge shift to shift to digitization of payments and the tools and software that we're using to enable a bunch of digital payments. And in healthcare, we really haven't really seen that. I think 25% of payments from a payer child provider are still done in a cheque and obviously payers are not incentivized to pay in a timely manner because services have been rendered in a fee for service world and we're making the revenue cycle management processes incredibly complex to prevent providers from getting paid and payers are paying and there's just this very complex system. So how do we think about digitization of the health tech payment stack and how do we take out a bunch of services vendors that exist that touch different parts of the system with with best in class software? How do we take parts of that system and automate processes that required today hundreds and thousands of coders and and billing and administrative personnel? Because I mean, our system is ballooning and costs and the big driver of that is the administrative burden that that the system is taking. I mean, there are other other drivers, but I think that's one way in which we can deploy software and that we've seen it done well in other industries like traditional financial services. And then another area, I guess tangential to that is just how do we leverage all of this incredible innovation and kind of technological shift that's happening in kind of large language models in generative AI and how it's applied to to healthcare? I think, I mean, like we said, innovating in healthcare is incredibly hard. And I think having a differentiated distribution and go to market is is critical. So I think what are the use cases within health tech that we think can be addressable with innovations in AI, in how do we deploy that in a very responsible way? I think is is one area where we've been spending a lot of time in Bessemer.

We have the privilege of working with incredible investors and others that have deep experience in other industries at Bessemer, and I try to work with as many partners as possible and kind of have learned from kind of the investments they've made and what they've seen in shift in their industries. One example and near that, I've been spending a lot of timing is in kind of this health healthcare payment space or what we call like this, like health care and fintech intersection. And that's because in financial services over the past, say, ten years, we've seen kind of a huge shift to shift to digitization of payments and the tools and software that we're using to enable a bunch of digital payments. And in healthcare, we really haven't really seen that. I think 25% of payments from a payer child provider are still done in a cheque and obviously payers are not incentivized to pay in a timely manner because services have been rendered in a fee for service world and we're making the revenue cycle management processes incredibly complex to prevent providers from getting paid and payers are paying and there's just this very complex system. So how do we think about digitization of the health tech payment stack and how do we take out a bunch of services vendors that exist that touch different parts of the system with with best in class software? How do we take parts of that system and automate processes that required today hundreds and thousands of coders and and billing and administrative personnel? Because I mean, our system is ballooning and costs and the big driver of that is the administrative burden that that the system is taking. I mean, there are other other drivers, but I think that's one way in which we can deploy software and that we've seen it done well in other industries like traditional financial services. And then another area, I guess tangential to that is just how do we leverage all of this incredible innovation and kind of technological shift that's happening in kind of large language models in generative AI and how it's applied to to healthcare? I think, I mean, like we said, innovating in healthcare is incredibly hard. And I think having a differentiated distribution and go to market is is critical. So I think what are the use cases within health tech that we think can be addressable with innovations in AI, in how do we deploy that in a very responsible way? I think is is one area where we've been spending a lot of time in Bessemer.

I'm super excited about that as well. To your point, kind of digitization was perhaps an intermediate phase of disruption in a good way to kind of collapse and automate. And then with AI and these large language models, you can go from point A to point Z in a fraction of a not just time, but cost. And and then there's this whole code list or minimum code solutions that if you are a healthcare administrator, I mean, it's just it opens up a whole host of opportunities for innovation, efficiency and and very exciting time for sure, as long as it's done with the right guardrails in AI and ethics perspective from DEI and bias and just making sure that the models are very much representative of the reality.

I'm super excited about that as well. To your point, kind of digitization was perhaps an intermediate phase of disruption in a good way to kind of collapse and automate. And then with AI and these large language models, you can go from point A to point Z in a fraction of a not just time, but cost. And and then there's this whole code list or minimum code solutions that if you are a healthcare administrator, I mean, it's just it opens up a whole host of opportunities for innovation, efficiency and and very exciting time for sure, as long as it's done with the right guardrails in AI and ethics perspective from DEI and bias and just making sure that the models are very much representative of the reality.

Yeah. And I mean building the trust with the consumer and the buyer or the user, right? I mean, it could be the physician, a clinician. It could. Be the consumer, or you can just be a provider like administrator and it's about what is the use case you're solving how big of a pain point that is and why using gives you like a leverage in in a differentiated way to solve that problem. And then obviously, what do you have? Right. If we believe that large language models are going to be used for solving a lot of this issues, is it the data that you're accumulating to train and the processes that go to market differentiation and obviously scalability of that that will kind of build modes over time? We're we're still learning a lot. Another thing that also guides a lot, the areas that we invest in and outside from kind of big technological shifts is legislation and regulation. I think we said in health care you should use regulation to your advantage and have it be a friend instead of a foe. Right? You don't want to be disrupted by regulation. Have your business begun in kind of the span of a blink of a day, I guess. But in instead we we study and think about what are the big regulatory changes that are happening and then how is our regulation enabling for incentivizing for innovation and new business models to to kind of arise? I mean, the high tech act that gave kind of birth, as you want to say, to the health tech industry as we is, we look back like 15 years to changes in payment models, to enabling new value based care businesses or even small on the patient and ultimately play this game between the pair and the provider on utilization management and prior authorization, not let the patient kind of have access to the drugs they need. How do we make sure that biosimilar is now that we're finally kind of seeing some of those get approvals, really the benefit accumulates to the patient and actually really seeing increased market share in that space?

Yeah. And I mean building the trust with the consumer and the buyer or the user, right? I mean, it could be the physician, a clinician. It could. Be the consumer, or you can just be a provider like administrator and it's about what is the use case you're solving how big of a pain point that is and why using gives you like a leverage in in a differentiated way to solve that problem. And then obviously, what do you have? Right. If we believe that large language models are going to be used for solving a lot of this issues, is it the data that you're accumulating to train and the processes that go to market differentiation and obviously scalability of that that will kind of build modes over time? We're we're still learning a lot. Another thing that also guides a lot, the areas that we invest in and outside from kind of big technological shifts is legislation and regulation. I think we said in health care you should use regulation to your advantage and have it be a friend instead of a foe. Right? You don't want to be disrupted by regulation. Have your business begun in kind of the span of a blink of a day, I guess. But in instead we we study and think about what are the big regulatory changes that are happening and then how is our regulation enabling for incentivizing for innovation and new business models to to kind of arise? I mean, the high tech act that gave kind of birth, as you want to say, to the health tech industry as we is, we look back like 15 years to changes in payment models, to enabling new value based care businesses or even small on the patient and ultimately play this game between the pair and the provider on utilization management and prior authorization, not let the patient kind of have access to the drugs they need. How do we make sure that biosimilar is now that we're finally kind of seeing some of those get approvals, really the benefit accumulates to the patient and actually really seeing increased market share in that space?

Absolutely. And I think it's a it's a partnership with the government, right? It's, you know, informing and influencing for some of these policy changes and also kind of doing the dance with the government and ensuring that, you know, investments are done in the right places to really elevate, you know, in all the areas that you mentioned, the innovation and the opportunities for market shifting products and services, I feel like we can talk forever. And so I'm very excited not just for the work you have done, but for the next generation of the work you're doing, because it's not just I want to clarify this and we'll post this with the podcast. It's not just the benchmarking of these companies. And for you as an entrepreneur to kind of see where you fall in that bell curve shape, if you would. But it actually gives you a sense of where you can go or where you can take your company. And that's why for those of you who are entrepreneurs listening or in the investment community want you to follow this work that Sophia is doing, because the next generation of it is going to be just as much, if not more informative and powerful. And so we'll make sure that we continue the conversation. Sophia, anything you want to add to what you are publishing next and how people can engage with you, follow you, Where where do they find you as they get even more interested in the body of the work you're covering right now?

Absolutely. And I think it's a it's a partnership with the government, right? It's, you know, informing and influencing for some of these policy changes and also kind of doing the dance with the government and ensuring that, you know, investments are done in the right places to really elevate, you know, in all the areas that you mentioned, the innovation and the opportunities for market shifting products and services, I feel like we can talk forever. And so I'm very excited not just for the work you have done, but for the next generation of the work you're doing, because it's not just I want to clarify this and we'll post this with the podcast. It's not just the benchmarking of these companies. And for you as an entrepreneur to kind of see where you fall in that bell curve shape, if you would. But it actually gives you a sense of where you can go or where you can take your company. And that's why for those of you who are entrepreneurs listening or in the investment community want you to follow this work that Sophia is doing, because the next generation of it is going to be just as much, if not more informative and powerful. And so we'll make sure that we continue the conversation. Sophia, anything you want to add to what you are publishing next and how people can engage with you, follow you, Where where do they find you as they get even more interested in the body of the work you're covering right now?

Yes. I mean, that's the the main goal of that is to make this accessible to all entrepreneurs out there. So, yeah, so we're going to be publishing the report for scaling health tech businesses to 100 million and beyond in the next week, or by the time you publish this, I'll be I'll be public. But then the the whole goal of this is to have this database be an ongoing project where we can continue to add more companies to the database and continue to follow longitudinally how the businesses in the database have scaled and cut it in different ways, either by understanding your your end customer, if you're selling to a provider or pharma or a payer, how those aspects benchmarks change. Or if you're a value based care business, which are particularly different business models, how do those benchmarks change? And yeah, we want to productize this and make it available to as many as many folks as we can in as many different cuts as we can. If you think about it, it's like a three dimensional cube, but you can reach me at my email. I'm at esguerra.com. You can follow me on LinkedIn or Twitter and you can share if you if you have where you are in your growth stage, what are some of the milestones that you're thinking about and how you compare to the benchmarks that we've published so far across kind of top, bottom quartile or average? And we can take it from there.

Yes. I mean, that's the the main goal of that is to make this accessible to all entrepreneurs out there. So, yeah, so we're going to be publishing the report for scaling health tech businesses to 100 million and beyond in the next week, or by the time you publish this, I'll be I'll be public. But then the the whole goal of this is to have this database be an ongoing project where we can continue to add more companies to the database and continue to follow longitudinally how the businesses in the database have scaled and cut it in different ways, either by understanding your your end customer, if you're selling to a provider or pharma or a payer, how those aspects benchmarks change. Or if you're a value based care business, which are particularly different business models, how do those benchmarks change? And yeah, we want to productize this and make it available to as many as many folks as we can in as many different cuts as we can. If you think about it, it's like a three dimensional cube, but you can reach me at my email. I'm at esguerra.com. You can follow me on LinkedIn or Twitter and you can share if you if you have where you are in your growth stage, what are some of the milestones that you're thinking about and how you compare to the benchmarks that we've published so far across kind of top, bottom quartile or average? And we can take it from there.

Thank you so much, Sophia. I cannot. Thank you enough not just for your time, but the wealth of knowledge and the work that you're doing and creating. Encourage our audience to find you and LinkedIn, Twitter and elsewhere. We'll make sure that we post all the research that you are working on and you have already published. I also would recommend people to look you up in Byutv and some of these other major conferences, health care conferences, in order to find you if they have questions in person and otherwise. But it was lovely to have this conversation. We are looking forward for the next version and the next edition of your research. And thank you so much, everyone, for joining the podcast today.

Thank you so much, Sophia. I cannot. Thank you enough not just for your time, but the wealth of knowledge and the work that you're doing and creating. Encourage our audience to find you and LinkedIn, Twitter and elsewhere. We'll make sure that we post all the research that you are working on and you have already published. I also would recommend people to look you up in Byutv and some of these other major conferences, health care conferences, in order to find you if they have questions in person and otherwise. But it was lovely to have this conversation. We are looking forward for the next version and the next edition of your research. And thank you so much, everyone, for joining the podcast today.

Thanks for tuning in. If you like what you heard, please spread the word. Tell your colleagues to tune in for all the awesomeness, then leave a review on Apple, Spotify or wherever you listen. This show is produced by Shift Forward Health The channel for Change Makers. Subscribe to Shift Forward Health on your favorite podcast app and you'll be subscribed to our entire library of shows. See our full lineup at Shift Forward Health one subscription all the podcasts you need and it's all for free. And remember, we might have a lot of work to do in health care, but we'll get there faster together. Thanks again. You.

Thanks for tuning in. If you like what you heard, please spread the word. Tell your colleagues to tune in for all the awesomeness, then leave a review on Apple, Spotify or wherever you listen. This show is produced by Shift Forward Health The channel for Change Makers. Subscribe to Shift Forward Health on your favorite podcast app and you'll be subscribed to our entire library of shows. See our full lineup at Shift Forward Health one subscription all the podcasts you need and it's all for free. And remember, we might have a lot of work to do in health care, but we'll get there faster together. Thanks again. You.