The Exchanges

Q What was the venture capital industry like in the eighties?

A Collaborative, friendly, small. It was not only small, though, in terms of VCs, it was small in terms of opportunities. There just weren't that many companies and great entrepreneurs at that point, and I knew, I think in 1983, there were 300 disk drive companies that were all trying to get funded. I mean, we had funded Seagate and Fund One at Oak Investment Partners and had one of the great companies, but I wasn't that interested in investing in disk drive companies, and there was only one public software company at that point. So it's one of the reasons I actually identified healthcare and life sciences and biotech as an area that I wanted to specialize in and lead for Oak, and that really established and launched my career.

AI assessment note: “Collaborative, friendly, small. It was not only small, though, in terms of VCs”

Q How did that take you from that into venture capital so early on?

A Well, a year and a half into having a job at H&Q, I just said to everybody that I knew, like, I want to be a venture capitalist, and there weren't many of them out there, and nobody was hiring associates then, or young, twenty-four-year-olds at that point. But luckily, a sliding door story, where I walked into an elevator, ran into an old friend from Stanford that was working at NEA, went out for a glass of wine, told him I wanted to be a VC, and the next day he happened to call the founder of Oak, About a Victoria's Secrets magazine that he wanted him to fund with him. And of course, the founder of Oak said, we only do tech. We're not interested in magazines, but I'm looking for a research associate. And three weeks later, I moved to Westport, Connecticut from San Francisco.

AI assessment note: “founder of Oak said, we only do tech... but I'm looking for a research associate.”

Q So in that transition, which I guess is now seven, eight years ago, you don't often see both a spin out of that ilk, but then also a retention, or at least a rolling over commonality of the brand to some extent, right? From oak to oak, HCFT. How did that play out?

A I think we felt that we were oak. You know, people knew us as that. We've been known as for a long time as that. We could have certainly many new brands have come into play. Many people rebranded that have spun out. But the existing entity, Oak Investment Partners, wasn't going to exist any longer. That entity, we all agreed, was going to die. We were going to roll off all the companies, and we were the surviving new entity, essentially, Oak HCFT, so you could call us Oak, but the healthcare and fintech team basically spun out and started a new entity, and we weren't going to name ourselves Oak Investment Partners because it was no longer Oak Investment Partners.

AI assessment note: “we felt that we were oak. You know, people knew us as that.”

Q Are there particular angles of types of companies playing into that that you're excited about?

A Every company we're involved with at some level, but Dispatch is actually providing, they have cars that literally provide ER and hospital-based services in your home. They come to your house, and it dramatically lowers the cost of care. It's fascinating. They're rolling out across the country. You've got Vesta and CareBridge, which are monitoring caregivers in the home and helping them and taking risk contracts to manage these caregivers who have been, think about it, Talking about 12 dollar an hour workers that are responsible for very sick people in the home with literally no support in the past. So if you bring a model around them, and nobody's looked at the total cost of care with these patients, and now that somebody's responsible for that risk, and you then have a service to manage those people in the home, and you keep them out of the hospital, and you keep them more well, it's a winning financial model.

AI assessment note: “Dispatch is actually providing, they have cars that literally provide ER and hospital-based services”

Q What are the themes you're most excited about today?

A In healthcare, it's really a pay-vider model is one of the things we're very, very interested in, in part because it has the most impact on cost reduction and improvement of quality of care. And a pay-vider could be a devoted, that's a Medicare Advantage plan that's incorporating a provider model so that they have their own devoted medical group, virtual primary care, effectively, for their own Participants, members in the Medicare Advantage plan, and it's the merging of that, where you're actually managing the care and taking the risk on the care. Or it could be a village MD that comes at it from the inverse, where a village MD is a primary care provider that's taking global cap risk, is taking risk on those patients, and with an MA plan, Medicare Advantage plan, and saying, I will manage the margin of these people. I will day-to-day be responsible for For these people's care, and I will provide all the infrastructure and data around doing that well. It's worked incredibly well. The numbers in terms of increased star ratings for MA plans that work with them, the quality of care they're delivering, and the reduction in cost of care is extraordinary. This is truly what should happen across America at every level. I was like, you really should have doctors at risk. For managing patients over the long term. That's what's going to have the most impact. The other thing is just think…

AI assessment note: “In healthcare, it's really a pay-vider model is one of the things we're very, very interested in”

Q Kind of curious with all this money sloshing around, how has that affected the deal environment, even with the relationships that you have in these sectors?

A I think it's just move price up. It's not that we're losing deals. It's just, what are you willing to pay? Early is, is all more expensive, but it's not that we, do we care if we paid sixty million or ninety million? You know, it's in the grand scheme of things, is this company worth, could this be five hundred million or a billion or two billion or three billion? You know, so we don't get hung up in the early stages in terms of valuation, and so I think we've probably moved a little earlier in growth and earlier, and we've done a little bit more early stage. We work with a lot of repeat entrepreneurs, so that mitigates losses, and I don't worry about that. But I do think we're in a reset mode right now. Public markets have corrected dramatically. They already had in healthcare before the end of the year, and now in fintech, you know, we've seen that in the last couple weeks, pretty dramatic reset, to the point of, it's almost ridiculous. There's some public companies we want to buy right now. So, I do think that the pace will slow, but there's just, you know, in these environments, there is a lot of money still out there. There'll be a separation of wheat and chaff. And those that are truly exceptional companies, we just invested in a company, Paxos, a couple months ago, two billion dollar valuation. We're already getting offers at more than twice that for that company. So for…

AI assessment note: “I think it's just move price up. It's not that we're losing deals.”

Q So scale matters, but you don't want to be too big. And then there's always, well, isn't size the enemy of performance. You don't want to be too small. Like when it really comes down to brass tacks, how did you decide how big to get and what felt right?

A I think we have kept every fund is about 20 to 25 companies, so that's been an important stat. We've gone from three people to 40 in the last eight, seven and a half years. We've been very, very careful. We have one person dedicated to hiring Four Oak within the team in terms of filtering, and every person that we hire, we have to believe could ultimately be a partner. They may not all make it, but it's just very high bar in every person that walks in the door. So I think that as long as we're not creating a hundred companies in a fund, and we're just spraying money out there, and the bar is very high on each company that we're investing in, we're going to feel very good about, about our returns and the quality of what we're doing.

AI assessment note: “we have kept every fund is about 20 to 25 companies”

Q I'd love to walk through effectively your investment process. How do you think about the top of the funnel?

A Well, we have these strategic themes. The top of it, we have incredible networks. We don't cold call. We're not like a TA or an insight, have a bank of kids that are, they're trying to find deals. Just not the way it works. We may call cold call people because we've identified a strategic area and a few companies specifically in that area. But 90% of what we get is not books. We don't generally invest in companies that come from investment bankers, but it's just proprietary deal flow. We've lived in these two sectors so long. Our network is just fast and deep, and we have great relationships, and this is such a relationship business that it just comes from that network.

AI assessment note: “The top of it, we have incredible networks. We don't cold call.”

Q How do you balance today that same vector of the CEO being the key part of your investment thesis compared to all these interesting things and trends in the industries?

A Well, CEO is number one. There are CEOs that we backed 15 years ago. We would never back now. And CEOs who had positive outcomes, but it's that much harder now. It's that much more competitive. The companies are growing that much faster. So CEOs just have to be better, and there's more demanded of them, which is one of the reasons we created this talent function, because the first thing we do is make sure that that individual is surrounded by the best team possible. And CEOs are growing out of teams. Every two years. So we're replacing half their management team because they can't scale fast enough with the companies. It's a different world we're living in than we were a decade ago, 15 years ago. Just more is expected of everyone. The reason we do early and growth, I think it's really important to think about it. 1015 years ago, a growth company was very unlikely to be dislocated by a new company. A five-year-old company being dislocated by a new company, probably not happening. Now happens all the time. So we really need to know what is going on with new seed stage companies in order to be the best growth investor. And some of our strategies and growth are organic and inorganic growth. So, and you're going to see that more and more. I mean, with these big fundraisers, people are consolidating industries. And with the public markets declining and more challenges probably in the…

AI assessment note: “Well, CEO is number one.”

Q Somehow we got to jump from then to today. And maybe the way to do that is to ask about what were the inflection points? So you started in the eighties, it was quiet. There weren't that many people, totally different story today. If you look back, how do you map out what those couple of decades have been like?

A The internet mania, period of 98, 99, 2000, that was an education itself. Beginning of the internet, beginning of e-commerce, fascinating period. If we hadn't had a mania, we wouldn't have funded things like Google and Amazon, some of the great companies of today. But you also learned what business models worked and what didn't, and I feel like we're hitting a second mania over the last couple of years, but with many more great Entrepreneurs and business models and companies. So at that time, what I learned was in 2002 1001, when there was a retrenchment, when we felt like the opportunity set wasn't there, it made me think more about the different sectors that I was in, what I would be doing. Frankly, I had vectored away from life sciences because you could see by 99, 2000, That there were 3000 public biotech companies, and only five approved products. You could see that the science wasn't there yet, and that it wasn't, people just assumed that because you were working with molecular biology, that these products would work better, that the trials would go faster than those with chemistry, and it, it just wasn't true. So there ended up being like a ten-year Dry period between 2002 1010. And when there were very few great biotech companies created, taken public. So I actually stepped away in 99, 2000 from life sciences and made it a mission. Frankly, the, the crash gave us time t…

AI assessment note: “The internet mania, period of 98, 99, 2000, that was an education itself.”

Q Have you had the opportunity to sort of do anything in that seat at a state level?

A There is no prescribed role. I think it's just being supportive of my husband, and obviously he's become a healthcare expert the last two years, and he never wanted, he couldn't spell healthcare before that, so not something he loved talking about, but now he loves talking about it, so we've got a lot in common, and I I think that's been good, and one thing we have done is created a, a seed angel capability, a tax credit for it. Connecticut Innovations is an amazing vehicle for investing in early-stage companies. We've been an advocate. I've certainly helped him, introduced him to entrepreneurs that, in terms of fostering the seed and, and entrepreneurial community ecosystem in Connecticut, that's something that's been fun and Positive, hopefully, and hopefully people perceive it that way. It's more of just, I think it's important. We've created a female-oriented seed group called Tidal River, and gotten, and amazingly, in three years, it's gotten organized, and it has its own team that's now running it, and it's gotten women in Connecticut involved. So, it's great.

AI assessment note: “one thing we have done is created a, a seed angel capability”

Q I was curious if you flip over to the fintech side, you know, you mentioned Paxos, which of course leads into the whole crypto world. How are you thinking about crypto as it relates to DeFi and fintech?

A I think the COVID was as impactful for fintech as it was for healthcare. Certainly, all these services that one would go to a bank for, would get title insurance, would show up at a lawyer's office, all those things were digitized. All of a sudden, payments and services and mortgages were digitized, and you were doing it from your bed. And so, companies that we were invested, you know, doubled in sales during that period. It was just fascinating. And Obviously, COVID has been, the pandemic's been incredibly negative event for so many, education, mental health, but in terms of making progress in the use of tech for healthcare and fintech, it's been extraordinary and moved us five to 10 years faster than we would have. So from that perspective, there will be lots of great opportunities that come out of that. On the crypto side, we haven't been investing in it As a currency. We haven't been investing in crypto per se, but we invest in digital asset infrastructure. So Paxos is digital asset infrastructure. It's what we do. We've been doing B to B enterprise software in effect. And if you think about digital asset infrastructure, that it's basically just taking blockchain and applying it to different use cases. And we've been waiting for that for seven years, but now those use cases are here and we're seeing more and more companies where this digital asset infrastructure Makes a ton…

AI assessment note: “we invest in digital asset infrastructure. So Paxos is digital asset infrastructure.”