Stakeholder alignment: who decides, who benefits from, who uses and who pays. Many investors will highlight signals for product-market fit as things they need to see before making a VC investment. One thing I look for is, “Does the founding team have an understanding about how their product aligns incentives in the market?” In a consumer company who buys, who decides, who uses and who benefits from a product is the same person. But in healthcare, not only can these be different entities, but they can have conflicting interests. I look for entrepreneurs that understand how their product addresses these stakeholders, and find that the more closely aligned they are, the faster the adoption curve for the company.
As part of our series about “5 Things I Need To See Before Making A VC Investment”, I had the pleasure of interviewing Kristin Baker Spohn, General Partner at CRV who has spent her career building enterprise companies at the intersection of healthcare and technology.
Thank you so much for joining us in this interview series! Before we dig in, our readers would like to get to know you a bit. Can you please share with us the “backstory” behind what brought you to this specific career path?
When I was at Goldman Sachs, I had the opportunity to work with clients spanning biotech and life sciences to healthcare IT, and I fell in love with these companies. I was attracted to the opportunity to build a career focused on driving breakthrough innovations that impacted people’s lives. I first started investing when I went to Stanford for business school and joined the Life Science Angel Network. There I managed deals and diligence for early stage investments for a large angel network, and I admired the many investors I worked with who had built and scaled companies as operators. Their career paths resonated with me — first do and build, then advise and invest. That led me to invest my own time and energy building and scaling companies — with an eye towards venture capital hopefully down the road. I joined two startups at the earliest stages: first helping build and scale business development and finance functions at Castlight Health, and then leading the go-to-market as the Chief Commercial Officer of Collective Health. After taking Castlight public in 2014 and growing Collective through Series D, I made the move to VC and went to Social Capital as an early stage investor. In my current role as a General Partner at CRV I focus on the intersection of healthcare and technology, and have invested in companies like Viz.ai and Wheel.
Is there a particular book that made a significant impact on you? Can you share a story or explain why it resonated with you so much?
The Harry Potter series, for a few different reasons. Growing up, I tutored kids with special needs and one boy I was working with had dyslexia and struggled with reading. I had heard that Harry Potter had been engaging for other kids and figured it might be worth a shot. We worked our way through the book alternating who’d read each chapter and before long I’d show up at his house and find him reading on his own and telling me about what I had missed. That experience showed me how powerful a great story can be. How it can transport you to another place and also how an incredible narrative can transform people and drive them in a way they never thought possible. The Harry Potter books also strike a chord with me since now that I’m a mother, I get to share these stories I love so much with my kids. One of my favorite quotes is in the final book, when Harry asks Dumbledore, “Is this real or is all of this happening in my head?” And Dumbledore responds, “Of course it is happening inside your head, Harry, but why on earth should that mean that it is not real?” For me, that quote is equally true of entrepreneurs who aren’t afraid to believe in the things that are happening in their head, and make them real.
Do you have a favorite “Life Lesson Quote”? Do you have a story about how that was relevant in your life or your work?
I’m lucky to have a close family and my dad was full of nuggets of wisdom. My favorite quote he used to share was from the basketball coach John Wooden, “Be quick, but don’t hurry.” I found it applied to sports, building relationships, making decisions, building companies and investing. Whether building companies or investing, it is important to make thoughtful decisions, but also not overthink them or the opportunity can pass you by.
How do you define “Leadership”? Can you explain what you mean or give an example?
I think great leaders learn how not only to model leadership and inspire others to strive for audacious goals, but also build up leaders around them. Leaders inspire others to strive for audacious goals, but truly great leaders also know how to build up the next generation of leaders around them. My hometown team is the Golden State Warriors and Coach Steve Kerr is an incredible example of a great leader by that definition. As a former player himself, he knows precisely what to ask of his players on the court, but it’s what he asks of his team off the court that elevates him as a leader in my mind. He listens to his players, takes the time to understand what topics they are passionate about off the court and then encourages them to speak out about the causes they support. By growing his players’ influence beyond the basketball court and into other realms like activism and charity work, Coach Kerr is inspiring not only other players, but fans like me both on and off the court.
How have you used your success to bring goodness to the world?
I try to go the extra mile to help people connect with companies and roles that can propel their success, particularly from underrepresented groups. There have been a number of studies showing that women have a hard time seeing and being seen for their own potential. Women benefit greatly from advocates and allies. There was one time a founder I had been advising was about to hire a COO, and the candidate they were considering looked great on paper. Even though the company was 99 percent sure they had their guy, I encouraged them to take one call with a woman I knew. Though her title was a VP level, I knew she was a rockstar because I had seen her in action — responsible for launching, building and scaling teams, only to be layered by a more tenured man (who then still relied on her to run the team). The company ended up hiring her instead and she has crushed it. I think of it as my responsibility as an investor and board member to help founders and companies broaden their aperture for talent and see the potential in people, much like VC’s see the potential in them as founders.
Ok, thank you for that. Let’s now jump to the main part of our discussion. The United States is currently facing a very important self-reckoning about race, diversity, equality and inclusion. This is of course a huge topic. But briefly, can you share a few things that need to be done on a broader societal level to expand VC opportunities for women, minorities, and people of color?
It can start with hiring, investing in and empowering those networks of people. If you’re looking around the table and everyone looks the same, broaden your network. It’s also about making diversity a true and authentic priority, not a quota to be hit or a box to be checked. Diverse perspectives and experiences strengthen businesses. If you’re just looking to add a female to your firm and not giving her a true seat at the table, and a checkbook, then you’re not going to attract the caliber of talent that can make her and your firm successful. You’re hiring these people for their nose for breakout startups, and smart men and women can smell BS from a mile away.
Can you share a story with us about your most successful Angel or VC investment? What was its lesson?
I made an early seed investment in Alyson Friedensohn, the Founder and CEO of Modern Health while she was in YC. It was an easy check to write because I had seen Alyson in action when she worked with me at Collective Health. I had a prepared mind on the market opportunity for behavioral health having spent years in the space and saw the pressing need for employers to support their peoples’ mental health, which has only heightened in the pandemic. I felt the same way when I came across Wheel and met Michelle Davey, the Founder and CEO. The lesson I learned there was the importance of both moving quickly to get to conviction on an opportunity, but also taking the time to build relationships with founders. Be quick but don’t hurry. Through both of those women, I’ve learned the importance of understanding what motivates them, seeing their horsepower in action, and I’m constantly amazed by their ‘get stuff done’ capabilities.
Can you share a story of an Angel or VC funding failure of yours? What was its lesson?
I think I love this job because I am a curious person, but there have been times where I have been too quick to judge companies based on my past experiences. When I think of failure, I think of missed opportunities to learn, and the times where I needed to unlearn lessons. Much has changed in the past decade, particularly in the healthcare landscape; roadblocks and seemingly insurmountable obstacles I faced building previous companies may not be there (or as intractable) any more. So my lesson learned is to ask, “What is different now?” and to try to prove myself wrong when I am too quick to judge.
Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?
I met Zach ‘Z’ Reitano during a fundraising process for what was at the time called Roman, now ‘Ro’ and I was blown away by him and his vision for the company. He was seeking to build a true consumer experience for healthcare starting with DTC cash pay prescriptions. From my experience, I thought that the market size for cash pay prescription medication would limit the market opportunity, and that they’d hit significant barriers to penetrating the insurance market due to PBM entrenchment. What I underappreciated was that we had reached a tipping point in the US on the amount consumers were paying out of pocket for their healthcare and were making different decisions and willing to pay for a modern consumer experience.
What I learned from that example is that there was true consumer pull for healthcare experiences that ‘meet people where they are’, and that Ro would not be the only company to recognize this pull. Because of that learning, I invested in Wheel, a company that powers the clinical workforce and infrastructure of virtual care for companies — a need has only accelerated with the pandemic.
Super. Here is the main question of this interview. What are your “5 things I need to see before making a VC investment” and why. Please share a story or example for each.
Beyond the traditional things VC’s need to see before making an investment such as stellar team, large market, differentiated product, here are four additional things I look for:
- Why? With each investment, I try to understand not only whether the entrepreneur and founding team has the skill set, insight and horsepower to build a company, but also their ‘why’ for doing so. What motivates him or her to persevere in the face of obstacles and roadblocks? What is their driving purpose? Because there will be significant roadblocks along their path, and the ‘why’ is how founders find that extra gear to push through to the other side.
- Why now? Assuming the company is addressing a large market opportunity with legacy incumbents, with each investment I ask the question, “Why now?” What has changed in the underlying technology, with the regulatory environment, in the competitive landscape, or consumer/customer demand to enable a new entrant to scale? Many folks will look at regulations as imposing barriers to growth or business risks, but we’ve seen how changes in healthcare regulation and reimbursement can drive opportunities. A very recent example is the move by CMS to reimburse telehealth visits on par with in-office healthcare visits, which has provided significant tailwinds to the digital health space overall, and companies like Wheel that power virtual care companies have accelerated.
- Stakeholder alignment: who decides, who benefits from, who uses and who pays. Many investors will highlight signals for product-market fit as things they need to see before making a VC investment. One thing I look for is, “Does the founding team have an understanding about how their product aligns incentives in the market?” In a consumer company who buys, who decides, who uses and who benefits from a product is the same person. But in healthcare, not only can these be different entities, but they can have conflicting interests. I look for entrepreneurs that understand how their product addresses these stakeholders, and find that the more closely aligned they are, the faster the adoption curve for the company.
- A great example of this is Viz.ai and their first product focused on stroke care. The Viz technology enables large vessel occlusions to be identified instantaneously and transforms the workflow for neurosurgery. Who decides the Viz algorithm? The hospital and neurosurgeon: the hospital is incentivized to provide care efficiently and effectively, and the neurosurgeon is motivated to perform life saving surgeries. Who uses? The neurosurgeon and care team who are delighted that the Viz product drastically accelerates and simplifies their workflow. Who pays? The hospital and insurance companies: the hospital makes revenue from each surgery and the health insurer that saved over 1M dollars by not having a member with brain function loss. Who benefits? Everyone, but especially the patient who received the right care from the right doctor at the right time to save their life and livelihood.
- Would I go work for this company? The founding team of a startup needs to be a beacon for talent, capital and customers. I was fortunate to join two early teams as an operator that rapidly scaled companies, and so with each investment I ask myself, “Would I go work here?” That’s how I see my role on the venture side as well, waking up every morning and thinking about how I can go to work for these companies, now as an investor, and help them build breakout businesses
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
It might sound simple, but given where we are as a country my hope is that there is a movement to treat others as we hope to be treated, and for those with power and capital to be allies to those underrepresented on teams, in boardrooms and beyond.
We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this. 🙂
Recently I’ve been thinking about who would I want on my own personal Board of Directors. Most of my ‘Board’ is comprised of family, mentors and peers that I routinely go to for guidance and advice. But if I got to choose a dream group of ‘independent directors’ that have broken barriers and whom I admire, I would love to have lunch with Tina Fey, Serena Williams, Michelle Obama, Lin-Manuel Miranda, Vice President Kamala Harris and Coach Steve Kerr.
This was very inspiring. Thank you so much for the time you spent with this!