Google Ventures Outlines Investment Strategy in Digital Health Startups Targeting Diverse Patient Segments

Google Ventures is the early-stage investment arm of Google. According to Krishna Yeshwant, a general partner at Google Ventures, the firm receives $300 million annually from its parent company, with approximately 30% of its capital allocated to investments in healthcare startups. Yeshwant, who is also a practicing physician, recently shared Google Ventures’ investment philosophy in the digital health sector at the 2015 HxRefactored event held in Boston. VCBeat has compiled a summary of Yeshwant’s remarks, based on reporting by Aditi Pai, to provide insights into the investment perspectives and strategies of this venture capital firm backed by an internet giant toward healthcare startups.

Google Ventures has invested in healthcare-focused startups including FitStar, a video workout app recently acquired by Fitbit; Doctor On Demand, which provides video consultation services; One Medical Group, a healthcare provider; and Spruce, which offers asynchronous telemedicine services.

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One of the methods Yeshwant uses to analyze healthcare startups is by examining their target patient populations. During the event’s discussions, he sharedA Four-Quadrant Approach to Classifying Patient Populations Along Two Axes: Medical Complexity and Social Complexity, including the patient's socioeconomic issues and their social support system.

“In one corner, certain individuals have low social and medical complexity, much like the many ‘Googlers’ I work with at Google,” he said. “They have good jobs, health insurance, and typically do not struggle with alcohol abuse. But at the other end of the quadrant, patient populations with high social and medical complexity are plagued by a variety of social issues: homelessness, often accompanied by severe mental illness, which has led to estrangement from most family members and left them with little social support. Comorbidities also cannot be overlooked; if these patients cannot figure out how to get to the hospital, they will miss the vast majority of their outpatient appointments, making their conditions even worse.”

In between, there are also patients with low social complexity but high medical complexity, such as those “Google employees who have cancer,” but90% of outpatient visits involve patients with high social complexity and low medical complexity.

VCBeat has prepared the following target user quadrant analysis chart based on the above description for your reference.



“Although this model is simple, I find it highly intriguing because we are currently treating four distinct groups with the same product or service,” said Yeshwant. “...Each group has entirely different characteristics. Google employees, for instance, have jobs they are passionate about, families, and often children; they exercise and pursue ten different hobbies. Seeing a doctor ranks at the very bottom of their life priorities; they would rather pay extra to avoid medical visits. If they could interact with doctors via Twitter, that would be ideal for them.”

Yeshwant added that, based on his clinical observations, patients at the other end of the quadrant require vastly different tools to help them maintain their health. Unlike patients with low medical complexity and low social complexity, these individuals do not have access to the same resources as the former group, such as internet connectivity.

“Google engineers frequently visit my office, sometimes once or twice a week, telling me they want to make an impact in the healthcare sector,” said Yeshwant. “They have read numerous articles and are eager to understand what they can do for the 20% of patients who differ from you and me. These individuals cannot simply pull out a smartphone app to manage their diabetes—many still use flip phones, and some do not even own a mobile phone.”

Yeshwant continued, noting that the landscape may shift in the future, as an increasing proportion of the 20% of the population using smartphones with health-supporting apps adopts these technologies. However, for now, investing in provider groups like One Medical is a sound strategy. One Medical specializes in premium, specialized medical services in the market, and the experience of tech-savvy patients serves as the best benchmark for evaluating these services. In contrast, Yeshwant is less inclined to invest in other types of health-tech companies, such as those providing electronic medical record (EMR) systems.

“I firmly believe we are entering a world based on value and calculated by population,” said Yeshwant. “This is not the mainstream in today’s market, but it is clearly growing stronger. I think the biggest investment risk is who will become the next U.S. president. If the next president wants to repeal or abolish Obama’s healthcare reform bill and is determined to implement it, what will happen? As far as the current situation goes, this seems unlikely, but I hope we can look at things from that perspective. As an investor, this has been my argument for investing all along. At the same time, I have also invested heavily in companies that can achieve something in the present, and they have greatly benefited in the process of transitioning to the new world... Of course, personally, I do not want Google Ventures to be exposed to such risks at this time.”