A high VC at Felicis Ventures advised us why it’s betting that money is king in healthcare because it invests a $300 million fund

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  • Healthcare startups are providing services and products that buyers pays for with money, reasonably than going via their medical insurance. 
  • That is a development that the venture-capital agency Felicis Ventures is betting on as a result of extra sufferers are going to buy round as health-insurance deductibles develop, Sundeep Peechu, a managing director at Felicis, mentioned.
  • “As an instance 5% of the market turns into money pay — that is an enormous quantity of spend, and there is going to be many, many giant firms that come up there,” he mentioned.
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As sufferers, we’re used to pulling out our insurance coverage playing cards when going to the physician or choosing up a prescription.

However for some new startups, insurance coverage is out — and money is in. 

The shift is one which the venture-capital agency Felicis Ventures is betting on. As of late, even individuals with health-insurance protection are more and more dealing with excessive out-of-pocket prices, driving a “cash-pay” market through which shoppers will store round for one of the best offers, Sundeep Peechu, a Felicis managing director, advised Enterprise Insider.

He predicts that this development of high-deductible well being plans will solely develop over the following decade or so and says that it is a gap for VCs like Felicis and startups. Of people that get medical insurance via employers, 26% have a deductible of a minimum of $2,000, up from simply 7% in 2009.

Learn extra: The girl who based high health-tech VC Rock Well being is now launching her first startup, and it reveals long-neglected market is heating up

“As an instance 5% of the market turns into money pay — that is an enormous quantity of spend, and there is going to be many, many giant firms that come up there,” Peechu mentioned.

Felicis is now trying to make investments a $300 million fund

Peechu has been with Felicis for almost a decade. The agency has invested in firms like Fitbit, the cancer-testing firm Guardant Well being, and, extra just lately, the artificial-intelligence-powered biotech Recursion. Peechu led the Recursion funding, in addition to others in tech startups acquired by Google and Salesforce

For Felicis, the cash-pay area is “an lively space” of funding. One specific enterprise there has captured the agency’s curiosity, however it will not but disclose which it’s, Peechu mentioned.

Broadly, Felicis is targeted on up-and-coming areas of healthcare. The VC is investing out of its sixth fund, which comes to only over $300 million, and healthcare has made up about 20 to 30% of prior funds, the Felicis associate Dasha Maggio mentioned.

Felicis has made heavy investments in psychological well being of late, via such startups because the remedy and training supplier Octave, Peechu mentioned. 

Octave’s method immediately additionally largely matches into the cash-pay mannequin. Its remedy periods, that are run by a licensed therapist or psychologist, vary from $180 to $300 per session and are sometimes reimbursed out of community, the corporate says. 

There’s additionally curiosity at Felicis in longevity, or easy methods to hold wholesome individuals wholesome, an space that conventional pharmaceutical firms do not get entangled in, he mentioned. 

Corporations are experimenting with money companies throughout healthcare

Right this moment, firms throughout healthcare are experimenting with the cash-only mannequin. Some are engaged on new primary-care fashions, and others ship pharmaceuticals to your door, taking a shopper’s cash or bank card as an alternative of working with their health-insurance firm.

Hollis Johnson/Enterprise Insider

The startup Curology, as an example, prescribes personalised zits therapies by mail and doesn’t take insurance coverage. The associated fee to sufferers ranges from round $5 to $60 for a two-month provide. (Felicis hasn’t invested in Curology, in accordance with PitchBook.)

Learn extra: We tried out 7 startups that declare to make it simpler and cheaper to go to the physician. Some fell wanting the hype.

New startups sometimes take into consideration the area like so: Begin in money pay, then transfer to getting giant employers on board and, lastly, on to well being insurers, when you’ve gotten sufficient clients, Peechu mentioned. 

However which may not all the time be the case, he mentioned.

“With excessive deductibles, will increasingly of medical spend transfer in that course? It isn’t been confirmed but; you do not see large firms there,” Peechu mentioned. “However our sense is there is a chance for that to occur.”


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