A Conversation with Ellie Wheeler of Greycroft
Burton Goldfield: So, an interesting time for companies today and investors like yourself. If I'm a CEO looking for capital today, what should I be thinking about and how is this different than approaching you a year ago?
Ellie Wheeler: Sure. I still think it's a great time to be building businesses and a great time to be investing in them. Right? There is a lot of capital out there that hasn't changed. People have raised huge funds. We've stuck to our core strategy but there's a lot of capital out there. So, it isn't necessarily a lack of capital, but there is a change in what's viewed as attractive.
Fundamentals are back. Right? Growing a little bit more, growing your costs a bit more in line with your revenue. People who are, of course, public companies or private equity backs, that hasn't really gone away. But in venture it did it and in you know the businesses that we back, it moved a little bit closer to growth at all costs
Ellie: And a little bit further away from really making sure that the business was working before we accelerated. And that's because capital was virtually free for a certain subset of these businesses. Granted, that's a small slice and there are many companies that don't have access to that type of capital, but there's still plenty of opportunities. There's huge kind of tailwinds in the markets that we're spending time in.
I spent a lot of time in digital health. That is growing tremendously. That isn't changing. In fact, it's accelerating. So there's still really exciting opportunities, just have to have a compelling story for why you are going to stand out in a time where people are taking a little bit less risk.
Burton: So ,you specialize in digital health. Can you talk about your excitement there and what's going on in that particular segment of the market?
Ellie: Sure. So obviously a ton, right? So thankfully, we were investing in digital health and health tech before the pandemic. So, we got the benefit of, you know, the just huge penetration and adoption and in things like telehealth that happened seemingly overnight. But it also meant that there's been a lot of activity in a lot of change, so we're really excited about what we're seeing.
We're seeing new care delivery models that are kind of providing access and able to do things that offline can't, right? We have a fairly siloed system right offline, as anybody who's had to go to six different places to see six different specialists knows, right? So, some of that is obvious. Like, how could—how can digital make this better now seeing the various models and how they actually find their customers, I mean, there's a whole bunch of detail in making these things a success, but we're seeing really interesting models that are driving down cost and ultimately providing more access.
Burton: And has the pandemic sped that up? And is it enabled by pure technology horsepower or is it a behavioral change that drives the technology backbone?
Ellie: Yeah, it is. Well, it's always about people, right, as you well know. So, of course, there's people involved, even if it's behind the technology. But often in some of these models, it might be a tech enabled service. There's also really interesting software models that are changing how the system is working. You've got to start in a small way.
You can't tackle it all overnight, but just making data interoperable between different systems, enabling the patient to take more of a role and having a sense of their various test results and having a sense of their records and being able to bring them from place to place. So, things that in other markets might seem fairly obvious, but just for good reason takes a little bit longer in health care.
Burton: So, you talk about the data and the technology. On a scale of 1 to 10, where are we on accessing our own health information, our own data? So I can choose the doctor I want and the care that I want.
Ellie: Yeah, the regulatory is pushing and there's some things that are really pushing these things forward. We're starting to see APIs get exposed from various payers. We're starting to see that. I'm sure you see it too, but it's still so early. I had someone ask me, you know, for the applicability of Web3 to digital health…
I mean, we're still operating on mainframes. There's still a lot of faxing, like we're very far from, you know, Web3 really having true use cases within digital health. So, I would say, you know, we're about a three, but we're moving in the right direction.
Burton: And what role does the insurance company play in this?
Ellie: A huge one, because most of the time they're paying. So, there's a number of models, things that you're like, well, why doesn't that happen here in the U.S.? And the answer is almost always because there's no one to pay for it or there isn't an obvious person to pay for it within the system. A good example would be really almost anything preventative.
I'm being slightly hyperbolic, but you know, getting people on an exercise program or nutrition and doing things ahead of a problem, actually showing up, it's really hard to bill for that. And since it's hard to bill for that, it doesn't tend to happen because ultimately people want to get paid for their time and their expertise in the way that we're set up.
We're not there yet. It's moving there slowly. Whether it's Medicare Advantage, value-based care, we're moving there, but it's early.
Burton: So, you want to move this industry forward—a lot of great ideas—we're facing what appears to be a challenging economy. How do you make decisions as far as where to invest, where to reinvest? Is it the team? Is it the straight math of the business plans or is it the art and science of the mixture?
Ellie: Yeah, I think it's all of the above, but we're investing early typically, and so it has to be the team. You know, without a team, without a team that we're inspired, that we're excited about, that we think can really hire and recruit. And because ultimately, they're trying to be talent magnets. And the best companies are. The best companies are able to hire the best people and then are able to move things forward a lot more quickly.
It tends to compound being able to be a talent magnet. So, we care a lot about the team. Obviously, you know, we are thinking through themes and we're spending time in specific areas that we think have big tailwinds and big opportunity. We're having to invest today for something that's probably going to happen in 10 years.
Burton: Right.
Ellie: In terms of actually exiting the investment and, you know, being able to basically see it all the way through. So, it's certainly about the team. But they've also got to be in an area that we're excited about and ultimately the opportunity has to be big enough. You know, we're looking for things that can hopefully be public companies…
So they need to be able to get to a scale where that is feasible.
Burton: So we are seeing growth in our install base, which a lot of people find a little bit incredulous. You get to see the other side of that and I think it has to do with what you're saying, which is you're investing in a core group who are growing our companies and we see that growth on our side. How important is the team in attracting the incremental people, which is what we're passionate about in making the companies ultimately successful?
So are you betting on one founder? Are you betting on the dynamics of the team? And how important is attracting and retaining more great people to get an idea to market?
Ellie: Yeah, I mean, the team is usually the single most important factor, right? So certainly it's the founder, particularly in the early days, sometimes just through sheer will. You know, they're able to get things done. Those first few sales are almost always founder-driven. No one can sell a dream better than them. But ultimately you need people to build the business…
And they need to be able to attract that kind of talent, be able to delegate to that talent and hopefully bring the company the whole way.
Burton: So, we have some questions from the audience. In what ways—this is a great question. I should have asked it. In what ways, other than giving companies capital, are you helping them to be successful in these times?
Ellie: Yeah, it's a good question. So, we have like many we've got a pretty extensive platform effort that in addition to the individual team that you're working with and we do work as a team. So, it isn't just, you know, the one partner who is investing, but we also have a number of operating partners who are helping, particularly on the go to market side.
How to set up your sales team and, you know, walking you through dashboards and helping you evaluate talent and make sure those first few hires or, as you're scaling, making sure that your processes are exactly where they should be. We also have a talent capability in order to both help and some of the executive level talent, some of the executive level searches be able to help, you know, kind of manage the recruiters, make sure that we're, you know, setting up those processes for success as well as, you know, kind of sourcing throughout our network.
And then we have a pretty extensive board member matching program as these companies grow and, you know, are starting to think about next steps and starting to think about getting public ready. We have a bit of a focus toward underrepresented and underrepresented candidates as well. So it's a really exciting effort that enables us to spend a lot of time with corporates in that kind of next generation of corporate leaders and helping them get exposure to board roles and know moving our companies forward, too.
So we view it as a total win-win.
Burton: So, you mentioned a great point. What is the board's role in these young startups, which changes radically? I can tell you as a public company.
Ellie: That's a huge understatement. So, at the earliest stages, you are a sounding board. Your, you know, your support—sometimes they don't necessarily have a co-founder. So your while you are of course, you're their investor, you're not there, you're not operating. You know, you're not you're not their co-founder. You can help them up level or help them think about things from a 30,000 foot view in terms of, you know, what do they need to be doing to prove out the business to be able to get to the next set of milestones?
So, it does start out as certainly governance, but also more support. And then as the company evolves, the board starts to resemble more of a growth stage board, which ultimately, you know, kind of morphs into a public company board. But we are huge fans of independent board members early to be able to have an independent perspective, have another operator on the board to be able to, in some cases, coach and mentor, in other cases to challenge.
Sometimes those are the same things, but to be able to round out the opinions.
Burton: So does the independent board member in a startup have the same standing as a board member who invested in the startup?
Ellie: If it's done well, yes. In the in the very, very early days, probably, no. It gets better as the company starts to scale and then they do. And then particularly around certain inflection points, then they are worth their weight in gold. So particularly as M&A comes and they've, you know, perhaps they've been through that process or—you know, there's a bit of a pivot in the business or something that they've experienced themselves.
I mean, they can be amazing and can change the trajectory of a business. But in the very early stages, it's a little bit maybe it's a little more even.
Burton: Yeah, that's fair. That's my impression as well. Everybody wants to go public. Do you see different exit strategies today and in the future here that may or may not involve a liquidity event around the public offering? And how do you guys factor in private equity and some of the other things that may be another way to allow companies to continue their journey.
Ellie: Sure. In certain sectors, private equity outcomes is more of a secondary transaction is absolutely works. And they're, you know, ten, 15 years ago wasn't something that private equity firms wanted to do. That's changed. So that certainly is an option. But the way that we view it and I think the way that most people view it is if you aren't building for kind of a public scale outcome, your other options are also limited.
Burton: Yeah.
Ellie: So it is better to be shooting for that if it's feasible and it tends to drive more of a strategic process even if it does go M&A because you have a viable outcome. Another viable option. So, you know, it's obviously along the way, there are oftentimes M&A opportunities and sometimes that's absolutely the right call. So, it really depends on the company, but more options are better.
But I think still, you know, the IPO retains its top spot.
Burton: Yes. I never dreamed of ringing the bell at the New York Stock Exchange. But I will say to you and the entire audience, it was really cool. So, a question from the audience. What excites you most about the future of health care? Vast opportunity. Is there an area where you think we'll be able to wrestle to the ground and have meaningful impact over the next five to 10 years?
Ellie: I sure hope so. No, there's a bunch of really interesting things. So, we are spending a decent amount of time at the intersection of health care and fintech. And that sounds like a bunch of jargon. But really, it's not just in how services are paid for and how people are reimbursed, but it's also getting back to the consumer, enabling them to understand what they're going to be charged, when they're going to be charged, and who they have to pay.
And that is not a small problem. It is a huge problem and can really unlock a ton throughout the ecosystem if that is even able to be solved 10% of the way. So that's just one example of something that we're really excited about in that segment. The other thing we're seeing is there's a lot of discussion and in circles around health equity and social determinants of health.
So, the fact that your environment and oftentimes socioeconomic status and other things have an impact on your health, that seems fairly obvious. And there is a ton of evidence that says, yes, that is, of course true, but how do you actually change that and how do you change that in a business model? And I think what we're seeing right now is most of the—where there is there's a bunch of exciting approaches to that that are taking more of a financial technology approach.
So more of a consumer fintech solve. Or kind of that health equity piece, which is a really interesting kind of intersection of a bunch of themes.
Burton: So you alluded to it earlier. How do you shift the focus to preventative care as opposed to sickness care?
Ellie: Right. That's all in how it's paid for. So that is ultimately moving to a value-based world.
Burton: Right.
Ellie: Where you're able to get a case rate for solving a certain problem and that certain problem can then be solved. Really, however, that company sees fit and typically they're pulling in all sorts of things, they're pulling in diet, they're pulling in exercise, they're pulling in mental health services to be able to drive that outcome. Like we have an investment in a company that's focused on substance use disorder and treating it digitally.
Obviously gigantic problem that was only amplified during the pandemic, but with regulatory change, they were able to roll out digitally. But through a case rate model, which is how they got started and how they were able to build and they were able to build the business through that lens. They were able to pull in a bunch of different services to be able to ultimately drive a different outcome.
But if you weren't paying for it as a bundle, it's much harder to do.
Burton: Right, right.
Ellie: So we're starting to see it. It's just taking its time.
Burton: So do you see telehealth being even more a factor in the future than it is today?
Ellie: Certainly, I don't think we've had probably 10 years of adoption in an 18-month period. And that's not going away. There are some things that, of course, there will always be offline health care. It would be absurd to think that that's not the case. Of course, that will always be a big part of it, but we will…
The sheer number of people who had to try telehealth during the pandemic and then realized this actually has a lot of utility means that there's lots of opportunity. We've seen it across our companies. We've seen it across payers. We've seen it across traditional, more traditional pockets of the health care system. That's not going away. The question is, how do you, I think the first wave was moving from offline to online.
This is how we did it offline. Now we're going to put it on a screen and that's not enough anymore. And I also don't think that the outcomes of doing that in terms of actually lowering costs and changing outcomes have been as much as people were hoping for. So, what we're seeing now is actual changes in the care model and changes in the approach. So it's not just channel switching, it's actually changing what's happening, which I think there is a lot of promise around.
Burton: And that goes to the reimbursement. So they have to go hand in hand as if they're not getting reimbursed. That's just not gonna happen.
Ellie: That's right. It's just a smaller market.
Burton: So the next question from the audience is, what advice do you have to an entrepreneur entering the market today and what coaching would you give somebody who's saying, I want to do this?
Ellie: Definitely do it. You know, if they if you've got the fortitude and the stomach for it and the support from people around you, that it's going to be a rough road, definitely do it. It's a great time to build a business. You know, there's lots of support out there for entrepreneurs, you know, for outside of just VC.
There's plenty of platforms, plenty of places to help you. And it's the backbone of our economy are our small businesses, and the more the merrier. So get out there and do it. You know, it's what actually changes things in our communities and it's something that should be applauded. So absolutely do it. But, you know, it's not easy.
Burton: Right. Well, thank you so much for joining us today. I appreciate it. I learned so much from you. And I love your passion for small businesses. If you're not a VC, you got to work at TriNet because I get to work with small businesses every day and I am optimistic, like you, for the future of the entrepreneur.
So, thank you.
