Funding, Flywheels and the Future of Healthtech with Folklore Ventures
Why Folklore's going long on health and literally dancing out of bed
Healthtech investing seems to be the flavour of the month (or year?). And given our recent killer panel had so much interest and endless follow-up Q’s, it only seemed appropriate to deliver more of the goods.
So today, we’re diving deep with Alister Coleman, Partner and Founder of the fabulous Folklore Ventures. (Yes, they are my partners and I’m biased. But I wouldn’t have partnered with them if they weren’t actually awesome).
🌈 TL;DR of what we cover
Why Folklore is going long on healthtech
What they saw in their current portfolio - Swoop Aero, HealthMatch, Arli & Komodo
Thoughts on the healthtech and investing landscape in Aus
What gets Alister tap dancing out of bed in the morning
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We had an awesome Melbourne drinks despite the weather gods this week ❤️
Sydney - I’m so sorry… given the current state of affairs we’re going to play it safe and postpone until 2022. Thanks for all the interest and promise we’ll see you soon
Something about having to wait making it sweeter?
Ok, let’s jump in…
So Folklore - you’ve been in the game for a while as “first cheque to forever” investors, with the goal to identify and help visionary companies at the early stages of their journeys. Though you’re an industry agnostic fund - clearly healthtech has been a focus. So, the obvious question: why healthtech?
To put it bluntly, we all die eventually and quality of life up until that point is really important. Everybody experiences wellbeing in a different way, and we believe that technology – in particular, software – has the potential to really impact people's lives and to improve people's wellbeing. We’ve seen this in our portfolio already in mental wellbeing, addiction and helping people get into clinical trials that they can't access or work out how to apply for.
As an investor who's now backed a few companies in the space, what do you see as the key healthtech opportunities that get you really excited?
I think that there is a huge opportunity to improve people’s wellbeing outside of traditional medicine. We've seen the onset of that through products like Headspace and Calm, but the opportunity extends so much further than that into preventative medicine and helping people to identify where they could be healthier and how their wellbeing could be facilitated by-products or applications that enable them to take control of their wellbeing. Preventative Health is really powerful.
There is also a huge opportunity around clinical diagnosis and the utilisation of data in order to help people's wellbeing and other conditions. I'm very excited about the entire value chain.
I'm being intentionally vague about my excitement because I think if you are too narrowly-focused on what can be done, you’ll miss a lot of opportunities and we believe there is a total white space for the development of products to facilitate better wellbeing.
Diagnostic is great, but preventative… whole new world. Sounds like you're really excited about the full end-to-end spectrum and the redesign and acceleration of healthcare and in all different ways…
Harnessing compute power and software to synthesise complex information, or chemical compounds or design drugs in simulations before we even get to the point of testing them, is going to be quite extraordinary. Hopefully, these advances will also bring down the cost of medicine and the time it takes for people to get better.
A lot of people reading this might already feel the pain of, or be a contributor to, the inefficiency and lack of productivity in the delivery of healthcare. Software will bring major advances that will help people manage patient outcomes and care while putting patients first.
The better the experience for the practitioner, the more time that they can devote to patient care and the better the outcome hopefully for patients. This is one huge flywheel and I think it’s a fascinating area to be investing in.
And that flywheel is only just getting started. Diving into a couple of the companies that you've backed already: Swoop Aero, HealthMatch, Arli and now Komodo… What made you invest in those particular companies?
At the core of these investments we’ve made is one common thread: using technology to deliver impactful change that can ultimately create really large scalable companies, and improve our quality of life.
Swoop Aero, HealthMatch, Komodo and Arli are using software to solve some of the biggest challenges to our health at scale – respectively, last-mile drone delivery of critical medical supplies, opening up life-saving clinical trials, enabling schools to track students’ wellbeing more effectively and helping people overcome their addiction challenges.
When the healthcare industry as a whole sees the power of being able to do things quicker, safer and with less spoilage and less cost, that will spark a movement towards prioritising the patient that is going to be hard to reverse.
When you first met these companies, what size were they and what were the stand out indicators you saw?
HealthMatch was a two-person business with an MVP. Swoop was a few people with an MVP product and a test customer in Vanuatu. Komodo was the same with about four customers. And Arli was a one-person business with no customers and no product.
For all of them, it was the passion for the problem and an overwhelming belief in the founders, and their vision... and a belief that our firm and network could help those people to succeed. We love investing early, and we love investing for the long term as each companies scales and we’ve continued to do that with each of these startups
Many VCs or traditional tech investors in Australia have tended to shy away from healthtech but it's become a bit more of a hot focus area lately. How do you see VCs' role in the ecosystem? And how can they better enable Australia’s healthtech ecosystem?
There is a pretty rich history of venture capital in drug discovery in Australia, with both international and domestic venture capitalists having invested in drug discovery, clinical research organisations, small pharma companies and so on.
There’s been less VC activity when it comes to software and technical innovation, but in time, more VCs will wake up to how talented Australian’s are, and how successful Australia has become at developing breakthrough medical technologies and drug discoveries.
I suspect a lot of VCs have shied away from the non-clinical aspects of healthtech because many of the products that are developed are extremely valuable - but very niche with small customer bases - so they don’t necessarily fit the profile of venture capital funds and the returns VCs ideally want to unlock from their investments.
What do you see as some of the gaps in the ecosystem that might be preventing people from either having access to the knowledge about technology or thinking big? And how can we overcome these blockers?
I think ambition is a big gap. I've got a theory that collective & creative ambition is not encouraged because, in part, the healthcare system is extremely hierarchical, and perhaps people are not encouraged to think beyond the existing structure and challenge the way things are done to see what’s possible in healthcare.
Those that do have ambition, however, face the second major challenge, which is being able to connect the founder/s with the health and medical expertise to the engineers, developers and operators who can help bring their product visions to life.
Connection is always key at the end of the day. How do we get more people investing into healthtech, and participating in the healthtech space?
Communities like What the Health are the way to do it and that's why we are thrilled to be supporters of this group. You have to unlock people's awareness of what's possible in and around healthcare by showing them examples of what’s possible, and from that point we only need a small number of people to try and to succeed, for the ambition to build a startup to become more commonplace and acceptable.
Over the last eight years or so, we've seen startups become a viable career path broadly. We’ll that start to play out more in healthcare as talented people choose to work for a startup rather than follow the traditional career path into say, big pharma or more traditional clinical practices.
Big shift in culture, and the risk is not taking the risk anymore.
We have to bring the best and the brightest from wherever they are into the game. Communities like What the Health and Earlywork, along with accelerators and other Aussie startup success stories, will help do that.
Cultural change and visibility are really big components. Okay, last but not least, is there anything that's really exciting for you? A company? A space? Programs? Is there anything… that you're super, super excited about right now?
I’m really excited about solving the infrastructure layer for healthcare delivery at the moment. And what really excites me is that we've had so many good software companies built over the last 20 years in Australia, and so much value is being created and so much talent has been brought into our ecosystem. That will multiply exponentially in the coming decade.
Every day, we’re one step closer to the next HealthMatch or Arli, and that's what keeps me tap dancing out of bed every morning. I wake up knowing that we’re going to see the next great healthtech founder or founding team that’s building the next great healthcare company walk through our doors – and to be part of their journey is incredibly exciting and rewarding.
Well, what a note to finish on… tap-dancing out of bed.
Want to connect with Folklore? Are you the next founder Alister is going to tap dance out of bed for? Know someone who is?
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Until next time
*Shout out to Folklore’s fab Head of Comms Stef Safahi for all her help bringing this one to life 💜