Existing Foundations
Apps like Uber were built on top of smartphones.
The Dark Knight was built on top of Batman Begins.
The culture of hip hop remixes gave us enough classics to fill up a 50-pack of CD-Rs that used to burn and play out of my parents’ Nissan Maxima once I got my driving permit in the mid-aughts. I still can’t get over that Kanye verse on the Because of You Remix.
And this post is built on top of the framework that Balaji Srninivasan laid out in “Founding vs Inheriting”, in which he brilliantly distinguishes inheritance from founding and points out the failure of the former in crisis times.
The entire premise resonates with me especially because I’m an East Coaster who chose to participate in the “West Coast” culture of startups.
However, my first critique of “Founding vs Inheriting” is that he doesn’t qualify the importance, in some cases, of maintaining foundations or in developing second degree innovations or in inheritance. There’s value in building on top of existing foundations.
That being said, I think most folks who study innovation or work on complicated problems in complex industries will agree that there’s even greater value in both meritocracy and first-principles thinking.
On a Spectrum
When I worked at Percolate, the company’s founder & then CEO Noah Brier came up with a framework that attempted to explain why there was no centralized system of record for marketing at the time, while such a system or record did exist for finance (ERP) and sales (CRM). His thesis was that the output of marketing made it difficult to design a system that could satisfy the needs of all its users. He plotted a typical organization’s primary departments on a variance spectrum, and then double-clicked to plot the marketing process on a variance spectrum (images below).
You can read more about the Variance Spectrum in the archives of Noah’s blog. The reason I bring it up is because while I was reading Balaji’s post and discussion of various heirs and founders, I found it a bit limiting to bucket everyone into two distinct groups.
My second critique of “Founding vs Inheriting” is that it doesn’t offer a spectrum on which to consider the relative degrees in between pure founding and pure inheritance.
Disruption vs Integration in Healthcare
So why isn’t there enough actual innovation in healthcare?
As a healthcare startup entrepreneur, I have worked on (cofounder), for (operator), and with (consultant) several founding teams to build up new companies from early stages.
Every single founder gets asked this question early and often: Who pays?
In healthcare, the answer is usually an employer, insurance company, or perhaps a hospital or other provider type. But it is rarely the consumer.
Consumers tend to not want to engage with the healthcare system unless they really have to, and this desire is somewhat perpetuated by the fact that the system is a pain to deal with in the first place. So generally, there is a very low willingness to pay for healthcare solutions among consumers.
Thus, even many of the most disruptive former founders who enter healthcare realize that they have to serve the incumbent system in order to succeed.
But there are degrees to which founders decide to engage with the incumbent system, and sometimes the decision to do so is a short-term strategy to scale up. I think about the spectrum of this decision-making as a Collaboration Spectrum that ranges from Disruption to Integration with the existing system.
As a quick example, I plotted on the spectrum three tech-enabled companies that broadly “deliver care” to patients. The scaling here isn’t perfect, simply directional.
Ro (https://ro.co/): Ro is a vertically-integrated healthcare experience that offers consumers that ability to go from diagnosis to delivery to medication to ongoing care through its virtual platform. They’ve built their own technology, directly employ providers, fulfil prescriptions via their own mail order pharmacy, and importantly do not accept traditional health insurance.
Cityblock (https://www.cityblock.com/): Cityblock is a healthcare provider for low-income communities. They offer primary care, behavioral care, and social services, combining community-based care with a tech-enabled delivery model. In many ways, they are revolutionizing care for underserved populations and highlighting the benefits of value-based payment models (as opposed to the fee-for-service payments that most providers receive). But they’re also purposefully integrating with an existing system to effectively serve their target populations.
Teladoc (https://www.teladoc.com/): Teladoc is part of the original wave of health tech companies. Despite promoting a new care delivery mechanism (telemedicine), they have largely existed as a feature that existing healthcare service provider systems have folded into their service models.
What I’m excited about is moving more founders from the right to the left side of this spectrum.
Health Tech Needs its Own Silicon Valley Moment
Whereas the advent of the internet and computer science made it easier and cheaper to found tech companies, this doesn’t translate equally to health tech companies specifically. That’s partially because healthcare is highly regulated, and both new and existing regulations tend to favor the incumbents. And also because healthcare has a huge component of care that still requires an offline or in-person interaction.
In the context of new cities and new countries, it would presumably be easier to implement new healthcare innovations from first principles. But until that’s possible, the energy of healthcare innovators should go towards improving the cost and time-to-market for founding healthcare startups.
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