Lee Greene (HealthInc): The health industry is very complex – we call it “tripod”, that has to have 3 legs in order to stand up.

Lee Greene is Managing Director at HealthInc. His specialties are Startup growth acceleration, corporate startup collaboration, investment, digital health, coaching, startup advisory, internationalization, pitching ideas, developing strategic partnerships, networking, innovation management, impact tech and life sciences.

How it all started? How did you decide to enter the venture investment business?

I am a serial health entrepreneur for many years. I started my career at age of 18 by buying a restaurant. Then I sold that and I created one of the first telepathology companies, uSCOPE.com, back in the late 90s, then sold it as well. I stand in Digital health for my entire career creating several more companies along the way. In 2015 I’ve created a telehealth company Steward. At that point, I decided that I wanted to go on outside of startups because I had a long career there. Fortunately for myself, I had some exits, so I was able to start investing individually. One thing led to another and now I’m the CEO of HealthInc.

What surprised or impressed you the most when you started working in venture capital? 

A fairly high percentage of startup founders don’t have the right attitude or don’t follow through. We always hear that 90% of startups failed, and what I realized going on the outside and working with a lot of startups is that there is a specific reason for that. 

What was the most unusual startup you ever supported?

I consider myself to be quite fortunate because we specialize in Digital Health. So I would have to say about one startup. You know, if somebody needs a liver or kidney, they go on a long waiting list for transplantation, and it takes years to get a donor. People pass away because they hadn’t found one. And that startup decided that there are already all necessary technologies exist that can clone a patient’s own liver or kidney and then transplant it back.

How startup teams usually find you? Do you wait for inflow or scout actively? 

We scout actively and have a scouting team. Also, we have a lot of startups that contact us through LinkedIn, which I encourage people to do. We have a lot of inbound startups on our website as well. But we find the most successes after the scouting program. 

How many startups do you review per year?

Just finished scouting for our new cohort and saw 3,500 digital health startups. We call that a long list. The scouting has started even before and those are the only companies we found interesting to engage from there. It’s quite a lot.

How many of them go through the first filter?

We ended up investing in 10 startups. It’s a pretty long process that has various different stages. When we get that 3,500 companies-long list, there was another set of criteria that they went through. By the time it gets to me, it’s usually around 250-300. I’m actively involved in that stage and meet these companies one by one through Zoom. There are several key components to the process that takes it from 3,500 to those I meet. 

What verticals or industries are you interested in? 

Our key sub-verticals are Telehealth, personalized medicine, and something that we call “Doctorless world,” which is a misleading term. What it basically means is self-help, wellness in prevention, and tools that are enabling people to help themselves. It doesn’t mean that a doctor is not involved, just that a patient is involved more. With that, we’re involved in the aging market as well, in elderly care, in chronic diseases, things like blood management, etc. 

What verticals in the Healthcare industry you really like but will never invest in?

Biotech. I like Biotech, but it takes a lot of money and a very long time for things to get to market. Pharmaceutical products have to go through a clinical trial process. That’s not for me, but I love it because that’s really life-changing. I invest in those at the public level, in shares and stocks, but at the venture level, I would never do it. 

At what stage do you prefer to enter? 

We are focused on the early stage – just after the incubator stage. What that means is that deal has a team and a place, they have an MVP or a prototype. We work with them on scaling and going forward – going to market, finding product-market fit. 

When do you decide to exit?

We don’t have a specific stage that we exit in but we usually hold our investments for over 7 years. 

What is the geography of your interests?

Europe, for sure, however, because of the pandemic, we were able to go globally and the last group we’ve invested in has startups from Chile, Tanzania, and Africa. Still, our preference is in Europe.

What is your due diligence process and how long does it take?

This is a multi-layered process that takes, usually, about 2 weeks. We’re looking at the balance of the team – is it all technical people or a mix of technical and business, we look for industry experience. One of the challenges that we have in Digital health is startups founded by product people that don’t have any idea of how the health industry works. We really look for founders that have either experienced the problem themselves or have dealt with the problem. We invested recently in a startup called ShareMed that offers a platform for surgeons to communicate with each other and to learn from each other, and founders are surgeons also. That’s what we’re looking for – for a very complex understanding of the industry. From there, when it gets to me and I do the interview, I look at personalities: are those founders willing to do whatever it takes, do they have a passion. Then we take a look at the technology to see how far is it. If we believe that this is something that that team can actually pull of. 

What qualities you’re looking for in startup teams?

Passion. Industry knowledge. And the third one would be how long they worked together.

Who you would prefer to work with, Steve Jobs or Steve Wozniak?

I’m a big believer in a team and I would want to have them as a team. 

Investors prefer to work with teams. Have you ever supported a one-person startup?

We have, but that’s a very rare case. The startups we supported had solo founders but a big team around them already, so it wasn’t just a one-man or one-woman show. 

What are your red flags?

My red flags are difficult people. If I’m talking to a founder and they become defensive or something like that, it’s a big red flag. It has to be people that we can work with.

What are the most common mistakes startups make?

The biggest mistake that healthtech founders make is that they don’t understand the flow of money. The health industry is very complex. We call it “tripod”, which has to have 3 legs in order to stand up. Say, you designed an app for patients that have diabetes. You need to understand that patients, probably, won’t pay for it, doctors may prescribe it but won’t pay either, so it is an insurance company that will actually pay for it. That’s how money flows in health.  

Your target multiplication on exit?

The highest possible! The Standard we all look for is 10x, that’s the ideal. 

What percentage of ownership of a company is fair to take for investment?

It depends on the context, but I would recommend that a startup for any given round, not to give up more than 15%, and I think that’s really important. I think it is reasonable for any single investor to take between 5% and 8%.

Have you ever rejected a startup and then regret it? 

No, I wouldn’t say that I rejected the startup and then regretted it. I’ve done the opposite when I really liked the startup but had to reject them for whatever reason, but that’s a different situation. 

Has your VC approach changed after COVID-19 started?

Other than everything is remote now, it hasn’t changed our approach. In Health and Digital Health COVID has actually boosted the industry. It changed only the ways we search and engage with potential startups and investments. 

Can you compare COVID with the crises of 2000 and 2008?

The valuations are lower. For me, any recession is always an opportunity – for both the investors and startup founders. If a startup has a great product, it won’t have any problems. The good companies survive while the bad ones go away. We didn’t see slowing in deal flow, the only difference is that startups are now raising smaller rounds. 

But generally speaking, is COVID a threat or an opportunity for VC world?

It’s an opportunity because it opens a wider range of funding. There is a lot of grant funding in our industry, and now startups have greater access to free funding if you like to call it that. On the investment side, it’s an opportunity as well, because startups are really focusing on something that has a big impact, on change. 

Where do you get your daily information from?

Books, blogs, Unicorn Nest. We have an analyst team. They are constantly doing research on trends and prepare reports. 

Can you name the three most breakthrough startups in history in Healthtech? 

Moderna, a biotech company that created one of the vaccines. It’s interesting because it’s the new form of delivering a vaccine: they don’t push the virus into the body, but using instead its DNA to tackle it. That is brilliant. Tesla is a very important company, being the first electric commercial vehicle. I would say that Amazon is also becoming a health company as well as Apple with its Apple Watch Series 6 that can monitor a batch of your health indicators.

Well as a greatest startup failure in healthcare?

Theranos, for sure.

Are you satisfied with what you do? Or maybe you think to change someday and apply your knowledge and skills to something else?

“Never say ‘Never’.” I’m a health entrepreneur through and through. I may at one point go back to the other side, but at the moment I’m perfectly happy and feel fortunate that I’m literally making a difference in people’s lives.

What are the most important things you have learned from founders? 

Never give up.

From fellow investors?

Know the industry. That’s one of the reasons why I don’t do anything outside of Health. 

What qualities do you think are important to be a good VC?

You need to understand the future. You need to have a feel for the trend and the future. If you do that, you can move back to look for startups that would meet that future. That’s very difficult. I think that successful investors we read about all the time have this instinct. And if you’re not one of those, you just have to kiss a lot of toads until you find the right one. 

Is VC business chess, checkers, backgammon, go, card games?

Chess for sure – it’s a lot of strategy and a lot of things to consider.

Your three pieces of advice to founders

Follow the money. When you understand that then you are a successful company. Understand the flow of money is the better way to put it. 

What is your second favorite city in the Netherlands?

Rotterdam.