Andy and I have been working on our thesis at USV around self-directed healthcare. We published it yesterday on the USV blog. The gist is that people are fed up with the existing healthcare system, and a movement has formed at the edges of the market. It consists of individuals who want to take their health in their own hands and a variety of products and services that empower them to do so.
USV has made several investments in self-directed healthcare, and Steve and I have angel-invested in several companies that fit this thesis over the past years. I grew up in a household with two doctors. I spent a good chunk of last year researching how to prevent heart disease. I have been going on a years-long personal health journey. This is a space I care about a lot.
One of the things I've noticed is that many entrepreneurs envision the same end-state. They want to be the AI advocate and doctor that is always on and personalized to everyone who uses the service. The way they plan to get there is by accumulating large datasets on customers through a variety of different mechanisms: biomarkers through bloodwork, diagnostics and scans, self-reported information, wearable and sensor data, etc. It's a very unique moment in time where a lot of founders share a similar vision but have very different approaches to get there.
I think it's important that whichever approach a founder takes, they must build a good business along the way. Not everyone is going to get to the holy grail, but a lot of people can build great companies while they try. There are likely many different viable paths, some direct to consumer, some through practitioners in the existing system, and others I can't even imagine. Each will have their own pros and cons. I don't think this is a winner takes all market. It is so large. But value will absolutely accrue to the players that accumulate the most data the fastest, successfully use that data to create experiences that drive positive and measurable results, and build trusted brands.
There are some open questions I have and some we have discussed as a group at USV about unknown dynamics:
Will direct-to-consumer companies need to partner with known celebrities and medical influencers to achieve scale? We have seen how credible influencers with their own distribution channel and following can help get a business off the ground rapidly: Peter Attia and Early, Sam Harris and Waking Up, Dr. Becky and Good Inside, Andrew Huberman and Athletic Greens, Tim Ferris and Momentous, Mark Hyman and Function Health, countless celebrity endorsements of wearable companies, and many more. I do not think this is a pre-requisite for success, but it certainly has proven to help jumpstart the early stages.
Are many solutions marketing wrappers for someone else's product? If a company is selling someone else's product or service to accumulate data on customers, what does that mean for barriers to entry? Does the wedge need to be proprietary, or can it piggyback on something else? How does one think about exclusivity and/or other dynamics with these partners?
If barriers are low and the movement continues to pick up steam (as I suspect it will), will D2C customer acquisition channels quickly become a race to the bottom? We saw unsustainable margin compression in most D2C companies over the past decade. Digital acquisition channels quickly get arbitraged and unit economics go upside down. Will similar dynamics be at play and if so when?
These open questions are not deterrents by any means, but they should be proactively addressed by entrepreneurs along with a convincing view of what makes their approach genuinely unique.
I am excited to see how this space unfolds and think we will see a shift in consumer behavior and participation in self-directed healthcare much more quickly than we thought possible. Most of all, I love using these products and trying new services and am eager to continue to partner with great entrepreneurs building them. The tailwinds are strong and society is embracing change. A generation of iconic companies that empower consumers to live healthier lives are getting started right now.
Yesterday Nick published a post about USV's thesis-driven approach to investing. We also updated our About page. There is a section called How We Operate that I love. I have had a lot of conversations lately about why I joined USV and why I think it's such a unique place. I wrote about my relationship with the firm over time, but that was only part of the story behind my decision. The rest is encapsulated by this tweet that Andy wrote:
1/ small funds for 15+ yrs (last core fund $275M)
2/ "vehemently" generalist - everyone invests in every area of thesis
3/ completely collaborative investment decisions, made as a collective
All of these attributes are very important and unique, especially for Founders that choose to work with us.
To me, the beauty of venture capital is about the alignment between the investor and the entrepreneur. Managers of small funds make money the same way founders do, and there is something very romantic about this and it deeply resonates with me. Small funds like USV can deliver venture scale returns through concentrated investments in early stage companies. By design they are required to focus on Series A and seed. This is exactly where I like to focus because as a Founder the investors I partnered with at this stage were the relationships I cherished and found most helpful on my journey. I don't think there is a perfect fund structure in venture capital. There are many ways to do this and firms have been successful pursuing different approaches, but small funds are my strong preference and I think create the best alignment between entrepreneurs, fund managers, and LPs. Fred has written some excellent posts about this here and here.
Thesis-driven investing is important because it reflects that you know who you are and what you stand for. I also think it's also an entrepreneurial style of investing because you are painting a picture of how you think the world will unfold over the next 5-10 years and what you want to happen, and then strategically using financial capital as a tool to realize that vision with like minded entrepreneurs. A strong thesis helps Founders understand how an investor thinks and what motivates them beyond financial returns. Being generalist means that we can maneuver across social applications, marketplaces, web3, fintech, health, education, climate and more. This enables serendipitous things to happen in portfolio construction and for people to transfer learnings across all these different areas. A lot of the most compelling and exciting opportunities happen at the intersection of different fields and being generalist equips you to play at these intersections, which are often at the edge.
It was very important for me to join somewhere where partners work together as a collective. USV has long prided itself on being an equal partnership. I think this is the ideal model that creates a set of aligned incentives across the firm, and I fervently believe that incentives drive behavior. When there are no politics or people vying for a bigger slice of a pie, magic happens. When things are done collaboratively and equally, everyone roots for each other and the only winner is the team. This means that everyone is all in on every investment because everyone has a meaningful and vested interest in the success of a company and entrepreneur. When people work with USV they get the whole firm and that is quite rare and special.
Andy's tweet was less than 280 characters but it is loaded with meaning. The implications of these defining characteristics determine how the firm works and how an entrepreneur experiences USV, and they're one of the major reasons why I'm here today.
For the last several weeks I’ve tried to use Perplexity as my default search engine on mobile. I’ve enjoyed the experience more than Google and ChatGPT and I’m going to stick with it for now. I don’t know if my usage will last for a long time, mainly because I think other search applications will quickly innovate on user experience and that for the first time in decades this will be a hot and competitive market.
One of the new behaviors I noticed for myself was that I now like to use voice as an input to search. I’ve always been a typer, especially on mobile. But new AI powered search results actually improve as my queries become much more specific and detailed, and voice is a more seamless and natural way to make this happen. Instead of a quick text blurb, a conversational approach to search now yields superior results.
Voice as a part of UX has been around for a long time (eg Siri), but I think we are about to see it explode in usage. A key part of that is the movement to natural language as the fuel by which we make software do things for us. I no longer think of voice as just an input, I think of conversation as the new UX. This leaves many open questions, like will people be speaking out loud to their personal devices all day long? Is that preferable to being hunched over our phones tapping away? Will we be comfortable expressing our private interactions with software out loud?
My intuition is that in an era where a lot of digital experiences (particularly non media or entertainment based ones) are abstracted to voice interactions, we are going to witness a lot of behavior change at a mass population level. We are also going to see a lot of creative people start opening up new experiences within voice as an interface the same way we saw people innovate on UX on our mobile screens. Perhaps one of the early impactful things AI will do is free us from the glow of our physical devices.
