How Lerer Hippeau’s Graham Brown—Backer of K Health, Klara, Medly, and More—Considers Investments in Healthcare

“In healthcare, things certainly move on their own timelines and slowly,” says Lerer Hippeau partner Graham Brown, “but it feels like we've been at an interesting tipping point for a while, where data and interoperability used to make smarter medical decisions are becoming more and more accepted.” 

He’s spent years investing in this sector, from early-career exposure with a major screening service to joining Lerer Hippeau to lead investments in K Health, Klara, Medly, and more. In this interview, he shares how he’s seen the opportunities evolve and how he encourages founders to move nimbly even in this more legacy-laden space. 

See a deeper dive on our new digital publication, First Edition.

How did you get into healthcare investing at Lerer Hippeau? 

My first investing job was at a group in Boston called Polaris, which had deep roots in both tech and healthcare. Although I was part of the technology and growth equity group, I got a lot of exposure to what was going on in the healthcare side, which ultimately allowed me to build knowledge in the space and work for one of our healthcare portfolio companies: Life Line Screening. They built what was the largest direct-to-consumer preventive health business at the time, which had screened millions of patients with different health screens, all at low costs and all out of pocket. 

Further on, while pursuing my MBA at Columbia in New York, I got connected to the team at SoftBank, where I had my first investing job in the city. I was part of the early-stage group and focused on tech investments. Here, I spent a long time with different venture investors in the New York ecosystem and in particular Eric Hippeau’s team. Eric was a founding partner of SoftBank Capital back in the late ’90s and spent a long time building out that group. Through that connection, I got to know the team really well, so when Lerer Hippeau was raising its fifth fund in 2015, I jumped at an opportunity to join the firm. 

I've been there since and look across the board at early-stage opportunities, but spend a lot of time within healthcare and digital health. Some notable investments have been K Health, an investment we share with Primary Venture Partners, Medly, a company that is re-imagining retail pharmacy and chronic care management, and Klara, which is enabling communication for practices. 

What are some trends or predictions you’ve noticed in the healthcare space? 

Telehealth has been around for more than 15 years, but it took the last 18 months to really accelerate it to a place where it has become mainstream in many different facets. In healthcare, things certainly move on their own timelines and slowly, but it feels like we've been at an interesting tipping point for a while, where data and interoperability used to make smarter medical decisions are becoming more and more accepted. You also have changing patient behavior, and then lots of opportunity in the healthcare financing and payments space. As higher deductible and more personalized plans become more common, consumer expectations are shifting. Products driven by a customer-centric mentality are no longer exceptions, but rather the expectation. 

What are the characteristics of founding teams that stand out to you as an investor?

We have a rubric of things that we look at when evaluating a company specifically as it relates to healthcare. Each case comes down to certain particulars, but if we think in broad strokes, we're looking for innovations that nail two things. One is that the product is improving access to quality care in some way. Some questions we keep in mind are: How is the product making care better and improving its reach? Second is about reducing costs.How would this company's success remove costs from the system? These two things are a great starting point to evaluate a healthcare company.

Next, and this is true of any investment we make, we consider the team at hand. We need to believe that each team we invest in can defy the odds and make a dent in what is a difficult and slow-moving industry. The common thread of the best founding teams we work with is an obsession with the customer, whether that customer is a patient, a provider, a doctor's office, a hospital, an insurance plan or any other healthcare organization. Some of our star companies have founding teams that did not have industry domain expertise coming in, and then we have founders that had grown up in the industry. Both have been successful in their own ways, but I think the more interesting thread that connects all of them is their obsession with solving the customer’s most critical needs. 

Helpful resources for founders.

Axios Vitals is a great daily read for healthcare news. NYC Health Business Leaders produces helpful quarterly reports on digital health innovation in New York. Rock Health is my go-to source for updates on digital health funding. And I’ll share two book recommendations: “An American Sickness” by Elisabeth Rosenthal, and “America’s Bitter Pill” by Steven Brill. These titles outline the fascinating history behind and problems with healthcare in the United States.‍

How do you help founding teams find product-market fit for their business?

In order to help our founding teams find their ideal product-market fit, there are a couple of components we keep in mind. One is making sure they're hiring phenomenal people into the company and at board level. Particularly at the early stage, every new hire makes such a big relative impact to where that company is going that we think this is an essential component for founding teams to consider. 

Another really valuable component we draw upon is the power of community. Now that we have close to 20 companies within the digital health ecosystem at different stages that have experienced and been through similar challenges, making sure that we're sharing those best practices back and those insights and making the right connections is a really important part of helping that really early-stage company get to product-market fit.

And then a lot of it is just being a thought partner. We're never going to know as much about the business as the founding team, but we can help challenge assumptions and make sure we're thinking about the go-to-market in the right way. We also encourage founding teams to move quickly and test. A mistake teams often make is trying to perfect their product without a good feedback loop from the customer—this feedback loop is incredibly important to make sure you're building the right thing.

And so it's better to get something that's most of the way there and then continue to improve it. There are scenarios where you need to be more fully baked when you're going to market and hopefully you can iterate with trusted design partners, but in general, there are things that don't have to be perfect that you can do somewhat manually in the early days to get the right insights to then to build something that is more scalable and more automated. The speed and that feedback loop in the early days are critically important to getting product-market fit.