Some healthcare companies fail because the technology doesn’t work. Others fail because the market moves, capital runs out, or they simply cannot scale fast enough.
But there is another challenge that is much harder to solve: healthcare is a system of incentives, and even great ideas have to operate within it.
In a recent episode of Blindspot Capital, I sat down with Halle Tecco, one of the pioneers of digital health investing, co-founder of Rock Health, founder of Natalist, co-founder and Chair of Cofertility, and author of Massively Better Healthcare.
Halle has seen healthcare innovation from almost every angle: as an investor, founder, operator, board member and educator. And what makes her perspective particularly interesting is how much her experience building companies changed the way she thinks about investing in them.
Our conversation explored a deceptively simple question: what actually separates healthcare companies that scale from those that don’t? The answer is not simply better technology or more capital.
It starts with understanding the problem deeply enough to build for the healthcare system that actually exists (its incentives, reimbursement structures, workflows, stakeholders and constraints) rather than the system we wish existed.
And for investors, that has important implications for how we evaluate healthcare businesses.
We talk about:
* Problem before product: why the strongest healthcare companies start by becoming deeply embedded in the problem rather than searching for healthcare applications for new technology
* What venture capital changes: why taking VC funding fundamentally changes the growth expectations, time horizon and eventual destination of a company
* Aligning margin with mission: how business models can reward better outcomes rather than simply more activity and why incentive design matters in healthcare
* Why good companies still fail: the role of founder adaptability, market timing, capital, changing conditions and luck and why failure does not necessarily mean the underlying idea was poor
* What operating teaches investors: why Halle says building and running a company gave her a very different appreciation for the difficulty founders face
* Where healthcare opportunity is moving: why Halle is watching full-stack healthcare services businesses using AI and other technologies to deliver better services and outcomes, rather than simply selling another software tool
Perhaps the most important idea from the conversation is that healthcare does not change simply because a better technology arrives. Systems produce the outcomes their incentives encourage.
For founders and investors, understanding those incentives may be just as important as understanding the innovation itself.
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