Bill Gurley, the legendary Silicon Valley venture
capitalist, is getting serious about healthcare.
After a multiyear journey to learn more about the
industry, he’s starting to invest in companies based on a
conviction that the future of healthcare is going to revolve
He’s not the only one: A growing number of tech
investors have been getting into healthcare in recent
Bill Gurley is getting serious about healthcare.
The tech investor, a general partner at Benchmark Capital, has
made a name for himself backing companies like Uber, Snap,
Twitter, and eBay. But Benchmark’s footprint in healthcare wasn’t
In 2014, he tweeted that the healthcare market is “really messed
up,” leaving room for startups to come in and shake things up.
The reality was a lot more complicated than that.
1) Over 3 years ago, sent tweet below. Having invested in OpenTable, Zillow, Grubhub, Uber, we felt same opportunity existed in healthcare. https://t.co/3pkC52baO4
— Bill Gurley (@bgurley) April 19, 2017
2) While the opportunity in healthcare is massive (17-18% of GDP with tons of inefficiencies), navigating the landscape is quite tricky.
— Bill Gurley (@bgurley) April 19, 2017
Now Gurley’s ready to jump in, with investments in Solv, a
company that helps book same-day urgent-care appointments,
and Stitch, a
communications tool for doctors.
Benchmark’s interest in healthcare investments comes at a time
where there’s been growing interest from Silicon Valley in
healthcare. Andreessen Horowitz, for example, in December
raised its second biotech-focused fund at $450 million.
Speculation that Amazon
might be getting into the pharmacy business has been running
rampant. And Menlo Ventures also got
back into biotech in 2017.
Business Insider spoke with Gurley in December about what he
learned during the three years between his initial tweet and his
new investments, what it’s like to launch a startup in a
regulated industry, and what the future of healthcare looks like
in the US.
A journey to figure out healthcare
For investors and entrepreneurs, jumping into healthcare after
spending a career in other sectors can be an uphill battle. The
industry’s heavily regulated, people’s lives are on the line, and
middlemen who make paying for healthcare complicated.
“The first year I just felt dumber and dumber every day because
you realize it is so complex,” Gurley said.
There are also a lot of companies and ideas to sift through that
won’t necessarily make a dent in bringing down the spending on
which has been increasing. While on the lookout for
entrepreneurs with smart ideas, Gurley found himself coming
across startups that weren’t going at it the right way.
“A lot of entrepreneurs go into healthcare because they want to
make a difference and make an impact. And as they build a
business model, many of them are building tools that make the
problem worse,” Gurley said.
For example, electronic health records are mainly built to help
healthcare providers communicate with health-insurance plans.
That doesn’t do a whole lot for patients, who are increasingly on
the hook for paying more of their healthcare costs. The
consumerization of healthcare is something Gurley, who will join
Stitch’s board, hopes the healthcare system will shift toward as
a way to drive down the cost.
“I’ve seen others that just help carriers extract every last
dollar. The software’s being used to drive up healthcare as a
percentage of the GDP, not improve it,” he said. “There may even
be a quixotic tilt to want to improve things for the customer and
hope the market’s moving in that direction enough that it relates
to sales. Our early signs suggest so, but that’s probably a
There may even be a quixotic tilt to want to improve things for
the customer and hope that the market’s moving in that direction
enough that it relates to sales. Our early signs suggest so, but
that’s probably a risk.
What Gurley does envision is that the consumers — the patients
who are actually receiving the care — are going to start
expecting more. Instead of waiting for an appointment or
struggling to find out how much a particular procedure is going
to cost, care might start getting more convenient.
“The industry’s gotten to a point where the customer is expecting
better service,” he said. For instance, there’s the MinuteClinics
CVS hopes to build on with its acquisition of Aetna, to
transform the drugstore chain into a “Genius Bar.”
“You’re getting different service levels in other industries, so
your expectation is rising as a consumer,” Gurley said.
And there’s some evidence to suggest consumers might start being
better healthcare shoppers. Patients are now a more active part
of paying for their healthcare, thanks to the rise in
high-deductible health plans, which leave people on the hook
for thousands of dollars before their insurance starts pitching
We’re at a ‘tipping stage’ that’s making care more convenient
In particular, Gurley said he’s seeing this happen with urgent
care, which he hopes will someday rebrand itself to “convenient
For example, Gurley said, there’s a pediatrician in Dallas who’s
open from 3 p.m. to 11 p.m., so that instead of kids leaving
school to get a check-up, they can wait until the evening. “Why
are kids leaving school to see a pediatrician? We all taught
ourselves that that’s OK,” he said.
The shifting approaches of established healthcare companies like
CVS toward quick-service clinics is a sign we’re on track to more
convenient and consumer-friendly care.
“We’re at that tipping stage,” Gurley said. “Because deductibles
are going up and coinsurance is going up, you’re making more
people shoppers.” Online, for instance, you can see a price
list that helps you determine how much you may be on the hook
for during a particular visit.
“The US market is remarkable in that it has the perception it’s
competitive and capitalistic. The perception of being regulated
in terms of pricing. But it’s got the benefit of neither.”
“We’d be better off with either a wide-open competitive system or
a single-payer system than we would be with this one we’ve got.
It’s so bad.”
Changing the way we pay for healthcare
The change toward more consumer-focused healthcare could have an
impact on how we pay for this care too. For example, Gurley sees
companies that encompass both healthcare provider and insurance
plan gaining momentum.
“One of the benefits of that is that they become a de-facto
narrow network,” Gurley said. Narrow networks are controversial
because they contain fewer providers that people who have the
plan can go to. So in the case of Kaiser Permanente, which has
both a health plan and a hospital, members see the doctors Kaiser
Permanente employs in network.
The thing holding narrow networks back, Gurley said, are
employers. Employer-funded healthcare covers more than half of
non-elderly population, according to the Kaiser Family
“Narrow networks are a huge opportunity here,” Gurley said. “I
don’t know if employers would have the gumption to maybe offer
one of each. Or if that could somehow be mandated, because then
you get around the big hospitals that are driving up costs.
People are afraid not to have them on their list.”
Ideally, employers would be removed from the picture entirely.
“I’m a big believer that you should get the employer out of the
game altogether. We’re the only mature nation that actually does
that. It’s silly,” Gurley said. “They’re just an extra step in
the process and they’re reluctant — they don’t even want to be
there. It’s not their fault.”
‘Disrupting’ regulated industries
Healthcare is among the most regulated industries in the US. For
example, it might take a new medication
about 10 years to get through all the necessary steps toward
“I have a saying I use that regulation’s the friend of the
incumbent. And I firmly believe that,” he said. Gurley has some
experience with regulated industries.
until June sat on Uber’s board, watched the company take on
odd rules such as one that wouldn’t allow black-car service to
pick up a passenger within an hour of the call being placed, a
rule that ultimately favored taxis.
“The biggest problem with the United States capitalism is that
democracy and capitalism corrupt one another over time. The
industries that become the most regulated become the most
corrupt, and the people that write the regulations are the
incumbents. It makes it harder for startups to break in.”
That also applies to the Health Insurance Portability and
Accountability Act, or HIPAA.
“If you ask them each about HIPAA you will find that HIPAA’s used
to block innovation more than anything else,” Gurley said. “And
it’s used by the incumbents to argue why they don’t have open
APIs and insurance information. It’s this big, big blocker.”
When it comes to finding more healthcare startups to invest in,
there are a few things Gurley said he knows he doesn’t want to
do: developing drugs and selling medical devices are among them.
He also knows making waves in the industry won’t be easy.
“And one thing I will tell you is I’m eyes wide open. I know
there are a lot of traps and hooks and concerns and I don’t come
at it with this attitude of, ‘Oh, my God, we’re going to disrupt
them all and it’s going to be easy.’ I don’t have that attitude