While there are more startups than ever, there’s also more money chasing them than ever. Vator News is profiling key members of the investment community to help companies understand what investors are looking for and how they can help startups to scale. In this installment, Vator interviewed McKesson Ventures Partner Michelle Snyder.
Snyder brings more than 25 years of healthcare industry experience in marketing, business development, strategic planning, and general management, and is recognized as a leader in the digital health space.
The first question Snyder answered was about McKesson Ventures’ investment philosophy and methodology. McKesson Ventures is strategic investment firm that veers more towards a financially minded strategic on the spectrum of investors, Snyder said. The firm thinks about generating positive returns as well as gaining insights into key markets in which it is involved and looking for synergistic opportunities within McKesson and making introductions where it makes sense.
“Unlike some other strategics, we will never promise that we can get you a deal with McKesson, but I can promise the entrepreneur that I will get them to the right person within McKesson and try to connect them where I think there could be mutually beneficial opportunities,” Snyder said.
McKesson Ventures is looking for companies that fit with some of the strategic priorities of McKesson, which are focused on oncology, biopharma clinical and commercial services, and the transformation of pharmacy. At the same time, the firm is looking for where the industry is going because it wants to be in those companies that are on the leading edge.
The firm typically invests $20 to $25 million total in startups it partners with. Its partners understand that it takes a long time and it takes money to build a startup, so McKesson Ventures tries to reserve as much money as it believes the company will need so it can be there through all the ups and downs that tend to happen with healthcare startups.
“One thing that’s very important to us is making sure that whoever the entrepreneur is getting as an investor is someone who understands the difficulties and challenges that they will face building a healthcare company,” Snyder said.
When it comes to deciding to invest in a startup, the firm cares less about stages (like seed, A, or B) and more about where the company is in its life cycle. “So we typically look for companies that have some type of meaningful revenue, and by that we mean $3, $4, or $5 million in revenue, but they’re really at a commercialization inflection point in their businesses,” Snyder said. “So, they’ve already found product market fit, and they have some customers, they’re seeing some good results, and the company is ready to scale to the next level.”
Snyder says she still likes to see teams that have a balance between people who understand healthcare and people who come from other industries and bring different perspectives. “I like more humble entrepreneurs; I want somebody that you can tell has grit and perseverance. Those are super-important in building a digital health company,” she said.
How does McKesson Ventures differentiate itself from other funds when pitching itself to entrepreneurs? Snyder said that being a strategic investor is different from being a financial investor because the firm brings McKesson as a business and its different business units, and the insights it has gained through those units. The firm also brings relationships that it has with providers, payers, pharmacies, and pharmaceutical manufacturers—basically, its network.
“Our track record is one thing entrepreneurs look at, and we’ve had a pretty good run over the last couple of years for being a seven-year-old fund,” Snyder said. “So, just the learnings we’ve had building companies that have been successful that we can impart to our future investments. Also, one thing I like about our team at McKesson [Ventures] is we have a nice mix of people who have significant investing experience but also operating experience and entrepreneurs really value that.”
What are some of the investments Snyder has made that she’s most excited about, and why did she want to invest in those companies?
- Galileo Health. “I’m very bullish on this future model of care, these value-based, hybrid models of care, and thinking about how a multidisciplinary team, or a primary care clinician plus support, can actually take on more of the role of specialty care. That’s what’s exciting about Galileo. How do you build from a virtual first approach, using technology to be able to take care of, not only employees and the commercial population, but complex populations with chronic conditions like Medicare or Medicaid, using a hybrid model?”
- Vineti. “They’re thinking about the challenge of bringing new cell and gene therapies to market and how do you get the right therapies to the right patients in a safe, efficient, scalable manner. They have created a platform to support a new supply chain for cell and gene therapies.”
- Aspen RxHealth: “It’s thinking about a new paradigm in the patient-pharmacist relationship. Pharmacists are often some of the unsung heroes in the healthcare world. So, how do you think about using pharmacists in a different way, and maybe having them practice more at the top of their license?”
When asked what advice she would give to entrepreneurs, Snyder said, “The advice I would give to entrepreneurs asking who you go with as an investor is that it’s one of the most important decisions you can make. Your investors are going to be with you for a long time, as you are building your company. Are these people going to continue to fund you and be there financially for you? Are they going to be patient, knowing that you’re probably going to be going through your ups and downs? Are they going to be willing to open their network to you and connect you to people that will be important for your business? That’s really important.”
Read the full interview here.