Becker Private Equity & Business Podcast
Fireside Chat with Venkat Mocherla on Early Stage Investing and AI 1-30-15
Thu, 30 Jan 2025
In this webinar turned podcast, Scott Becker speaks with Venkat Mocherla of Midstream AI. They discuss the latest developments in AI investment, the recent DeepSeek news and its impact on the market, how companies are adapting their strategies amidst shifting trends, and much more.
Chapter 1: Who is Venkat Mocherla and what is his background?
Thank you folks so much for joining us. We're thrilled today to be joined on the Becker Private Equity and Business webinar with Venkit Mokurla. Venkit is a brilliant person and a terrific person. He's really two different things. He's an avid early stage investor who's invested across the board in a lot of healthcare companies and digital health companies.
Part of his role at one point was Chief of Business Development a great company that grew into a really successful company in the healthcare analytics space. He's also served as an operating partner at Andreessen Horowitz, which is one of the most well-known names in healthcare investing, one of the great venture capital funds of our time.
Finally, Venk, it's the founder recently of a company called Midstream Health. We're going to get a chance to talk to Venkat today about a number of subjects, both investing, founding companies, use cases for AI. I'll probably try and bother him a little bit on what's happened today in the markets with deep seek and all these things with AI and the sort of tumult in the AI world.
I'll encourage our audience at any time, text a question. There's a chat box. Send your question by chat or send it to me, Scott Becker at 773-766-5322. Venkat is a close colleague, a fellow investor. We're huge fans of his. Venkat, take a moment and tell us about yourself and your background.
Yeah, happy to, Scott. So great to do this with you, and I'm genuinely excited for this conversation. I've been quite lucky in my career. I've been in healthcare now for nearly 15 years, and my fortune is I've been at the intersection of technology, healthcare delivery,
and company creation um so i started my career scott you know believe it or not 15 years ago we're talking about value-based care primary care transformation so i was at davida and a handful of us actually were hand-picked to figure out the future of the business beyond ckd and dialysis and so i got to work with a group of people
many of whom I'm still in touch with, started a company called Palladina Health, which is now called Everside and now part of Marathon, I believe, which was the early innings of direct primary care and primary care transformation. And that was for me a blast because I was technically part of a 75,000 employee company.
You know, $6 billion, Fortune 500, but really we're just three or four of us trying to figure out a new company. And for me, as somebody, I grew up in India and I grew up in Silicon Valley, that bug of starting something from scratch kind of got onto me in 2010.
I also, because, you know, I'm a big believer in not just thinking about American healthcare, but also around the world, I actually got to go work In the Middle East, I got to work in Europe. I got to work in Canada for a research and consulting firm called the Advisory Board.
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Chapter 2: What key challenges exist in healthcare today?
The great point solution gets dumbed down because the entrepreneur is forced into a larger box that the system or customer investor wants. How do you think about that point versus larger solutions?
Yeah, yeah. Look, I think it's a phenomenal point because I think if you and I talk to CEOs and CIOs all day long and the thing they're constantly thinking about is they've got a couple hundred, maybe if not a thousand vendors to think about. And if you're coming to them with saying, hey, I'm going to solve this little tiny problem for them.
The question that, by the way, crushes my soul to ask is like, is this on Epic's roadmap, which is basically like that pit in the stomach of this idea might not make it to a meeting. But I think, Scott, I'd say two things. One is that, look, you might be worried about point solution.
And if you're an investor, you're thinking about how does a great entrepreneur come up with a second and a third act? But let me be very clear. You have to nail the first act.
So I think that if the pain is so high that whatever I have, Epic, Microsoft, Oracle, whatever the platform that I have that's trying to solve everything, if the pain is still too high, I'm willing to sort of think about the second path. And so I think that you're right in the long term. No one point solution can make it. And you need a comprehensive map, I think.
But I think far too often entrepreneurs at least talk about platforms before they become one. And so you really want to think about the first act. That's great. I think over time, Scott, you're absolutely right. I think the question is, how do you build a space that is unique enough that where other people can exhibit?
I think in my experience in the last 10 years of working on AI companies, you know, from the days of Juventus to now Midstream, I think the core differentiation you have is not always in the technology, which increasingly can get commoditized. It is more in the last mile. It's like, how do you understand change management? Can you change someone's behavior? Do you understand the workflow?
And I think what's really exciting now, Scott, in the way we're building technology is it used to be back in 2015 or 14 when we were selling these things. when I was selling SaaS applications, I would come to you, Scott, and say, I have a throughput widget. And you as the chief medical officer would go back and you would evaluate that against Epic.
Somebody on your IT team will say, well, I can build this thing myself. And then me as the entrepreneur, you compare contrast on build by partner. I think what's fascinating today, Scott, is we're just selling intelligence. And so it's really a race towards use cases. It's the race towards workflow because these agents, if you will, can take on many different things.
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Chapter 3: How do investors assess healthcare opportunities?
Chapter 4: What role does AI play in healthcare and where is it headed?
If you've done this wonderful job with essentially a startup, getting in the door and getting business with some large, large systems, how do people navigate some of that? Whether, and this person asks on the financial side, the ops side, the security side, it's so hard to get in the door and get things approved. How do you sort of move through some of that?
Yeah. Yeah. I mean, I can completely empathize with that. And I think, you know, finding finding the right partner is half the battle in building a company in health care. So I think there's a couple of things, Scott. I think first is understanding there's a there's a sort of there's a famous book that's now been written for a long time called Crossing the Chasm.
And I think in written by the guy named Jeffrey Moore, I believe. But the thing about the crossing the chasm is think about your customers as a sort of like there's tiered of there's early adopters to sort of the late, you know, majority. Right. So Back in the day, there's a person who always lined up for getting the first iPhone to the person who's still using a flip phone.
And I think far too often, entrepreneurs focus on selling. They treat everybody like it's one sort of homogenous customer set. So I think... understanding and doing some research on who are the early adopters of technology and who like to be on the bleeding edge.
You know, systems, you know, in the health system world, you know, there's systems like common spirit that like to be on the bleeding and trying to think about new things. And in some cases, or New York Presbyterian, like in another, right?
So I think actually doing some homework on not just the systems, but who are the people inside these systems that have successfully brought in AI companies, navigated it through and have a perspective on what does it take to help you do that? So I think first step for any entrepreneur is do your homework and finding the right early adopters of technology. The second piece I would say
is trying to actually get to the core P&L owner because, you know, so often I think you might just have an idea, but the operator at the end of the day or the clinician or whoever your end user is can quickly tell you if it's worth their time or not.
And so you might spend all of this energy in navigating this organization, et cetera, but at the end of the day, that core user, if they're like, this is not worth my time, then all of it is a waste. So again, somebody told me early in my career, yeses are obviously great, but the quick no after that is your gift. What kills these companies is a maybe. Right.
So so so I think actually getting to that. And the last thing I'll sort of say is, gosh, you need you need a village to to like partner and collaborate with these health systems and payers and life sciences companies. And so, you know, I find the entrepreneur community, the investor community, other health systems, they're incredibly collaborative. And so ask, reach out for help.
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Chapter 5: What is the significance of unstructured data in healthcare?
The one thing I'll sort of say, Scott, is that I think that entrepreneurs also have to understand that funds and investors come in all sizes. So if you talk to a multi-billion dollar fund, they want to make sure that if they underwrite your investment, that you're a multi-billion dollar outcome.
So if you're a billion dollar fund and they're going to invest in you and they own whatever, a fifth of your business, you better be a $5 billion outcome as, as sort of whatever IPO exit, et cetera, versus going to a $300 million fund or a $50 million fund.
So I think educating yourself in that all sorts of investors come in all shapes and sizes and knowing which one is the right fit for you is also, also goes a long way. Sorry, I didn't mean to mean to cut you off, but it's sometimes people.
I think your point is so well taken though, because you and I have seen so many business that have flanted out at numbers, That would be very exciting numbers to most of us. And again, I've got the unfortunate of seeing this on both sides as an investor in small startups as well as an investor with major funds like Apple.
your former business, Andreessen Horowitz, and an outcome for Andreessen Horowitz can't be $30 million. It's gotta be a big number. I don't wanna speak about Andreessen Horowitz specifically, but General Catalyst, they're playing the big, big, long game.
And then for many of us, we're investors with that, but we're also investors in lots of smaller types of things where if it ends up being, you know, 10, 20, 100 million, it's a win for those entrepreneurs and those investors. And there's not absolutely a right or wrong. Not everybody has to become Amazon. A lot of people could become something and be quite successful at a mid-market size.
And a lot of times it's a lot easier to become very successful to mid market size than a billion dollar size because the competition is different. But it does take a lot of a lot of blocking and tackling and a lot of execution. And I think the thing that you said to me a few times today is.
And I've heard you say it, but not as clear over the years, is this hardcore last mile product to market fit, hitting it really right on with what the customer needs is so important. Because if you do that well, then you could really blow up a value equation that really can work. across big systems and small systems. I think it's really such important advice. There's a great question.
I'm not sure this is really right in your wheelhouse either, but let me ask you the question and see if it is. And I want to get back to a couple final minutes on what advice would you give to founders and what advice would you give to investors? Just a couple of core thoughts. And I also encourage our audience, any final questions,
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Chapter 6: How can healthcare startups succeed in the evolving market?
Chapter 7: What are the implications of DeepSeek in the AI investment landscape?
And then for many of us, we're investors with that, but we're also investors in lots of smaller types of things where if it ends up being, you know, 10, 20, 100 million, it's a win for those entrepreneurs and those investors. And there's not absolutely a right or wrong. Not everybody has to become Amazon. A lot of people could become something and be quite successful at a mid-market size.
And a lot of times it's a lot easier to become very successful to mid market size than a billion dollar size because the competition is different. But it does take a lot of a lot of blocking and tackling and a lot of execution. And I think the thing that you said to me a few times today is.
And I've heard you say it, but not as clear over the years, is this hardcore last mile product to market fit, hitting it really right on with what the customer needs is so important. Because if you do that well, then you could really blow up a value equation that really can work. across big systems and small systems. I think it's really such important advice. There's a great question.
I'm not sure this is really right in your wheelhouse either, but let me ask you the question and see if it is. And I want to get back to a couple final minutes on what advice would you give to founders and what advice would you give to investors? Just a couple of core thoughts. And I also encourage our audience, any final questions,
text scott becker 773 766-5322 thank you so much so next question we had is regulatory guidance or oversight mechanisms that should be implemented to ensure the safe ethical and effective use of ai in healthcare while maximizing the benefits of patient outcomes and it does feel like we are just moving into this wild west of ai solutions
where there's so much computing power being applied so quickly that no one could tell exactly where it's going. And we're all sort of a little bit sort of like, oh, my goodness, along for a Wild West ride. But give us a second, Don, what do you see there in terms of sort of safe ethical use of AI? And how do you think about that as a founder, as an investor?
Yeah, I mean, I think I'm really conflicted on this. On one side, I think absolutely you need to build a ethical business where you're very clear and transparent with your customer of what do you need the data for? How are you going to train the data?
And, you know, and where is the data going to go and what are all the safeguards behind that data set so that that the customer ultimately knows that you're not packaging that data and selling it to, you know, let's just say that if you're getting data from health systems and you're selling it to, you know, the life sciences companies, you're very clear about that business model and you're very clear about the process and the infrastructure you have to enable that in a very safe way.
So I think there's no ifs and buts on transparency and ethics around that at the same time scott i think i've seen multiple occasions where when the rules of the road have been defined before the as the as the space is sort of infant uh in its nature it's it's you know right now i think AI is still in the neonatal unit infancy.
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Chapter 8: How does user interface impact healthcare technology adoption?
So I think this is the most optimistic, bullish time I've ever been in my 15-year career doing this. And the advice I always have is this. Focus on customers. I think I've said this before. Focus on your team and then think about capital. Do not invert that trend. Don't think about investment first, then your team, and then customers. So that's one. Focus on the last mile. I think that's another.
The last thing I'll say is it genuinely takes a village. The only reason that Midstream has gotten off the ground with I think a world class team, a world class set of investors, world class set of partners is I've been able to build this village because so many people have generous been generous to me and our team and my co-founder.
And so do not you know, people are so generous in terms of people like you, Scott, and others in my career, you know, have been so generous with their time and mentorship. And so you, you often, I think people just, they say, I think you might've told me this, Scott is like, you ask for money, you get advice and you ask for advice, you get money, you know?
And so, so you sort of, I think when you reach out to somebody genuinely out of like, Hey, I'm trying to navigate this, you've, you've been in this space for 15, 20 years, whatever it is, can you help me, you know, navigate it versus just asking for dollars or asking for, you know, business from a customer, that's a very different approach.
The last thing I'll sort of say for, you know, I think, you know, investors in this space, I think my advice to investors who are outside of health care coming into health care is that there's just never been a better, better time in this space that this is a four and a half trillion dollar problem set in the US. But globally, I think the issues are actually, you know,
quite similar in some senses and obviously different. And so I think that there's never been a better time for investors to come in. The only thing I'll sort of tell them is that, you know, from the outside in looking in in American health care, a lot of things might make sense on paper. So, you know, revenue cycle in AI seems like such an obvious fit. But there's so many nuances.
So for people, again, coming into this space for the first time, get into the details of those nuances because payment flows, regulatory policy, all the stakeholders that are involved in making a decision set are radically going to influence an ability for a business to come in and scale at the speed at which venture capital wants it to scale.
For people who've been inside the space forever in healthcare, who do not need a PhD paper on RevCycle, because they've been through 10 RevCycle companies, I think I've been amazed at the set of talent coming in from the outside in.
It used to be, Scott, I think you and I have been, we've seen a lot of these entrepreneurs that frankly not are as humble, not as sort of growth-oriented in learning, but this new generation of entrepreneurs, Scott, been very impressed. They are headfirst. They want to learn. They're so eager, so curious.
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