A former Sequoia partner just joined a $313 million VC fund that's focused on digital health. He told us how he's planning to pick his next investments.
- Michael Dixon, who spent 10 years at Sequoia Capital, is joining a new venture fund focused on digital health.
- Dixon is joining up with Sequoia alum Todd Cozzens and Dr. Jared Kesselheim at Transformation Capital, the recently spun-out digital health venture arm of SVB Leerink. The fund, which initially got its start within the bank in 2016, manages $313 million.
- At Transformation Capital, Dixon is looking to invest in commercial-stage digital health companies, especially those selling to organizations beyond hospitals.
- "The thing that excites me equally and more is the advent of new customers in the marketplace," Dixon said.
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It's an exciting time to be a digital health company.
Billions of dollars are flowing into startups looking to use tech to change the way we see our doctors and access healthcare. And in 2019, the window to the public markets opened for a handful of digital health companies like Livongo and SmileDirectClub. Primary-care startup One Medical is reportedly eyeing a 2020 IPO as well.
Joining in to look for the next companies to get to that stage is Michael Dixon, a former Sequoia Capital partner. On Wednesday, Dixon joined a new venture fund called Transformation Capital as a managing partner.
In November, SVB Leerink spun out Transformation Capital as a digital-health-focused venture fund. The fund currently has $313 million under management and is invested in 12 compoanies. Dixon is joining Todd Cozzens, another Sequoia alum and Dr. Jared Kesselheim.
Prior to joining Transformation Capital, Dixon worked at Sequoia Capital for about a decade and invested in companies like Health Catalyst and Clover Health. He sits on the boards of both Health Catalyst and Clover. Dixon has an undergraduate degree from Boston College and lives in San Francscio.
Dixon told Business Insider that he decided to join Transformation Capital because he wanted to join a fund focused on digital health, rather than making digital health investments through a general fund.
At Transformation Capital, Dixon is looking to invest in commercial-stage digital health companies, especially those selling to organizations beyond hospitals. In the past, digital health companies have often focused on selling software to health systems. Now, that scope is opening up, he said.
"The thing that excites me the most is the breadth of the markets digital health touches now," Dixon said.
Dixon pointed to four markets that now exist for digital health companies to sell to.
- First, there are still providers, the traditional client for digital health companies. Newer companies have been boosted by the foundation laid by electronic health records. Take, for instance, Health Catalyst, which went public in 2019 and is an investment of Transformation Capital. "That company doesn't exist in a meaningful way without the EHR," Dixon said.
- Then, there are pharmaceutical companies, looking to use digitized clinical data to aid in developing new treatments. "Now that we have clinical data, pharmaceutical companies are reimagining their business," Dixon said. Already, Transformation Capital has invested in Boston Health Economics, an analytics company working with pharmaceutical companies.
- Increasingly, consumers are also proving to be a market for digital health. Dixon said he's been paying attention to companies that have been going direct to consumer like Hims, Roman, and SmileDirectClub. In that vein, Transformation Capital has invested in home health testing company LetsGetChecked. That growing market has been driven in part because of regulations in place that have opened up the chance to have virtual visits for particular prescriptions or tests as well as the reality that patients are increasingly faced with paying directly for their healthcare.
- Finally, employers have increasingly become a market as massive employers like JPMorgan, Amazon, and Berkshire Hathaway have sounded the alarm on the high healthcare costs they as employers are facing on behalf of their employees. "That has helped mobilize lots of companies who now realize changing and improving is fundamental to their business," Dixon said.
The fund's focus will be on commercial-stage companies rather than startups just getting off the ground. A key criteria for potential investments, Dixon said, is having a number of customers who are already using the product the digital health company makes.
"The thing that we're looking for in general is customers that love and use the product or service," Dixon said.
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