Now Might Be a Great Time to Invest in Health Care

Entrepreneur and investment expert Jay Goss made a career out of betting big on disruption and health innovation.

December 21, 2020 Eric Lindberg

Even before the COVID-19 pandemic, the U.S. health care system was undergoing intense upheaval.

After decades of a fee-for-service approach in which patients are charged for each appointment, treatment, test and prescription, the industry began to shift toward value-based care. In the new model, hospitals and clinics get rewarded for providing higher quality care, keeping people out of emergency rooms and developing meaningful relationships with patients.

Steering a titanic industry like health care in a new direction means lots of disruption and discomfort. For Jay Goss MBA ’98, it also means opportunity.

A startup savant, the longtime entrepreneur has spent much of his career guiding new businesses from idea to marketplace. When he spotted major changes coming in health care, Goss jumped to another side of the startup world: investment. As general partner at Wavemaker Three-Sixty Health, a Pasadena, California-based venture capital firm, he looks for the next promising health care startups. And thanks to his Trojan connections as a graduate of the USC Marshall School of Business, he hears a lot about health care innovations emerging from USC biomedical labs and clinics.

Goss collaborates with the MESH Academy, a program at the Keck School of Medicine of USC that connects researchers with industry partners and entrepreneurs. He spoke with USC Trojan Family about the big breakthroughs coming in health care.

How has value-based care inspired more innovation in our health system?

In the United States, we’re really going from bad to worse in terms of being able to afford our health care system. We currently spend almost $4 trillion dollars on this industry that employs 11% of the country’s workforce. The cost of health care is going up and up. And our baby boomers are still retiring. Our population of seniors is getting bigger proportionately, and of course, seniors tend to consume more health care than younger people in general. Value-based health is a response to that. We have to reward the system differently. We have to reward the system for keeping people out of the hospital instead of rewarding providers for providing more services.

We have to reward the system differently. We have to reward the system for keeping people out of the hospital instead of rewarding providers for providing more services.

Jay Goss

This phenomenon is going to create a lot of disruption. It already is. If you know anything about entrepreneurship over the last 30 years, you know entrepreneurs take advantage of disruption. It stands to reason that this should be the golden era of health care entrepreneurship. There is so much technology being advanced in this industry. There are new business models being applied, like telehealth, clinical decision support and remote patient monitoring. We’re talking about a $3 trillion to $4 trillion industry that’s gradually moving away from this fee-for-service approach.

It’s not just the U.S. — the world recognizes it needs to invest more in health care innovation, more so than ever due to the pandemic. In the United States, that innovation typically doesn’t start in big companies. It starts with these little entrepreneurial companies that are popping up inside USC and other universities, hospitals and garages. These startups are the real innovation engine.

Can you describe some of the partners you found through the MESH Academy?

We have a few USC health care startups in our portfolio, and soon we’ll have a few more. We have one called SeqOnce [founded by Chris Angermayer MBA ’01 and Joseph Dunham PhD ’15] and another called GIBLIB [founded by Brian Conyer MBA ’17 and Jihye Shin MBA ’14].

SeqOnce is focused on the chemistry of next-generation DNA sequencing. They help the world do that technical genomic work faster and cheaper. The very exciting thing about them is that — in layman’s terms — their cocktail is capable of speeding up COVID-19 testing. They launched the company years before the pandemic. But now they have this product that the world absolutely needed pre-COVID and needs even more during COVID. Their star was shining super bright in January and February 2020, but now it’s gone to a whole other level.

GIBLIB is another example of something that is super needed. You want to live in a world where surgeons are improving their skills by watching other surgeons do cutting-edge surgery.

A surgeon watches medical procedures on video screens.
Goss sees promise in the health startup GIBLIB, an online library of on-demand medical training videos founded by USC alums. (Photo/Courtesy of Brian Conyer, GIBLIB)

It’s a good way for all surgeons across the planet to stay on top of their craft. GIBLIB jumped in to create this online library of surgery videos. Before the pandemic, if you wanted to learn the newest way to do a surgery, you could go to a medical conference and learn about it there. Now that whole segment of commerce has ended, and doctors need an online way of learning. GIBLIB went from being one of many options for surgeons and other physicians to being the only option. You have to do this online, and this company is by far the leader.

What’s the secret to spotting innovators before everyone else?

Our job is to go find companies that are still flying under the radar, companies that are just getting out of the proverbial garage. They don’t have $5 million of revenue, they don’t have a PR department, they aren’t making the news in any big way. These are companies hiding at USC or in some laboratory in Boston or somebody’s garage in Colorado. These are hard-to-find companies that are doing important work in health care.

So how do we go about this? Unlike other venture capital firms, we don’t rely on a line of entrepreneurs waiting at our front door. We hustle and go find them. And that’s hard work. We’ll look at close to 1,000 companies to invest in 30. We’ll have lots of unrewarded conversations to find 30 companies that are as good as GIBLIB and SeqOnce.

The other thing that helps us enormously is that the majority of our investors are individuals who have health care industry experience. This is a huge advantage for Wavemaker Three-Sixty. We have more than 100 investors, and most of them are men and women who run the U.S. health care system. They have big jobs in big hospitals, big health systems and big insurance companies. They become our eyes and ears. They know the health care startup community in their area, and when they spot a company that has its act together and looks promising, they’ll send them our way.

How did your experiences in USC’s MBA program shape your entrepreneurial abilities?

It all started with the tremendous amount of time I spent in what is now the Lloyd Greif Center for Entrepreneurial Studies. At that time, Tom O’Malia [the late faculty member who served at USC for 31 years] ran the entrepreneurship program. Just about everything I do comes out of the work I did with Tom, including how I think about investing. One of his big themes was that “the perfectionist never gets in the game.”

If you’re going to be an entrepreneur, you want your product to be great. If you try to make your product perfect, however, you’ll never launch your company. Health care has to be a little closer to perfect, because we don’t want to do harm. But the perfectionist still doesn’t get in the game, even in health care.

We have a phrase we use all the time, which is that we have to be comfortable being uncomfortable. We have to get very comfortable with the very young companies we invest in, but we also have to be a little uncomfortable. Otherwise, we’ll spend the next five years trying to make an investment decision, and by then the company will have gone public or will have failed.

You spent much of your career guiding startups. What made you shift to the investment side?

I’ve been involved with many startups, from 3- to 6-month stints on the short end to 3 or 4 years on the long end. I’ve seen the good, the bad and the ugly of the startup world, and I’ve seen it across 30-plus startups during the past 25 years. I think I have a pretty good sense now of what it takes from a human and founder perspective to get a business off the ground.

It really boils down to understanding the team. When you invest in startups as early as Wavemaker Three-Sixty does, you realize almost no company has it figured out. If you look any company that went on to become famous and successful — Microsoft or Apple or Facebook or Uber — and you look at their original business plan versus what they ended up becoming, it’s night and day. They have to pivot. The market will change, competitors will pop up out of nowhere or there’s going to be a pandemic that causes all sorts of issues. All of these things knock you sideways as an entrepreneur.

If the business model is going to change so much over those first few years — and it will — then the real variable you want to be comfortable with as an investor is that core team. Are they going to be able to weather the storm? Are they going to handle the ups and downs that are inevitable in entrepreneurship? I feel like I’ve been involved in so many of these startup teams, I have pretty good judgment about that.

Editor’s note: This interview has been lightly edited for clarity and flow.