make a lot of change and as a by-product to create a lot of value. We invested in a company called Breakthrough that does a lot of telemedicine stuff around mental health. We helped get a company off the ground called Simplee which is now becoming a really interesting company in healthcare payments. So that’s that category, which is about how to improve the status quo.
Then there is the second bucket, walk, which is stuff that’s slightly aggressive, that will take a few years to figure out, but we know that the puck is going there, and we know that the revenue models are going there. So specifically in that middle bucket, PMPM [per member per month] is like the new SaaS. Everyone spent the last five years investing in SaaS, and in three years I guarantee you everyone is going to be running around talking about PMPM. So there, we have stuff like Glooko, which is about diabetes management; Asthmapolis, which is about asthma and respiratory disease management; and Neurotrack, which Peter Thiel and I just did, which is around Alzheimer’s detection and prevention. So there is a bunch of stuff in that category.
And then there’s run, which is basically just stuff that’s crazy science, and we do it because we think it’s interesting and we do it because we think it can be disruptive. Things like Integrated Plasmonics, which is about using a pinprick of blood and being able to do up to 200 biomarkers on a single $1 disposable in under three minutes. Things like that.
X: You guys have been pretty fearless about this so far. A lot of investors, when they look at the healthcare sector, they’re really asking understandable questions, like what are the potential exits for companies in this area, and as companies mature, how are they going to get products to market. Why are you guys not afraid about these things?
CP: Well, one, I’m rich, so I don’t give a shit, just to be totally blunt. That’s the benefit of having worked at a place like Facebook. I’m just going to keep firing. Fire, fire, fire. It doesn’t matter.
X: And your LPs?
CP: They’re rich too! We’re going to create change. It can take 10 years, it’s fine. It can take 15 years, that’s fine. It’s about creating a lasting, positive legacy, and not putting time constraints on it. I have the time. My partners have the time. My investors have the time. We are in enough stuff that is already working and making money, that we just know it will be fine.
X: But what do you say to the investors here in the room who aren’t necessarily in the same position, and are actually trying to figure out these risks and how to show returns to their LPs?
CP: Listen, I am actually the best-compounding fund of the last three years, so this is all about return. So copy it! Be a fast follower! The last three years, our IRR was 80 percent a year. Money is raining from the clouds.
X: So you feel like exits will create themselves.
CP: In the public markets, they love SaaS right now. They love predictability. They love what looks like a compounding, growing annuity stream. That is a revenue model they understand from insurance and a bunch of other businesses that is now demonstrating itself on the enterprise side. So they love it. These companies go out on the SaaS side and they just grow like maniacs. They are great, great names to own.
Similarly, that same revenue model and business model of Software-as-a-Service, that is healthcare-oriented, that is driven by PMPM dollars, will become a category like that. I suspect in the next couple of years, you are going to see some of these big companies emerge. Of course they will be able to go out, because people will basically have seen why SaaS is so interesting, they will also be slightly fatigued—there are not that many great SaaS names out there that have yet to go public, there are only handful left, Zendesk, Box, a couple of others—and now they will be looking for the next great thing. And in that time, they will see that healthcare has really changed, there are all these companies compounding dollars. For example, as Asthmapolis goes and raises their C [round], most investors won’t look at it as a healthcare company, they’ll look at it as an enterprise cloud company that’s involved in healthcare. That kind of shift in their mentality will be what it takes. So there are going to be a bunch of outcomes like this. It’s about being patient and building stuff that has great value.
Q [from an audience member]: I’m interested in these three categories of crawl, walk, and run. Are the entrepreneurs you want to see in these categories different from each other? Who do you want to see in each category?
CP: Run tends to be folks that are in hard-core science who stumbled into the biology side. Physicists, EE guys or girls, and they’re like “Oh, here is an application for this thing I’ve been working on for years.” So at Integrated Plasmonics, the three guys are PhD postdocs from Caltech who were working on plasmonics and didn’t want to do something in telcom, and we refactored the whole thing toward healthcare and said wow, we can take this thing and build a mass spectrometer on a CMOS chip. A lab on a chip. It’s just a cool application. In the middle, walk category, it tends to be frustrated healthcare entrepreneurs who have been married up with a bunch of Internet folks. And in the first category, crawl, it tends to be more Internet folks, who are okay, here is a tractable thing that is improving the status quo. That’s generally what we have seen in terms of the types of individuals.
X: Okay, my last question is, how are you doing in the poker tournament? Are you feeling confident?
CP: I’ve been knocking on the door for two years here. So I gotta close the door.
