Renowned investor Kevin Ryan thinks the big money is in healthcare

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Kevin Ryan became very wealthy by being in the right place at the right time – including online advertising network DoubleClick, which he joined as its 12th employee and eventually ran as CEO (it was later acquired twice). was) — as well as several co-founding companies including software company MongoDB, which is currently valued at approximately $30 billion as a publicly traded company. (Ryan still owns “at least half my shares” in the company, he says.)

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The other day, we spoke with Ryan about his biggest, latest bet, which is on healthcare technology. As we reported earlier, his investment firm Alecorp is largely putting $100 million of Ryan’s own capital into start-up and funding organizations in the space — and that’s on top of the roughly 20 related bets that the organization has already made. . We wondered how he became so involved when his earlier bets were almost completely unrelated. you can hear that conversation Here Or watch the excerpt below.

TC: For anyone not paying attention, your overwhelming focus on healthcare technology is astonishing. What inspired your initial interest?

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KR: One thing I always do from Alicorp’s perspective is what are the 5 to 10 year trends that we want to bet on. Some areas may be overcrowded, and you may think there is no opportunity there, everything has already been done. And sometimes you think there’s a big opportunity. And so two or three years ago, I realized that both in New York and healthcare in general, there were huge opportunities because there are so many aspects of the healthcare system that don’t work properly. It’s incredibly expensive, electronic records aren’t great, it’s super inefficient. Most of us are very disappointed with this entire healthcare system, which means opportunities.

TC: You’re mostly overseeing your capital here. Why not get billions of dollars of external capital to invest, which in this current market, as a proven entrepreneur and investor, you can possibly do?

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KR: Partly because the area of ​​the ecosystem in which I like to play and am most comfortable and know best is the initial stage. So do I want to invest in a company that is worth $3 billion and expects to be $10 billion? It’s not really where I play. I tend to be in the early stage, where it is the most risky, and requires less capital. Well, we don’t have the capital constraints, or we won’t launch all these other things [including incubating a number companies inside Alleycorp like Nomad Health, which raised a $63 million round earlier this year, and Pearl Health, which closed an $18 million round in September].

When we start a new company, it has to invest $1.5 million to $2 million to get the company off the ground, then we raise the money [from] And if we need to raise a lot of money, we raise a lot of money, and we keep investing, we try and limit our investments in any one company to about $10 million. But no, there are a lot of opportunities. And that’s why I want to play here.

TC: And does this model even work in a world where we’re now seeing $100 million seed rounds?

KR: It is the changed environment that helps us. Take Pearl Health. We put $1.5 million in that company and start out with a large equity position. It depends on the company but our partners will be somewhere between 30% to 60% because the management team has a lot and sometimes we have co-founders there too, so it’s a big position.

Then a firm like Andreessen Horowitz comes in at a big valuation, a big step up — and we put in another $3 million or $4 million in that round — but we only get to choose who comes along. And, by the way, if there’s a round that happens, I don’t know, $400 million, at that point, we’ll probably stop investing. The same happens with seed funds. Other big funds will come, we will be weak, and that is not a problem. Our money is most effective when we think that we can earn 10 times our money.

TC: So you’re not interested in participating in the later stages.

KR: No. I have invested occasionally. We just put a bunch of money into Nomad, and Nomad is at a valuation of about $250 million. But I think it’s a $2 billion company that can be built, so I still feel good about it. [our bigger investment]But this is probably the last round we will invest in. There are others who take the role of investing money and think that they will get 2x or 3x returns on it, which is great for their fund. They are much later stages; they’re only going to be in [a company] for five years. We want to invest our money, live for nine years, and earn 100 times our money,

TC: A lot of your contemporaries have begun to transition out of the enterprise industry, or at least their own firms. I wonder how you are thinking about this. Do you have a right hand in Alleycorp? What happens when you finally decide to back down?

KR: First of all, I don’t think it’s going to happen anytime soon. But you know, it’s Brenton [Fargnoli], drive health care efforts; this is wendy [Tsu] which is in the non-health sector. And then I estimate that from now on we will have two or three other partners in a year and I will effectively be the managing partner of the firm. But I’m good for another 10 years.

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