The three ways a health fund can decide what to back
The conclusion I keep coming back to, after a year of building the thesis for our new fund, is that starting from the problem rather than the tool or the disease has been the only honest way to keep the promise I made in the first of these pieces. The rest of what follows is the argument for why we landed there.
A few weeks ago I wrote that investing in health is not the same as investing for health impact, and that the discipline of actually measuring that impact, rather than assuming it follows automatically from the fact that a company operates in healthcare, is far rarer than it should be. The piece resonated more than I expected, and it left me with a question that I had not fully answered, either for the reader or, if I am honest, for myself: if you accept that impact in health has to be measured against the value a company creates for the system, then how do you decide where to point a fund in the first place?
I have been living inside that question for the better part of the last year, as Carmel, Luc and I have been developing the investment thesis for our upcoming new health fund, and these are some of the thoughts that surfaced along the way. They are not conclusions handed down from a framework, but observations that emerged from the slower and messier work of trying to define what we actually wanted to back, and why.
The starting point, which sounds obvious once you say it but is rarely said out loud, is that every health fund organises itself around some predominant axis, whether or not it admits to having chosen one. The point is not that a fund picks one lens and ignores the others, because in practice almost everyone layers them, and we are no exception. We back companies through a technology lens as well (we will not invest in biotech, for instance), and the disease space matters to us too. The question is which axis comes first, which one sits at the top of the hierarchy and does the real work of deciding what belongs in the portfolio and what does not. That predominant axis is also, I think, the most useful thing a founder can understand about a fund before approaching it, because it tells them not just whether they are in scope, but how the fund will actually look at them once they are.
Three ways to lead
The first is to lead with technology. You decide that you back HealthTech, or MedTech, or diagnostics, or a particular frontier such as applied AI in clinical settings, and you build your sourcing, your networks, and your technical judgement around that kind of innovation. The strength of this lens is focus and pattern recognition, because a fund that sees a hundred companies built on the same underlying technology develops a feel for what good looks like that a generalist simply cannot match. The blind spot is that a technology category is not, in itself, a problem worth solving, and it is entirely possible to assemble a portfolio of genuinely clever tools that share a common architecture but no common thesis about what they actually change in the world.
The second is to lead with therapeutic areas. You decide that you back oncology, or cardiovascular disease, or children’s health, or mental health, and you build deep clinical relationships, regulatory fluency, and a clear identity within that space. The strength here is depth, and the kind of credibility with founders and key opinion leaders that comes from genuinely understanding a disease and the people who treat it. The blind spot is that this lens ties the fortunes of the fund to the dynamics of a single space, and, more subtly, that operating within a therapeutic area tells you very little about whether a given company improves the system that delivers that care, as opposed to simply adding one more option inside it.
The third is to lead with problems. Not the technology a company uses, and not the disease it touches, but the structural failure of the system that it resolves. The strength of this lens is that it is, by design, agnostic to both technology and therapeutic area, which means it lets you place a surgical robotics company and a workflow automation platform on the same axis and ask the same question of each, namely what it does to the performance of the system as a whole. The cost, and it is a real one, is that this lens demands a framework to be credible, because a problem-led thesis that cannot define its problems rigorously, or measure whether they are being solved, collapses into exactly the kind of vague good intentions I argued against in the first place.
I want to be clear that none of these is wrong, and that no fund relies on a single lens to the exclusion of the others. A brilliant fund can be built with any of the three at the top of the hierarchy, and many have been. They are not better or worse than one another in the abstract, they simply place a different question first, and the honest task for any GP is to know which question that is rather than drifting into one by default.
The one we chose
But the question I kept returning to, as we built our own thesis, was the one the first article had forced into the open. If the kind of health impact you are chasing is the one I described there, a measurable contribution to the resilience and performance of the system, then only one of these three lenses puts that contribution at the centre of the decision rather than at the periphery. The technology lens starts from the tool, the therapeutic lens starts from the disease, and in both cases the system value, if it is considered at all, tends to be inferred after the fact. The problem lens starts from the system’s own points of failure and works backwards to the company, which is a harder place to begin, but it is the only one that makes the impact question primary rather than incidental.
That is the choice we landed on, and I offer it as a choice rather than a verdict, because I am genuinely persuaded that the other two lenses can be practised with real rigour, and that they may well be the right starting point for a fund chasing a different kind of impact than ours. What drew us to the problem lens was simply that it forces the discipline we already believed in, and it refuses to let impact become something you claim at the end rather than something you select for at the beginning.
It also requires you to be specific about which problems, and here I will resist the temptation to lay everything out, because the structural pressures bearing down on European healthcare deserve more than a paragraph and I suspect they will be the subject of the next thing I write. For now it is enough to say that when we looked closely, the fragility seemed to concentrate in four broad places. I) The rising burden of chronic disease, and the cost of managing it too late. II) The growing unsustainability of how care is funded and delivered. III) The fragmentation of access, and the broken coordination of care across a patient’s journey. IV) The mounting strain on a workforce that is ageing, overstretched, and increasingly asked to do more with less. None of these is a technology, and none of them is a disease, and that is rather the point.
I do not think there is a single right way to build a health fund, and I am wary of anyone who claims there is. But I have come to believe that the most useful thing a GP can do is to be conscious and explicit about the axis they have chosen, because the choice shapes everything that follows, from what lands in the pipeline to what counts as a good outcome. For us, starting from the problem rather than the tool or the disease was the only way to keep the promise I made in the first article, which was that impact in health should be something you can measure, and therefore something you have to choose on purpose.
