Why General Catalyst Is Doubling Down on Health Care Investments

General Catalyst, the 22-year-old Cambridge, Massachusetts-based venture capital (VC) firm, has been a contrarian of late in the health care investment community. While many VCs in the first half of 2022 have been pulling back on investments, particularly in the digital health sector, General Catalyst has been doubling down.

Roughly a year after closing its first $600 million health care fund, the firm last month launched its $670 million Health Assurance Fund II, focusing on health system partnerships. Meanwhile, General Catalyst continues to build its bench of investors, expert advisers and health system partners.

The latest addition: Marc Harrison, M.D., president and CEO of Intermountain Healthcare, will run its investment platform. He joins Daryl Tol, the former CEO of Altamonte Springs, Florida-based Advent Health, who in June became General Catalyst’s head of health assurance, and Stephen Klasko, M.D., the former Jefferson Health CEO who was named executive-in-residence in February.

A Return to Fundamentals

All of which begs the question: What’s General Catalyst’s underlying health care strategy and why is it so optimistic about health care’s future?

Company leaders see a bright side to the market downturn that has led to layoffs and cutbacks at some major tech companies. This has led more companies to focus on fundamentals and discipline that many people had forgotten, Hemant Taneja, General Catalyst managing partner, recently told Forbes.

Venture investments in digital health startups have slowed sharply in the first half of 2022. VCs deployed $17.6 billion in the first half of this year, a 40% decrease from the same period last year, according to CB Insights. Digital health exit activity has virtually ground to a halt in the first half, notes a Rock Health report. No companies went public in the first six months of 2022 after 23 public market exits in 2021.

Nevertheless, Chris Bischoff, managing director who oversees General Catalyst’s global health care strategy, is bullish about the opportunity to build companies that are more intentional and that are laser-focused on closing gaps in care and encouraging management teams to concentrate on their core business.

In digital health, the company is looking to repeat the success it had with the chronic disease management firm Livongo. It’s now focused on technology that can help underserved communities, underserved conditions like musculoskeletal disorders, clinical workflows and data exchange infrastructure.

Another aspect of General Catalyst’s efforts to spur more rapid transformation in the field includes partnering startups directly with health care systems. The firm incubated the patient engagement software company Tendo Systems with Jefferson Health in Philadelphia, with the health system serving as an investor and the first design customer. General Catalyst also has strategic partnerships with HCA Healthcare and Intermountain Healthcare.