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Hello and welcome back to Equity, TechCrunch's premier podcast about the business of startups. I'm Dominic Madori-Davies, filling in for Rebecca Balan, and in this episode we're bringing in industry experts to explore trends in the world of technology and delve into the details. The founders of Spotify created a company that scans your body, takes blood for analysis, and tells you your biological age within an hour. This startup, Daniel Ek's Neko Health, recently raised $700 million in a Series C round, and it's not alone. Midjourney is developing its own body scanner, and Function Health has taken out a $450 million loan to fund its growth. So is this the future of medicine, or the most expensive wellness fad of the moment? To help
us make sense of it, we're joined by someone who's seen it from multiple angles, -Rook A. Basi, founder and general partner of Preface Ventures. He has invested in over 100 companies, including Neko Health, and even got scanned at Neko himself. Ruku, welcome to the show. Thank you very much for inviting me. Yes, I can tell you a little about my experience, if that's appropriate. So, I've been doing venture capital investing for about 20 years. And by the way, healthcare, wellness, and artificial intelligence are currently experiencing a real renaissance and revolution for many reasons that we will talk about. So, Preface was founded in 2016.
We are investing from our fourth fund. We invest at the seed stage, and then continue to invest in the company again and again, in amounts of tens or even hundreds of millions over time. Well, both in our field of vision and the ones that attract us the most are founders who have successfully exited their previous projects. That is, people like Daniel and Hjalmar, and there are many other examples. And when they are motivated to take an even bigger step in usually related fields or ones they are truly passionate about. So yes, I look forward to the opportunity to talk about this in more detail. I wanted to ask what exactly attracted you to Neko Health, especially because it's probably obvious to you as an investor and to people deeply immersed in the
world of technology, because he created Spotify. So how do you switch from Spotify to, say, Neko Health? How was this presented to you as an investor? Daniel, Hjalmar, Shack, and the people on this team are some of the most talented entrepreneurs you can find. If you look at their track record, they've had success with Spotify and Helsing, as well as Neko, and these are projects they care deeply about. They invest a lot of their own time into it. I remember meeting Daniel sometime in 2016 or 2015, and he was already talking about this, about how he wanted to change healthcare and how in many parts of the world preventive medicine is simply not being used,
even in developed countries like the United States. I mean Europe; I lived in Europe, as you, Dom, may remember from our last conversation. You know, it's perfectly normal to go to the doctor for regular checkups, as scheduled, but in the United States-and not only in the US, but in other parts of the world -prevention is almost completely ignored. We solve problems when something goes wrong, by calling an ambulance, and we work with people who are already sick. But there's something that Hjalmar said, not just to me recently, but to groups of friends at a Neko launch party in New York a few weeks ago: if you look at the Hippocratic Oath,
prevention is better than cure. The team had been thinking about this for a long time. This is not some young company. She's already, you know, 6-7 years old. It just took time to build something as impressive as Neko, and we can talk about it in more detail. Yes, I am truly very grateful and happy to be a small part of this journey. And again, there are other investors in the company, like Lightspeed, OG Partners, and some others. But I'm very happy to support them. Yes. So, how did this deal even end up on your table? So, did you already know them? Yes, I've known some of this team for 10 years or so. We once supported each other in various investment initiatives. And, you know, maybe it's worth taking a step back.
I have 35 cousins who are doctors. My father and my brother, yes, they are both cardiologists. And anyway, my first job out of college was at a venture capital firm, which was actually the venture capital arm of Blue Cross Blue Shield. And two very successful companies, you know, one was called Change Healthcare, which went public, and I was involved in that. One was called Frigidaire. I was also with them when they went public. Um, it's just an area that I'm really concerned about. I mean, even for other examples like Aceso, a business that I nurtured with the Andreessen team, which is doing AI in revenue management, which is, you know, solving cash flow issues in healthcare and making that whole process much better for the
largest healthcare systems in the world, like HCA, Cleveland Clinic, Mayo. And you will learn more about them and hear, well, learn. They were a bit quieter, but they were, you could say, secretly very, very successful. You will hear more about them soon . Yes, yes, yes. Crossover Health is also in the portfolio, and again, very consistently successful founders and experienced founding teams in the provider directory space. Resilient Health is another primary care business I am involved with. So, yes, healthcare is an area that is really important, and one that I care about a lot from a personal perspective. But I think, to answer your previous question, at this point in my career, I'm not some very old man yet. But there are many places to invest,
collaborate with, and achieve success. Today in the world, people are investing in satellites, in defense, in consumer goods, in many different areas. I am motivated to work with people I truly trust, and these guys are some of the most reliable, talented, kindest, and most honest people on any entrepreneurial team you can find. So that's the first. And secondly, from the point of view of philosophical agreement, such a thing should exist. And again, more on a personal level. One of the things that makes me sad. I don't know if you've had that experience, Dom, or if you've had a friend who might have said to you, "Oh, you know, there's something wrong with my health, and I don't know what it is." And one of your
first reactions is, "Hey, you should just go, why don't you get checked?" And they feel this fear. And they have fear, and they don't want to do it. It's so crazy that we live in a system where there is such difficulty in gaining the knowledge needed to take care of ourselves. This needs to be addressed and addressed. And so, why do you think this problem is so difficult to solve? Because it seems like there are a lot of startups in the healthcare sector, but what is the main obstacle they all face? A very profound question. There is a lot of information around. Also, regarding medical data: there is simply too much information. And I think when people look at history, I call it the " WebMD effect." You went to WebMD, described your problem, and the site
would say something like, "You are terminally ill." Or something similarly terrible. I think there is a certain uncertainty in the human psyche about the unknown. Especially when it comes to something as critically important as health. This is the first thing. If we look at it from the perspective of the hospital system, let's forget about startups for a moment. Those lucky enough to have insurance in the United States can make an appointment. This takes time. This requires.I guess it's strange to admit this, but it's worth telling it like it is. I think that not only for me, but for many others, the reason for the fear of the unknown is that people don't know how much it
will cost. By the way, 67% of bankruptcies in the United States are related to health care costs. You simply don't know what your insurance premium will be. You don't know how much it will cost. There are so many problems and all kinds of difficulties. And I'm excited about the next generation of startups. You mentioned a few, right? You mentioned Function Health, and there are a few others. There are several problems that need to be addressed. Firstly, it is obtaining information from the patient in a standard structured format. And secondly, it is the transformation of this information into language understandable to the average person so that they can influence their lives-whether through
lifestyle changes, prescription of medications, etc. This is still not resolved. And what I like about Neko-first, it's easy to book, and all your information is in one place. This is economically beneficial. How much does it cost? About $500 in the United States. Does insurance cover this No, it's all at my own expense, but I believe that at some point in the future it should, I think, be reimbursed. I mean, it's interesting that if you look at the data, I think they had a kind of Spotify for reviewing anonymous Neko scan results. Those who do Neko scans, about 90% of them pay and want to sign up for next year because they are so happy to be able to get
all this information, book and access it. And this information includes a dermatological scan, a strength test, an eye pressure test, an echocardiogram. This is something that people don't usually do before they're 50, but it's extremely important and I like it going on? All together. Sounds exhaustive. It's comprehensive, but only lasts an hour. And what else I liked, you mentioned in my introduction that I did one scan, and I did two.
Oh, you did two scans? I had two scans done. I did a first generation scan and then a second generation scan. And another reason why I love this team and their business philosophy-they made the cost the same. So, my first scan had a blood test for 15 biomarkers. This time there were 55. And they are adding more and more relevant information and health biomarkers, doing everything they can to keep it accessible. I'll say this, I even interviewed a few of my friends. I ask, "Hey, how much do you think this should cost?" Or what price did you expect? They say, "It could easily be $2,000-$3,000, no problem." And they make it accessible to people, which is important.
Well, how do they do it so cheap, I guess? Or I mean, compared to how much it should have cost. How can all this cost only $500? Well, okay, "has". "Has" is an interesting choice of word. I believe that prevention and healthcare should be cheap and accessible. First, almost complete vertical integration. Um, well, first of all, the fact that the laboratory is on site. So you get your blood test results within an hour. And during that hour, you have a few minutes, sometimes dozens of minutes, depending on the situation, with a clinician, with a doctor who can personally tell you what's going on, what's going wrong, and what
can be improved. Yes, again, using the best of next-generation computer vision technology to identify and retrieve all of these biomarkers. And again, many of these things will be FDA approved in the coming months or years, this is just a guideline. So, again, I haven't seen a company that provides such a comprehensive and enjoyable experience. You feel like you're stepping into the future while getting a comprehensive and affordable primary care visit. This is head and shoulders above anything I've seen before. By the way, I want to ask: did you do these scans as part of your due diligence? Or did you just want to, well, be like a regular customer getting scanned?
I mean, I've known the founding team for Honestly, I just wanted to try it to support a friend. And as soon as I tried it, I realized, "Hey, this is pretty incredible." Like, I have to do this. How can I get involved? And I was very grateful for the opportunity to direct capital to solve problems that need solving and that I think are important for primary care. -it's only in New York right now, right? No, no, no. Actually, the head office is in Sweden. So, No, I mean, in the US. Oh, in the USA. Yes, yes. So, yes, Sweden, I would say, Sweden. There are three, four, five clinics in the United Kingdom. And then
New York, yes, 300 Lafayette. So please come. There's a pretty big waiting list, a very big waiting list. But the plans include, you know, Miami, Los Angeles, Boston, and many, many other cities in the coming months and years. This reminds me a lot of Los Angeles for some reason, because I was just thinking, what is the real possibility of scaling something like this? Can you imagine this happening, for example, in rural Mississippi or elsewhere? How do you even scale a product like this, not just like Necko Health, but all the others that are currently appearing on the market?
I actually hope -and again, with the information I have-I think Necko clinics should be everywhere. I think it will eventually happen, of course, not on behalf of the team, but I worked at a venture capital firm that deals with insurance and I understand how incentives work and how everything is structured. This should be insured. Everyone should do this. Of course. So how do you scale this? I would say this: the company has raised a significant amount of capital, and that's great. There are certain equity and debt levels, which is good for actually running these clinics. They're being economically smart, despite being economically efficient, because again, operators like Spotify are hard businesses to build and scale successfully, and they've
done it, which is just epic. Healthsing, as far as I understand, is moving in the right direction, and Necko, you know, is developing successfully so far, and that's great. So the key is to make sure people are using it, there's a booking model, operational processes, and you can manage costs effectively, but it has to be everywhere. And yes, in rural clinics, yes, I hope so. Or, excuse me, in rural areas, I hope, because again, primary care utilization in the United States is incredibly low. It seems to be less than 7 or 8 percent. This is not good. This needs to be fixed. Not good. This is not good at all. Do you have any concerns about the increase in the number of medical startups being funded by venture capital? Because I was just thinking, you
know, there's this problem with private capital taking over all the hospitals and medical facilities. Are there similar concerns about the growing number of medical startups backed by venture capital funds? Or, as I see it, where else can the money be obtained to finance all this? Yes, that's a great question, Dom. After all, there are a million problems in healthcare that need to be solved. You know, I actually wish there were more, let's say, optimistic dollars to invest in this, rather than in profit-squeezing private equity operations like buying up surgical clinics and then selling them off. This is quite funny. In
my personal opinion, there are certain VCs in the consumer healthcare space that are overfunding businesses that I don't think will be successful in the long term. And which don't really move things forward. After all, think about what's most important in life-is changing someone's health and improving patient outcomes. There are many companies, and I won't name specific names because I don't want to criticize anyone. I try not to criticize anyone in life. But this over- prescribing of medications and creating ridiculously easy access through telemedicine. they just don't think of them as patients. They perceive them as subscribers. And that's sad. And do they have a holistic view of a person's health to say that
supplemental, I don't know, GLP-1 or nicotine withdrawal or whatever you can easily sign up for through telemedicine, or maybe a blood test that gives you a fancy PDF that looks nice and gives you a bunch of information about possible outcomes but is actually unclear-that's the concern? To me, it somehow highlights a sector and area of our world that needs the attention of our best minds, best businesses, and models. Sometimes I get a little upset because I think, "Oh, one of these things got funded again?" Seriously, you understand? Whereas, again, Neko-I'm, of course, very biased, but you know, this is a case where you have to back up your words with actions. This is a company that will really save people. That is, there are certain statistics. They've already
saved several lives by referring people to other hospital systems when they needed help, and that's pretty impressive Yes, I wanted to ask who is involved in the follow-up of such patients. Does Neko have its own system for follow-up, or does it ultimately fall back to the traditional American healthcare system This is a better question for the team, um, the management team, but my understanding is that if something major arises that needs intervention, it falls into the American healthcare system. But then again, they just launched in New York, um, and they do n't have any clinics. I mean, there's still a lot to be done. Again, the philosophy of Neko is that it will be a place and a kind of central hub where people can return and
assess their state. With all the companies you invest in, including this one, what are the most challenging things about building a healthcare system? I guess I asked this at the beginning, but it seems like Neko Health is too good to be true, right? You know, you have this product and it just fixes everything. But isn't this healthcare system too broken to fix? I'm an optimist, and I'm paid to be an optimist, to some extent, but I would say no, nothing is too broken to fix. This is too important a sector. Look, I think about it this way: what problems are most important and need to be solved
Primary care utilization is a huge problem, and it's a bet that I made, and that the Neko team actually made, to try to fix it. I think another area of concern and concern that I mentioned earlier is finance, payments, and transparency of spending. This really hurts. This is a lot of work, so I think the healthcare venture capital ecosystem should support this, and I also think more people should try to solve these problems. I'm very glad that, to some extent, historically, 10 or 15 years ago, investors and professionals who went into healthcare were geared towards direct investment. These were companies providing medical services. If you look at how these companies were valued even when they went public, they generated a lot of revenue but did
n't trade as well as some software companies. I mean, if you look at companies like Open Evidence, the world is looking for better technology. By the way, Dom, are you by any chance familiar with Open Evidence? It seems not. Oh, incredible business. Well, also an investor. Hmm Two- thirds of doctors use it daily. Um, it was recently valued at $15 billion by Andreessen Horowitz. And, in fact, I think it's funny to call it "ChatGPT for doctors," but it's actually an opportunity to ask questions, check and upload information. Medical knowledge, the amount of medical knowledge doubles every year.
There is no way a doctor could know all this information. Notice, is all the new information relevant? But yes, Open Evidence has done something extraordinary: they have formed partnerships, including with the New England Journal of Medicine and other publications, to use this information, learn, and work together, effectively making every doctor or healthcare professional a superspecialist. Previously, it took a long time to create medical companies, 10-15 years to reach a certain scale. Open Evidence is one of the fastest growing vertical AI companies. When you think about it, Harvey is also growing very quickly in vertical AI. Glean
has grown in vertical applications. You know, Harvey, Legora, Open Evidence, Sub Bridge, maybe a few others. But everyone always hated electronic health records. People always said, "Oh my god, this is terrible to work with." People are constantly complaining. I give credit to Obama and previous administrations for implementing electronic health records. We have created a digital chain of patient history. Thanks to a standardized data format, people can now use artificial intelligence, automate processes, and make healthcare even better. So, what was unfashionable and then became super trendy? I don't know, maybe cargo jeans, or there's a better example. Which doesn't give away my age.
Yes, well, he said the word "AI." Now I feel like I have to say something about it. Oh my God. Well, actually, there was something I wanted to ask before I get to the AI questions, which is: companies like this one - this is a question from me as an average citizen. Um, I know that in the venture ecosystem, a big IPO is kind of a win. But when it comes to these healthcare companies, should they remain private, or do you see, for example, Echo Health or your other investments, as ultimately aiming for an IPO, where you're, as I understand it, taking people's health to the public markets, like a lot of hospitals? Or, let's say, what is a victory for you here?
Oh, what a question. The philosophical answer is this: in, I've been grateful and fortunate to have had some pretty big successes because of entrepreneurs who do all the hard work. Um, I want to direct and allocate funds to people who are working on meaningful and important issues. I also believe that a company should go public at some point to be open to the entire population so that people can participate as small shareholders. I know there are some issues when insurance companies go public, it's a little more complicated. Um, but, you know, I again have a certain bias towards free capital markets, but also, I think if I had a choice, I would want universal healthcare. So, I'm a bit " Nordic" in that regard, you know. Ahem.
No, yes. Do you notice that people are actually afraid of integrating AI into the world of healthcare, or is it just talk on the internet? I think any new technology can cause some fear. Healthcare issues are so incredibly important, and the impact that can be had on someone's health, longevity, population health, and the costs associated with maintaining health, well- being, and productivity as a member of society is very significant. I think the fears people have about artificial intelligence in healthcare are probably exaggerated compared to the benefits. Note that if you use the same filter and
tracking approach, it's pretty much the same. I'm negative about this, right? So, I think we need to consider the drawbacks of things like this, as well as the benefits and who benefits from it Artificial intelligence in healthcare is expected to make medical care more accessible, help people live longer, and, of course, there will be problems, questions, concerns, and unusual situations. I hope that the regulators who oversee such technologies and solutions will do their best, because, again , I believe the world should be healthier. So I wanted to ask about regulation, because do people perceive this, going back to the Neko Health example, as preventive medicine? Do they consider this a health precaution? Is this perceived as a wellness trend, as
some kind of fashion for recovery? Or do regulators, the ones who make the big decisions, say, "Oh yeah, this is the next frontier in medicine"? How do people view this? I mean, again, that's just my opinion. When I hear the term "wellness" or " fashion," or just talk about wellness, I think of meditation, recovery, ice baths, saunas-those kinds of things. Neko Health is a medical information tool that sets a very high bar for accuracy and success, providing patients with actionable advice to improve their lives, as well as know and realistically measure their health status. So, basically, again, I worked for Blue Cross Blue Shield at one time. To
achieve something, there are certain countries.By the way, Sweden has a much better system of digital reimbursement for healthcare costs. The medical reimbursement system in Scandinavian countries is truly excellent. You go to an insurer, public or private, and you show evidence, " Hey, with the implementation of this technology or process, you can have a healthier population that lives longer, and serve it at a lower cost." In my opinion, Neko Health is showing all the right signals so far, and will actually attract more and more people. I mean, there have already been, I think, a hundred thousand, hundreds of thousands of scans, and I hope there will be millions, or even tens of millions. I suspect that the data will be enough to
show that because these people, including me, have a therapist's appointment, we are responsible for it, and we have the opportunity to talk to the doctor. that I probably don't even know everything about, but things that are getting ready to be released are going to make a real difference. So again, I hope regulators will be happy to support a company like Neko Health. But I also think they have to be careful with those that are not as reliable, or maybe only capture a very small portion of the information and are not as comprehensive as primary care, you know? That's the difference between what I consider a fad and what is truly fundamental and traditional.
I think I only have time for one question: you said you have about 30 cousins who are doctors. This is Yes, cousins. Cousins, have they used Neko Health? What were their thoughts? What didn't they like? What do they think needs improvement? I'm very curious now. Okay, actually all my cousins who are doctors live in Chicago, and unfortunately Neko is n't in Chicago yet, but she will be. No, I'll just say that the feedback is mostly this: it's much better than any primary care experience I've had. And again, I think that's why people are so eager to sign up for next year and even share information. I mean, Neko Health makes taking care of your own health and primary care a matter of pride. That's why it's on social media, in X, and people are excited. I
know that in San Francisco, I think it will eventually be on Market Street. Oh, wait, this isn't in San Francisco yet Oh, wow. It's actually kind of crazy that this isn't in San Francisco yet. As far as I understand, you know, regulatory issues, zoning and stuff like that take time. This is California. I used to live Regulators, regulators, I forgot. Regulators, yes. You know, I'm really glad they're expanding there and in other places, because I think it's not just a US problem. I'm glad this is in Europe. There are many more countries out there, but really it should be everywhere.
Yes, it seems, I know, it looks very interesting. It seems like it's everywhere on the internet now. This seems like a form of health prevention in a sense. I don't know. I remember I was talking to a friend, um Wait, you haven't had a scan yet? I am terribly afraid of such things. What? We.I just told you a story about.No, I. we had a whole conversation. Oh my God, this is so funny. Oh, well, no then. The fears are justified. Your feelings are completely understandable, of course. Thank you. I would.Yes, of course. I would advise you.I would say that the fact that you can talk to the doctor for 20 or 30 minutes, or 10 minutes
, or however long you need, privately and ask all the questions; that the data is protected and belongs to you; and it is a truly safe space. So I would advise you.may I ask, when was the last time you went to the doctor? My scheduled check-up? I go through it once a year. Oh, you're doing it. Okay, that's good. I'm starting to do it, you know, get into the game. No, I think Echo Health is really interesting, and I'm also interested to see how it develops. Yeah, I mean, thank you for joining us on the show. Of course. And to our listeners: you can find me on Instagram. Please follow me
on Instagram: dominic.madorey. And you can follow Equity at @EquityPod. Where can our listeners find you? You can email Far***@p*************s.com as an option. I always prefer entrepreneurs who work on healthcare or artificial intelligence problems. I hope our conversation has shed some light on some of the topics that concern me, so please write to me. And yes, LinkedIn is always a good option too. By the way, thanks for the conversation. I hope it was informative. Honestly, I think we could talk about medical artificial intelligence for hours. This is, uh, such an interesting time, a real renaissance. Uh, so, thank you for paying attention to this.
Yes, of course. I mean, I hope this is a renaissance. This, this, this, this, this is happening. This is from. From a venture entrepreneurship perspective, it's amazing what we're capable of now and what's possible, even from a companies perspective, and how quickly they're growing, uh, and growing responsibly. This is not just a fad. Not a fad, they are real Truly real. So, yes. Thank you again. See you next time. Equity hosts- TechCrunch senior reporters, producer-Theresa Lo Concannon, editor- Kell. Subscribe on YouTube or wherever you listen to podcasts, and find out about upcoming events at techcrunch.com/events.
Thank you very much for listening, see you next time.
