Andrew Adams, co-founder and general partner of Oak HC/FT, leads the Greenwich, Connecticut, firm’s healthcare team.
Adams formed Oak HC/FT alongside Annie Lamont and Patricia Kemp in 2014 as a spinout from Oak Investment Partners. The venture firm backs entrepreneurs, investing in early- to growth-stage tech-enabled companies in healthcare and fintech.
Recent healthcare bets include WithMe Health, Therapy Brands, Cricket Health, Maven, Notable Health, Olive, Oncology Analytics and Paladina Health.
Since its inception, Oak HC/FT has made four strategic exits, all in healthcare. Notable exits include Aspire Health, the Nashville palliative-care provider purchased by Anthem in June 2018.
Most of Oak HC/FT’s exit activity comes through sales to strategics. Why?
The healthcare market is so big and there’s so much waste and complexity. When you’re [investing in companies] addressing those three central elements — cost, quality and consumer experience — that creates sustainable value.
Total addressable market is an issue we never address because it’s always enormous. That’s one thing that is attractive to strategics: growth runway.
Once we see the best opportunity, we’re looking to back the best entrepreneur. These are folks that know how to grow great companies and great companies of scale. [Strategics] can acquire a team that’s additive to what they’re doing or can fill gaps. If you’re running a very large enterprise, finding a technology that’s already built with a great team [is] a very attractive acquisition.
When you initially source an investment, do you already have an exit strategy or list of potential strategic buyers in mind?
None of that is preordained by us. We know that if we are successful in supporting a great team within a growth market that has a decade of runway, the exit usually solves itself.
If I look at our portfolio today, I can think of a number of acquirers for our companies that are not financial sponsors. But corporate imperatives change over time.
There’s an interesting thing happening in the healthcare market. You have big PE buying platforms and acquiring other companies. Providers taking risk. Payers buying providers. And you have new folks coming into the market.
If you look at the big vertical integrations like CVS–Aetna and the horizontal collaborations like hospitals mergers, and then you look at traditional tech players buying their way into the industry — the Amazons, the Apples, the Googles of the world — new players are increasingly becoming more interested in our companies.
So how does your investment strategy change as the healthcare ecosystem evolves?
We have to keep evolving our strategy based upon what we see in the market. We’ve got to make sure our companies and our investment strategy [remain] in line with that.
[For example], everyone talks about and continues to talk about the transition of fee-for-service to value-based payments. Things happen slowly, but it feels like this trend is accelerating.
If we find a low-cost operator that we think can be successful in fee-for-service, but can make that shift to value-based care, then we’re not making the bet on value-based payments. It’s hard to time that. But we invest in the ones that would benefit from that trend.
We’re not interested in being single-threaded on one thing like one regulatory change. If we’re addressing cost and quality, we’re successful in any environment.
How do you specifically provide value to your companies to best position them for a strategic exit?
How do we best support the team in growing and scaling their business? We have deep connectivity to most customers. We’ve made over a dozen payer-facing investments alone, and so we’re deep in that category.
Sourcing talent is always a critical function to scaling a business, and I think that’s an area where we make a lot of introductions. We have [investment professionals] that have come out of the industry themselves. [For example, McKesson, EnvisionRx, athenahealth]
It’s really that collective package that we bring to all companies. Because we are so deep in these areas, we know what the customers’ needs are — whether a provider, payer or consumer. And I think that’s different. We don’t think about ourselves as just providing capital.
What specific characteristics do you look for in the entrepreneurs you back?
People that appreciate the opportunities and have a pragmatic approach to the challenges of the industry [are] important.
It’s a regulated market. It’s very complex. I think that requires a certain lens. A pragmatic optimist is someone that has a vision and is excited about making a systemwide impact but understands you have to operate and scale within the framework of the industry.
This interview was edited for clarity.
Action Item: Contact Andrew at email@example.com