Hank Capps, M.D., chief information and digital officer for Georgia-based Wellstar Health System, and president of the system’s Catalyst innovation and venture arm, recently sat down with Healthcare Innovation to discuss Wellstar’s involvement in a new New York-based venture studio called Terrarium, which aims to incubate up to 10 companies over the next three years.
Also joining the conversation was Mark Rosenblum, Terrarium CEO and a partner at Company Ventures, which launched Terrarium in partnership with Cactus, an advisory firm that works with large health systems.
Healthcare Innovation: Mark, I understand you previously worked at Redesign Health. Could you talk about your transition from that firm to Terrarium?
Rosenblum: I joined Redesign Health in its very early days. I was the 20th employee there. I watched it scale over four years to about 250 employees. I incubated seven companies along the way. Toward the end, we had scaled so fast that in a lot of ways, I sort of lost connection to the vision and the strategy. That’s when I met up with the Company Ventures team, and we had this shared vision of a healthcare-focused venture studio that was very founder-centric, that was low-volume, high-conviction, and that’s really what we built at Terrarium. Company Ventures has been around for about 10 years. They invest in healthcare, but also enterprise software and fintech. Early stage investments were made into Maven, Centivo, Stepful, and Octave, to name a few.
HCI: Hank, I am interested in hearing how Wellstar thinks about working with startups, because some health systems tell us that can be challenging, while others really make it a point of emphasis.
Capps: We actually launched a subsidiary company called Catalyst by Wellstar, which is both an innovation company and a venture fund, and I’m the president of that. It has all the capabilities to do everything from building companies and spinning them out ourselves to proof-of-concepts and pilots and working with the broader healthcare business around what are the biggest problems that need to be solved. And it has an early stage venture fund alongside that.
We have a thesis that not all healthcare problems are solved by healthcare solutions, so that leads us to being a multi-sector venture fund. We invest in healthcare and non-healthcare companies, and the earliest of early — so minus one to 00, to one, series A as well. With all of that in mind, Terrarium is something we are incredibly excited about. When you are assembling some of the top talented startup founders and healthcare experts and partners like Cactus, which brings the perspective of design and the consumer, you have this incredible recipe for creating solutions that are going to impact the industry as a whole. Terrarium’s really special because it has all of those elements as a part of of how it’s going to build companies. When you add the venture backing and all of the incredible things that Company Ventures brings to the table, we’re excited about the potential impact that’s going to be made. And the first company that has been launched, Rota Health, is something that we are very interested in seeing and potentially bringing into our ecosystem.
HCI: Is Wellstar envisioning itself as a place to test out some of these solutions and figure out what works and what doesn’t?
Capps: For sure. We have a process where we bring in these very early stage companies. We fund the first pilot for them and assign innovation resources to help them navigate the health system. Then as they work on that proof of concept or pilot, either the business will say, this has value and we need to keep doing it, or we’ll have a set of learnings from that to harvest and and help the startup know how to be better in the future, if they’re not ready to expand their footprint within the health system. And we’ve been successful at doing that. We have 16 direct investments now that have all been through that same process, and as a partner of Terrarium, we envision that same process for these companies that Mark is building with these founders.
HCI: Hank mentioned the first company announced is Rota Health. Mark, could you talk about what their focus is?
Rosenblum: They are a healthcare data integration platform….Rota developed a technology that uses AI to ingest data on two ends of a connection. That could be the Wellstar hospital system on one end and a vendor that they’re working with on the other. Both companies would upload their data standards. The AI agent reads them, suggests a semantic matching and then writes the Python code to unify them in real time. This is a process that previously took weeks or months, and we’re super-excited about the implications of the ability to connect data at low cost and in near real time. Their team is built, they’re funded, and now they’re in talks to get their first couple of contracts.
HCI: From a media standpoint, we get bombarded with releases in which vendors have added AI to all their solutions. But whether they deploy AI or not, you still have to identify pain points or aspects of friction in healthcare for these startups to focus on, right?
Capps: At Wellstar, we have an approach that we want to solve problems, and AI is just a way in which you solve problems. So all those news releases you’re getting about AI really shouldn’t be about AI. They should be about the problems. It is a fascinating moment in time where people have focused on a capability; it’s like saying the Internet is going to solve problems. I think that we have been very disciplined, both at WellStar and Catalyst by WellStar, in terms of identifying the big problems that need to be solved. How are we going to make a difference and an impact for our patients and our communities? And then, as we identify those problems, how do you go deep on the research to understand them in such a way that you can begin solving them? AI might be one of the ways in which you solve that problem.
Rosenblum: We have four core themes that we think will help to shape healthcare over the next 10 years. One of those is healthcare data and AI. Others include value-based care and specialty medicine, workforce management solutions in healthcare, and the financial system of healthcare, which has trillions of dollars of payments flowing through it and transaction costs that are really high relative to other industries.
HCI: Mark, you mentioned having a real focus on founding talent. I read that you have a proprietary, data-driven talent platform. Can you talk about that? And are you interested in founders with clinical backgrounds as well?
Rosenblum: A common thing you hear in early stage venture is that it’s all about the founder, but oftentimes people aren’t really quantifying what makes a great founder. We’re obsessed with that. We’ve studied all the academic literature; we built some custom data sets, and what we decided to do is build a factor model, so we’re ingesting career histories from tens of thousands of potential founders, ranking and scoring them and then forming relationships with the top-scoring people. An example of a factor would be that you have more than one functional skill set. So clinical would be an example, but because if it’s going be a three-person early stage startup, we think it’s better if you’re clinical and you’ve done sales.
