E514 | Matt Cooper & Paolo Pio, Exceptional Ventures: Fixing HealthTech’s Hype Problem

25:35We could spend our time saying we need to be a lead so we can have a board seat so that we can sit around and watch out for our own interest sitting on your board. Or we could say, you know what, we're so confident that we add value that we know you're going to call us in anyway. We don't have to demand a board seat. We know that we're going to be more involved with you and your business than the guy who's bought himself a board seat. We know that when you need help, you're going to fly across the world to see me or see Paola. And so the words get confusing because we would say that for all of our investments, they would see us as the lead in terms of adding value, adding strategy, giving advice, bringing other investors.

26:11And yet, in terms of being the constructor of the final term sheet, if necessary, but not uniquely skilled at, nor work our time. We do get involved with our portfolio companies quite a lot. And Matt loves that. And in a way, that's his mission. On the contrary, from the other firms that was coming before, it was about putting a check-in and then I don't see you anymore. Let the entrepreneurs run. We don't want to be bothered. I mean, because it's too time-consuming. But in a way, I really saw the opposite and how much actually the help can really support young founders that might need incredible experience at something, but completely not at something else.

26:51So in other words, we love running up our students. And Matt does it time and again on certain areas. I do it on other areas. We are performing companies and it's 35 right now. And it certainly poses the question as we scale, how do we scale this support? And we're putting things in place so that we can. And we hired a young team that we are grooming right from junior position to mid-level position for Farm 2 and ideally to partner position for Farm 3. Ideally, it's going to be 2028 so that we can continue this because that's the culture that we want to read into our firm. Right. I think it's really important to talk about what involvement is, right?

27:29Because for most DCs, involvement is a seat on the board, right? That's a seat on the board so that they get to read the board minutes. They have that place to pontificate. Some of them don't even read the board minutes. I've settled on a lot of boards in 25 years. That's not where real value gets added. That's where, especially by investors, that's where investors look out for their own interests. Real value gets added when an entrepreneur is stuck and they know that they need help and they know that you can add value. real value gets added when they invite you in, not when you pound on the door saying, I need to know some information about your business because I'm getting nervous.

28:09I mean, real value. I was in LA last month and one of our entrepreneurs who's in Boston that I work closely with said, would it be okay if I fly in and stay over for a day? Because I need some help on some things. So on her own ticket at her own cost, flew across America to come and spend a day. And we rely on that. And we rely on it both at the choosing stage. I mean, I think there's a sweet spot. You want to choose an entrepreneur who's brilliant. I hope they're smarter than I am, who's going to be a great CEO. I hope better than either one of us will ever be, but also knows what they don't know, is willing to learn.

28:42Because there are a whole bunch of people who say, oh, you know, Andreas, really, I'm going to want your input. And then as soon as you sign the check, you're like, oh, I know everything already. We don't want those. I don't want to force my way into your business. I won't succeed anyway, right? I mean, you can hide from me, you're a full-time in your business, I'm part-time in your business. So we want the people who are brilliant and confident, but who also look at us and go, wow, one of the reasons I want exceptional dentures is because I know they're going to be able to help me. And actually, we want them to call us.

29:11I mean, we've got one of our entrepreneurs is our next phone call. She's in the insurance business working on reproductive health, which is a big gap in the UK and in some of the other markets. I've got a little bit of insurance background, but I'm not an insured tech guy. Kyla's got almost no intense background, but we know a lot about entrepreneurship. So the reason she's coming here after this meeting is to talk about her next fundraise, whether her NDP product is adequate, and it's a strategic conversation initiated by her, not by us. And I think that's one of the things that makes us different.

29:45So we started as a business, thinking like entrepreneurs with a mission, which isn't, ooh, let's invest some money and see if we can turn it into some more. It's let's change human health and well-being. And then when we look for entrepreneurs, we look for people who are brilliant, but want help. And we look to be invited in, not force our way in. Speaking of the mission of rewiring the really bad situation we are in with health in the Western world, or if not globally, let's talk a bit about JoySpan because that is a concept you guys have created. And I find it incredibly exciting. Sometimes we tell the story and we make it sound like we had all this stuff when we shut up.

30:25Like on day one, we knew we wanted to build a franchise. He seems our expert at that. But a lot of the things come later. A lot of the things come later. So we started in this area. We believed we had real expertise. We believed we could attract great entrepreneurs. And we saw a change already happening in the world. We didn't start. right? So, you know, people have been focusing more on how to stay well. They've been looking at the gut biome. They've been trying to detect disease earlier, understanding more about exercise, more about sleep, all of this stuff. And so there'd been a gradual movement already beginning in the world to go from talking about lifespan to healthspan.

31:04And words are trite, but loosely what that means is that, you know, if we've increased human lifespan from 70 to 80, but most of those years are spent in nursing homes, people that have Alzheimer's. We keep them alive even though they've got late stage cancer. They're miserable. Well, maybe actually that's not quite the right word to use. Maybe just keeping people alive longer. It's never fair to say that that's all the existing system was doing because that's nonsense. But we're simple people and we need simple labels. So a bunch of people gradually started to think lifespan. That's not a very good word.

31:37Let's talk about healthspan. How do we keep people healthy and vibrant for as long as we can? But then we noticed that was giving rise to a lot of fringe science. It was giving rise to a lot of black and white. You should not drink. You should have nine hours of sleep. You shouldn't mess up your circadian rhythms because that's terrible for you, traveling across time zones or whatever. And it was, you know, to me, Brian Johnson typifies this. You know, a guy who decides that he's going to eat the same number of calories every day. He's going to inject his young son's blood into himself and so forth.

32:09And so suddenly there's this popularization of - Aren't you guys doing that too? Well, I've got this wine cabinet behind me. Yes. Well, she'd come back to this at some point. Because, of course, Brian Gonson in the beginning said he was only doing that for his own benefit, that it was only about him. Well, then he did a Netflix documentary and now he's trying to sell stuff to be using its notoriety to sell a stack of supplements that doesn't work. But putting that aside, our mission is to affect the life of many people. Most people are not going to inject their young son's blood into themselves, even if that does work.

32:44Plus, they don't need to do that. They're not eating well. They're not sleeping right. And so we did a presentation a couple of years ago to our own LBs and founders. We put up a little thing that was, it was a health pyramid and it was sleep and diet and exercise and supplements and sense of purpose and connections. And we ended each section where, you know, we went through the current state of science and knowledge in each area. What's real, what's not real, what we're sort of on the cusp of learning, but we're not sure about. And we ended each section with a very verbose statement that said, so look, you, Andres, you should think about this area.

33:22Think about what changes you want to make and are comfortable troublemaking, make some commitments, and then try to stick to them. And that was how we ended it in each section. That's kind of cumbersome. And so gradually started boiling that down. And one day out comes the word joy span, which seems to encompass that, which is, yeah, you know what? You know that you shouldn't stay up late. You shouldn't get drunk, but you might want to anyway sometimes. I love chocolate. And so joy span is our way of saying the trade-off between health, happiness, wellness that every person can make for themselves is this thing called JoySpan.

33:57And that'll be different for you than for me. I like sweets a lot more than Paolo does. He's much more willing to give that up than I am. Yeah. And in my case, what I'm not willing to give up might be, you know, I love sports and they can be an engine of sports, you know, but still. So what are you willing to sacrifice in order to live longer? And what are you not? because it really gives you joy. And that's in a way what we want to promote, right? And what we are going after our investments. Yeah, we've even, we've trademarks the term. Not that we necessarily want to be the only ones that use it, but we think it's a meaningful term.

34:34It's interesting because I think there's one last piece added to that, which is a challenge, right? Because that would just suggest I inform people and then they make choices. And it doesn't work quite that way because we've got, you know, a million years of evolutionary biology, which makes us short-term decision makers. I'm genetically programmed to save myself and my family from the bear that's attacking me right now. So we're instant gratification. So one of the challenges in the whole health and wellness sphere is the instant gratification to bear a decision maker. You should be able to choose that you don't want to give up wine drink.

35:08That doesn't mean in the moment, just because it's in front of you, you should guzzle all the wine that's there. So we want to educate people. We want to sort of push toward longer term thinking. People don't go and get themselves checked out. They don't go to the doctor until they're sick. We want to help change that too. Can you tell me how does this whole concept, this whole work with health and JoySpan fit into your work as a fund, both on the LP side, but maybe even also on the founder side? Because we have some, as you spoke about it earlier, the huge interest you have in mental health. There's a lot of funds that offer mental health.

35:49Like they earmark some of the money that they invest to some mental health program. They have coaches on staff. They have a selection of coaches that they advise and so on and so forth. Like where does this fit into your model? Or is it just we invest in this space? We run cool community events in this space. We try and inform by our LP newsletter to everyone who is interested in this. But it's not something that is built into our model in terms of both how we manage our value delivered to founders and to LPs. The reason I sort of hesitate is it's really an interesting time to ask that question.

36:26I mean, the whole reason we ran that event last year was that most of our LPs at this stage are high net worths with some interest in the area. Over time, they might be more funds that just want to diversify or they recognize that this is a boom area. So would we take money from a non-purpose driven LP? Yeah, of course we would because we could still deploy it into purpose. Would we invest in a non-purpose driven founder? No, not ever. Never, never, never. But we ran that whole pyramid event because we knew that those people were interested and yet wouldn't have the purview that we... So it was not a sales event.

37:02It was an informational event. And we're now sitting and we're wrestling with, as we started this fund, thinking that it would attract purpose-driven entrepreneurs, not just people who want to get rich. Isn't that great? Because we're purpose-driven, we want to play in that field. This is terrific. And it does. But now we're seeing something different. And we're seeing, because now this is becoming a mainstream thing, we're seeing funds that aren't purpose-driven go, oh my goodness, I better get into health tech. Or even more importantly and dangerously, we're seeing people again, I don't know how much of this you'll want to use, but we see people like Brian Johnson who said, it's just about me.

37:41This is for me. I want to live long. It's about me. Then there's a Netflix documentary. Now he's selling stuff. The stuff he's selling doesn't work. It's junk science and it's overpriced. We see people like David Sinclair, no kidding, eminent Harvard longevity researcher, for real, real scientist, chairing longevity bonds and groups and forums, who one day decides that he'd rather sell dog food that claims to de-age your pets. So his colleagues lambast him. He's forced to resign his chairmanships. But my running joke is he's worth 100 million pounds and they still live in campus housing. So when we think about our mission, we see a massive mission, not just for our LPs and not just for our founders, but for the world to educate.

38:30Because we see more and more people. Tony Robbins, world-famous self-help guru, regardless of what you think about his, you know, have 10 ,000 people and have a few people walk around hot coals to show the power of the mind, has now launched health and wellness companies. These people don't know anything about health and wellness. There are 1 ,000 companies selling a stack of supplements. They cost 50 cents if you make them yourselves for$25, promising you'll never have a bad night's sleep again. The subject of education, of helping separate junk science from real science. And how do you square this mission and mission with being a VC firm?

39:07Ideally, we want to separate the science from the fiction. So we are dairy science-driven ourselves in our own backgrounds, as well as the team that we hired when a person is a PhD pharmacology and one of our advisors is a warned renowned medical doctor geneticist that co-founded a company in gene therapy. Another one is a PhD in machine learning. So we want to bring science and data into this world through the investments we make and all our investments therefore are rooted into this. That's one of the reasons for example we don't invest in supplements. We're users ourselves, right? But we prefer investing in things that do have the proper, proper foundation.

39:52Well, and it can win though, right? The issue for us isn't knowing which supplements work. On some supplements, there is real evidence. But because the claims that get made by the people selling them are unregulated, it's not at all clear that the best product wins. So we think they're hard to invest in. I have no problem telling a friend what I think they should or shouldn't take and why and trying to separate for them science and fiction or to tell our LBs that. We have a view that part of our role is going to be going forward, not only investing in the good guys, attracting the good guys, but calling bullshit on the bad guys.

40:28That's a weird thing to say because that's not what funds do, but it is what mission-driven business people do. I think we're in the process of thinking about how you do that. All of those scientists that that wrote nasty letters to David Sinclair and forced him to resign, they have no voice that the public hears. The publicist hears the dog food company. This guy in a Harvard coat stands up and says, you love your dog, don't you? I can de-age him. That's$50, please. So they work it over and nothing happens. But we want to give voice to the real science. So we're in the process of thinking, how do we, along with the funds, how do we educate?

41:06How do we give voice to the... We can't be the only good guys. There are plenty of good guys out there. There are good scientists. There are good entrepreneurs. There are good government officials. There are good regulators. How do we congeal those people and say, there's real progress happening in the world. We can change the way that health is dealt with. We can help people stay well. When they do get sick, which they still will, we can find it much earlier so that we can treat it and cure it. We can develop new therapeutics. Magic can happen in the way that we treat health. Unless we let the whole thing get hijacked by charlatans because it's complicated and it's scary and the consumer left to his or her own devices is going to be hard pressed to navigate it right we we one of our presentations we complained about the old system that hippocrates gave us of wait till you're sick and then go to the doctor well this year we're going to do an update tonight we're going to say remember we'd be up on hippocrates a little bit and we said you know he gave us this system where we don't think about staying well and we think about the mind body is separate this year we're going to say you know we've had a little rethink in the last year.

42:07He also gave us this thing called the Hippocratic Oat. So your doctor might not be as smart as the AI machine, but your doctor is trying his best to sell you the right thing. I use a silly analogy. I go to my doctor and I say, doc, my chest hurts. I'll pay you a million dollars to do open art surgery. And the doctor knows I have acid reflux. 99.99 % of doctors won't do that surgery. In every other industry, they will. In every other industry, if a consumer goes in and offers them a bunch of money to do the wrong thing, I'm a banker, I'm an airline, I'm a whatever, I'll do it. And I'll say, well, I just sold the consumer what he wanted.

42:44And their wellness revolution led by commercial private businesses doesn't have the Hippocratic Code. I was about to ask exactly that is what you're saying here, that you're finding that we have maybe air too much to the purely private side when it comes to solutions to the current health crisis, and we need to find faster pathways into those that actually have taken the Hippocratic Oath? We remain open on this question, because I don't think that the existing system can be repurposed, right? I mean, rarely does the incumbent system make a jump across the divide, right? Blockbuster didn't become Netflix, Citibank didn't become Capital One, you know, and so on and so forth.

43:28So, yes, I think we should work with the existing system, but I believe that there's going to be a lot of private delivery. And so somehow we need to make sure that those private deliverers are not acting out of greedy self-interest. I mean, there needs to be regulation. We think government must be about it. I'll use a simple example. We've known for 75 years that smoking kills people. So at first we thought if we just tell them so, they'll probably stop smoking. So we said, stop smoking. It's killing you. And people smoked more. We said, maybe we're not telling them harshly enough. Let's put a picture of some diseased lungs on a package.

44:02Maybe then they'll stop smoking. So we did. Well, they smoked more. And we said, well, okay, let's pack shit. So we taxed them. And people who can't afford to buy their kids birthday presents smoked more. And people didn't stop smoking because smoking is a habit. It's addictive. And it's instant gratification. And lung cancer is later. So people didn't stop smoking until the government stepped in and said, you can't smoke in your workplace. You can't smoke in public spaces. You can't smoke in the car with your child. And then smoking started to decline. So I think it's this complicated public, private, governmental circle that somehow we need to, and we want to help figure out how to organize so that the science can progress for real because the existing system won't progress.

44:46It doesn't have the resources, the money. The science is coming from pride. But it won't be delivered by people who are more concerned with getting rich than whether they're really de-aging your pet or not. And I think that we're early in this revolution, so we're not quite sure exactly how to play, except we know that that matters to us. And we know that just investing in the good guys isn't enough. We need to find some way to get governments involved, to get all the good guys, to give them a voice, to educate consumers. And that's not going to just happen by finding the investors and finding companies and sticking them together, it, which is what these cheese do.

45:25That's not a non-funding. We could comfort ourselves and say, we only invest in the good guys, but somebody else is funding Tony Robbins and Brian Johnson and David Siegler. And we want to scream about that. Andres, we trust that you will edit certain parts of this interview at a certain year before. No, we're going to put Darth Vader voices on some of the naming and shaming here. We are doing a presentation. I'm sure you've been invited in April. It's going to be our update. Last year was the health and wellness pyramid. This year, we're going to talk about that. We're going to remind people about that.

46:00But we also, I mean, the revolutionary books, we're going to start talking more this year about early diagnosis, not just staying well, but you can't stay well forever, right? You're going to get cancer or dementia. So get it found out early. So we're going to talk a lot more about early screening and stuff. And we're going to talk about this. And that's our analogy. Paolo talked about separating science from fiction. I'm a science fiction fan and I love pop culture. So we're going to do a lot of Darth Vader versus Luke Skywalker. We're going to do a lot of, you know, you know, this can be like lots of things can be a force for good or it, right?

46:30I mean, a lot of people are going to get rich. Well, okay. I'm, I'm good with that. I'm a capitalist. As long as they're guys who are going to get rich for doing good stuff in the world, adding value, right? I mean, we live in a capitalist world. That's fine with me. Yeah. And I think that, that exactly is hugely important when you're acting in this space. Gentlemen, we could have gone on and on and on, but now we're up on time. We will do more episodes together. I'm super happy. We will do one as a follow-up to this one, where we dive specifically into exceptional ventures from a more usual pitch concept style conversation.

47:06And I look forward to that because you've got so many ambitions and visions, and I'm looking forward to see how you bring it all into one fund and show that to everyone. So are we. I mean, you know, and this whole subject of how do you do more than the investment side? Are you familiar with WITCH in the UK, the consumer advocacy group that evaluates products and services? I was on the board of WITCH a few years ago. I had dinner the other night with the guy who was the CEO there when I was there. He's unusually commercial for a guy in that field. He was a McKinsey partner. He was at Unilever. And we're talking about this whole issue of how do you steer this revolution in science and technology and wellness toward the toward the good side we've talked about do you set up a foundation a not-for-profit is it part of us or are we one of many sponsors do we coordinate all the good guys so that those people that hate david sinclair have a voice together instead of just writing a letter that nobody reads so we don't we don't know how to do it but but but i think what since last year one of our big realizations has been left to itself.

48:08It started as purpose-driven, and then a bunch of the other guys went, ah, if I want to get rich, it's not FinTech anymore. It's health tech. Okay, good. And the consumer is desperate, and science is complex, so I can lie, and I can tell stuff. I mean, I'm being extreme, but that's what we see. We see ridiculous junk science claims. We see things that are 50 times the price they should be, and we look at this, we can't let this happened. And we don't know yet what our role in that is and who we want to help us. But we know that it's not enough just to do what we started out doing, which would say, let's find investors who care and the best purpose-driven entrepreneurs.

48:45It's like one piece of this thing. And the next episode, I definitely would love to explore more of these from our side. And also, we'd love to know more about your journey into bodybuilding, because I know you're picking up or you're picking up or don't? So you're going to have a discussion. I'm picking up. I'm 76 kilos now. I'm hoping, and I'm 35. I just turned 35 a few days ago. So I'm hoping by my 40th birthday, I'll be 92 again, which I'm not sure whether I can make. You know, I wish that there was a way. So I was a very skinny little kid, introduced to the gym very late. And when I started, I just wanted to be bigger.

49:23So I used to read all the bodybuilding magazines in the late 80s. Never happened. never was going to happen. Now I'm old and fat. So if I could give you 10 kilograms, you can have it. It just wouldn't be what you want. We had Arnold Schwarzenegger, a bunch of Arnold Schwarzenegger clips in our video last year. Yeah. Well, I love that guy. Anyone who hasn't seen Pumping Iron should definitely go and watch it. It's great entertainment. A million times. A million times. And Andres, look, one of these, frankly, look, this all works in two ways. So offline, from the podcast, we're trying to figure out how one steers this in the right direction, how one protects the consumer and the world and makes it a better place and makes the real science trump the fake science, makes the purpose-driven guys trump the greedy guys.

50:12And we're talking to anybody we can talk to, to figure out how to tell the story, access the government, access the science. Peter is on the board of the British Medical Journal, the guy from which. We're talking about whether they, I mean, they mostly speak to doctors, but would they do an issue on the state of wellness in the world? What's real and what, you know, we don't know how to do this yet. So we're, we're not ready to tell the world how we're going to do it. We're in a learning phase. I mean, we've talked about why we think we're the best DC and why we think this matters, but you know, we could have an offline conversation and we'd love to pick your brain and say, okay, you know, how would you steer this in the right direction?

50:48That is an open invitation for everyone listening in as well. I am sure. Gentlemen, thank you so much for joining me. Wonderful. Thank you so much, and brothers, great to see you.