Behind the Scenes at an Impact-First VC Fund

Intro 00:01
Welcome to Startup Success, the podcast for startup founders and investors. Here, you’ll find stories of success from others in the trenches as they work to scale some of the fastest growing startups in the world, stories that will help you in your own journey. Startup Success starts now.

Kate 00:18
Welcome to Startup Success. Today, we have Stasia Obremskey in studio, who is the co-founder and managing general partner of RH Capital. Welcome.

Stasia 00:30
Thank you. Lovely to be here.

Kate 00:31
Thanks for joining us to get started. We’d love to learn a little bit more about RH Capital. You have an interesting premise. If you wouldn’t mind walking us through it and the founding, that would be really interesting.

Stasia 00:45
Sure, happy to so RH Capital is a venture fund focused on investing in innovations in women’s health, and in particular within women’s health, we have a particular focus on reproductive health. So that means maternal health, ways to improve maternal health outcomes, contraceptive technologies and access has been a focus. And then this other bucket, which we call other high impact areas of reproductive health, and that can include the many areas where there are still unmet needs that women are looking for solutions for – for anything from ovarian cancer diagnostics to a home-based STI test to, you know, we’ve looked at opportunities in the urinary incontinence space, which, again, many women suffer from some form of urinary incontinence around menopause. Those are just some of the topic areas in which we are looking for innovation to really improve the health and well-being of women. And I would say we’re particularly interested in solutions which address the needs of marginalized communities, so women who often had a difficult time accessing care for a variety of reasons, and so that’s a lens that we use when we’re screening companies and looking at deals.

Kate 01:57
That’s great. I mean, as a woman myself, I can appreciate what you’re doing. I actually see a product I love behind you – Cora. So it’s not one of your companies.

Stasia 02:09
Wow, good eyes. That is not one of our companies. That’s a direct-to-consumer.

Kate 02:15
Okay, right? They are direct-to-consumer, yeah.

Stasia 02:18
Typically, because we are an impact-first fund which means when we’re looking at investments, we’re screening for companies which are addressing truly transformative innovation, not just incremental change, but a total paradigm shift or a new standard of care. We’re looking for companies which address access issues. So perhaps providing rural communities or underserved communities, with solutions. Affordability: so we like products that are reimbursed by payers, whether it’s a private payer, commercial insurer or Medicaid payer. And then lastly, we like companies or solutions which address systemic bias, which we know exists in the healthcare sector around both gender and race. So we have looked at a number of DTC Products and and it’s not to say that we haven’t invested in them. We have, but we like to see them on a path towards reimbursed. So maybe the first iteration of the product is DTC, but with the ultimate objective of being a FDA approved product / service that would then qualify for reimbursement.

Kate 03:20
Those are some really impressive objectives. I mean, it’s taking what you’re doing around women’s health to the next level. So if you wouldn’t mind walking us through the founding of a fund like this, because we don’t have a lot of VC firms and investors on here with that with those kind of goals in mind. So it’s great to hear.

Stasia 03:43
Yeah, so we have a great founding story. We are a startup venture fund. We have been around, I guess, about five years now. So we’re out of the incubator early stage. My partner, Elizabeth Bailey, who’s based in Boston, and I met about five years ago through a variety of circumstances. I and some of my other colleagues are based here in San Francisco. And I had partnered connected with a woman named Ruth Shaber. Ruth is an OB-GYN by training. Had a long, illustrious career as a clinician and as an executive at Kaiser. She had the good fortune to become a philanthropist, and had started a foundation called the Tara Health Foundation to use grant funding to try to address some of the issues around reproductive health in the US. And she likes to tell a story that as much money as she thought she had to give away, she realized the problems that she was addressing required much more capital than she had, so she went out to try to collectively and collaboratively invest with other like-minded philanthropists. And she also realized that while grant funding was good for some kinds of organizations, what was really needed was equity and loan and maybe even blended capital to address the entire spectrum of needs within the reproductive health space. So innovation, as we know, is often get started by entrepreneurs and venture capitalists who step in early to provide equity capital to fund those ideas. And she really saw a dearth of that kind of capital in this space. And so her vision was to help stand up a venture fund that, again, could complement the grant-making that she was doing, but under a different entity. And so Elizabeth and I joined forces to start RH capital, which would really be that vehicle to deploy equity against, you know, startups working on innovations in the space,

Kate 05:33
That is a great story. So five years, can you share an investment or two with us as an example?

Stasia 05:41
So we have 19 companies in our portfolio now, 20 and maybe 21 soon. And I always like to say, you know, like your children, you don’t have a favorite one. They’re all your favorite. Which is true. We invest across all healthcare segments. So unlike a lot of women’s health funds, we will do Life Sciences, which means we’ll do therapeutics, devices, diagnostics. We also do digital and service. as well. So we have a pretty broad, you know, segment focus. I think it’s because we invest pretty narrowly right now within reproductive health that we felt like we had to invest broadly across the healthcare sectors. So I’ve spent a lot of time investing in the contraceptive space, both around access and also around new technologies, and our focus has been on non-hormonal male and female methods. And so we have a great company out of so – I’ll talk about all three of them because I love them. And they’re very different, but we think they hit very important product-market-fits across the contraceptive spectrum, and we know that not one method of contraceptive works for women and men across their entire lifecycle, so we do feel like you need a menu of options. And so one company, which is one of our first investments, which we actually through the Tara Health Foundation made a grant in first, and then we made an equity investment through the fund, is a company called Circle Biomedical. And Circle is working on a on-demand female-controlled, non-hormonal contraceptive, and it uses the natural barrier properties of cervical mucus to form a barrier to prevent the sperm from getting into the upper areas of the reproductive track. This was a team – the science came out of a Swedish research institute, and the entrepreneur was based in Denmark. And they teamed up, and for the last, again, five years, have been doing a whole range of preclinical and animal studies to demonstrate this proof of concept, and they have really compelling data. And actually partnered a year ago, a little over a year ago, with Organon, who again, was looking to add a new product to their portfolio, and they signed a licensing and development agreement with Organon. And so the last year, Circle has been working very closely with the Organon team to continue this work. And, you know, excited to say that I think that work will continue on to the next phase. So that’s an idea, that’s an example where, you know, again, we invested very early, have seen that company form what could be a very valuable partnership, and continue on that development track with that drug. And again, that product is specifically for women. It would be again, it will go through the FDA, it will be reimbursed by payers ultimately. We’re equal opportunity, so we’ve also invested in two companies working on male methods. One is a company called Your Choice Therapeutics, which is based here in the Bay Area. And it’s working on an oral pill for men, which stops spermatogenesis, that’s the process that occurs in the testes to make sperm. And they have targeted and found a drug that shuts that off temporarily. So as long as you’re taking the drug, the sperm factory closes down. It takes about 30 to 60 days for the sperm factory to shut down. It’s dormant, and then, you know, as long as the man continues to take the medicine, they remain not fertile, because they’re not making sperm. This just start entered the clinic just late last year in phase one trial. So first step is always safety. Second step is efficacy. We have another company, a company called Contraline, that’s working on a male method, which is the best way I can describe it. It’s a plug that goes in the vas deferens. It’s a hydrogel that gets put in the vas deferens, which is the tube that carries the sperm, you know, to its ultimate endpoint. And this is like a little dam that goes in there, and it lets the lets fluid through, but it blocks the sperm. It is also in the clinic. It is gone through early pivotal trials in Australia, and has has passed all the safety mechanisms. And the nice thing about working in male methods is, unlike females, you can get a quick read about whether it’s working or not, because you can do a quick sperm check, right? Is there sperm or not? If you’re then it’s working as a contraceptive. Where, with women, you often have to give the product over a number of monthly cycles to say, did they get pregnant or not? So it is a little more efficient. And I think you get some data earlier, when you’re doing the trials in men, just because of the biology of men and women. So those are the three companies that I’m really excited about on the contraceptive side. If you have any more questions about that, I’m happy to talk about any other studies in the portfolio.

Kate 10:34
Yeah, no, that’s fascinating. And, gosh, I mean, so interesting, that this is where they’ve come with contraception. I mean, it’s pretty exciting. I’m sure you feel that way.

Stasia 10:46
Yeah, I think you know particularly to both post-Dobbs world, prevention and improving health outcomes really have got to be a priority for any person, any state, regardless of color that you live in. We should all be united around those themes. Okay, we don’t want to have unattended pregnancies. How do we double down on prevention, and education? And then, if we have a pregnancy, how do we double down on making sure that that mother and that baby have a safe and a good outcome of that pregnancy? So that’s always been the focus of our funs pre and post-Dobbs, but we really think that those themes are even more important now.

Kate 11:23
Really well said there. Can’t see how there would be anyone listening who would disagree with that. You have a really interesting investment thesis that you shared with us. In those areas, what excites you and makes you want to do an investment? Is it the founding team? You know, like you know beyond what you talked about, you see where I’m getting at.

Stasia 11:47
(11:28- 12:09) So I think that the thing that gets us really excited is when we find what we call a white space where we know there’s a problem, we know a lot of women suffer from it. Sometimes that suffering is done in silence. And one of my favorite areas right now is in the endometriosis space, where one in 10 women suffer from endometriosis. It takes seven to 10 years to diagnose. It presents in a very general way of pelvic pain. For some women, that pain is dismissed by the providers as like it’s in your head. It can’t be that bad. Every woman has to deal with it. Suck it up. So we know, you know that it is. It’s a very difficult condition to first and foremost, diagnose, and then, currently, there are no real long-term treatments that address both pain reduction and disease amelioration. So how do you actually reduce the burden of the disease as well as reduce the pain? And so we spend a lot of time looking at this space. Again, because what gets us so excited is that we think a solution will have incredible uptake in the medical community. And so, we’ll have good commercial outcomes, but will also be such a game changer for women who suffer from endometriosis. And you know, at the end of the day, if what you’re doing is it really helping patients in the end, you know, what’s the point? And I guess in this one, there’s just a such a clear win-win, where the systems cost of diagnosing and then treating women sooner, you know, again, both on the direct and indirect costs of regaining quality of life and health for those women is so large. And then for the women themselves, their quality of life and their ability to to not have to spend three to seven days a month in excruciating pain because of this chronic condition.

Kate 13:37
Yeah, I like the terminology that you refer to that, and I can see what you’re talking about that, you know, that’s, that’s a big problem that I think people downplay, because it’s invisible.

Stasia 13:52
Yes, even clinicians, you know, like, you come in four months in a row in pain, and they’ve tried – they put you on the birth control pill, they gave you non steroidal anti-inflammatories. They, you know, they don’t exactly know what’s going on. Maybe they’ll refer for you to imaging. But in a disease like endometriosis right now, the definitive diagnosis is for you to have laparoscopic surgery, which is incredibly invasive, and for the doctor to actually see the lesions that are outside your uterus, and then sample them and biopsy them. And, obviously, that’s expensive. I think the average cost of laparoscopic surgery is something like $17,000. It’s incredibly invasive. And so it’s just, it’s a silent disease. And again, because of the role that women have played, it’s often these which hasn’t had a voice or hasn’t been heard. And so I’m excited about that, because I think it just has the potential to it could really be a transformative innovation, which is something we’re really looking for.

Kate 14:53
I can see why. And then you had also mentioned about accessibility, which I’ve never on this show. We’re getting close to the 100th episode, and we heard investors or funds talk about. Are there good grounds being made there?

Stasia 15:10
I think the best example of that is when you think about the maternal health market. Half of all births in the US are paid for by Medicaid. So just think about that. 4 million births in the US every year. Half of those are paid for by Medicaid, and that’s because, regardless of whether you hit Medicaid eligibility in your state, if you become pregnant and you meet the Means Test, you automatically qualify for Medicaid. So that means, if you’re a company providing a solution to the maternal health market, and you’re not thinking about how your business model can be adapted or used by 50% of the market. You’re limiting, I think, your commercial upside. So I’ll give you an example of a company in our portfolio called Seven Starling. So postpartum depression is again, one of those silent suffering indications that women, often alone, suffer from and both during pregnancy and then immediately postpartum. And so Seven Starling has a model of working with OB GYNs, and actually, when you go for your six week postpartum OBGYN visit, the standard of care is that your OB should do a mental health screen for you. But so often those aren’t done because if they do the screen and it turns out you’ve got a problem, they don’t have any solution for you. They don’t like prescribing meds. They could refer you out to a therapist, but you know if your insurance company covers it. So Seven Starling has developed a product, which is a group therapy model. They market to OB GYNs, who say you should do that screening, and if your patient screens positive, you should send them to us. And we can provide a therapeutic solution for them both talk therapy and if they need it, meds. And all of a sudden, you provided a solution for a doctor who is like afraid to ask those questions because they’re outside their comfort zone. So it turns out that new mothers who are suffering from depression actually like being with other new mothers, because it’s often lonely and isolating. And being in a group setting with the with the trained therapist helping them work through some of their feelings and their hormonal imbalances, and hearing what other women’s experiences are, is very reassuring and very reinforcing. And if someone needs one-on-one therapy. There’s that option. If they need to be referred to psychiatrists, there’s that option. But Seven Starlings has developed this business model, right and a cost unit, unit economics, a cost structure, which means that it can sell to both commercial payers and to Medicaid payers. And so they started out in the commercial line of business, but with this group model, and they are now signing contracts with a lot of managed care organizations to manage Medicaid populations as well. And so we love that model, where from the beginning the company was thinking about not just half the market, but the entire market, and building a business model which would work for both markets. And, you know, again, unmet need, often a silent suffering. And you know, they’ve been around for about 18 months, so they’ve got some good outcomes data, which says this has really made a difference in these women’s lives.

Kate 18:34
It’s a great example. You’re making me feel more optimistic about a lot of these things that women go through. So that’s great. You all must feel that way too. We’re actually coming up on time. There’s so many questions I could ask you more about your portfolio, but we always wrap up the show, just to make it a little more general for all those founders listening. Any advice for them as they go through this journey of ups and downs.

Stasia 19:02
Yeah. So it’s hard work being a founder, particularly in this particular time and market you know, where fundraising is a challenge for everyone – for venture funds trying to raise their next rounds, for startup companies. I would say my best piece of advice is: Cash is king. And I came from a CFO background. And so whatever resources you are working with, just make sure it is the highest and best use. And that you have a clear path of how you can get with what you have to an important milestone, which you can then use to go out and raise your next round of funding. Because that is the cycle in the VC market, right? Like we gave you a little money, what did you do with it? Did you get to a value inflection point which now you can go out and raise more money. And just every single penny you spend needs to be accounted for and needs to be highest and best use, because money is hard to come by.

Kate 20:00
Yeah, wow. It’s almost like we planted your answer because the sponsor of the show is a CFO consulting firm for startups, so great answer. I mean, yes, that’s what we tell our clients, right? That cash runway is everything, and that’s what gets you to next round.

Stasia 20:16
I would say, listen to your CFO. They’re going to question every decision you’re going to make. That’s their job. And be incredibly thoughtful about every penny you spend.

Kate 20:27
Great advice, and also, thank you as a woman. And it is so great that that you all are doing this. It’s very exciting that this is your thesis, and you came together to, you know, invest this way. For those listening that want to learn more about RH Capital, where did they go?

Stasia 20:44
So we have a website, RHCapital.VC, I think, is the site address. We have a Pitch Us form. And if you think you have a company which meets our impact criteria and is squarely in our investment focus, please pitch us. We’d love to hear about new companies and always interested in new, great ideas.

Kate 21:03
Great. Thank you so much for your time today, it was fascinating. Thank you.

Intro 21:07
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