A Look at Emerging Healthcare Innovations From a Veteran Investor- Gurdane Bhutani, Managing Partner & Co-Founder at MBX Capital

Shiv Gaglani: Hi, I'm Shiv Gaglani, and today I'm delighted to welcome Gurdane Bhutani to Raise the Line. He's the co-founder and managing partner of MBX Capital, a venture capital partnership focused on emerging companies pursuing critical challenges in public health, including vaccine development, health system infrastructure and disease surveillance

among many others. 

Previously, Gurdane was the COO of FundRx -- a healthcare and life sciences investment marketplace -- and worked with private equity and corporate clients at Bain & Company and in public finance at Morgan Stanley. He has been an instructor on healthcare finance at the Cleveland Clinic Lerner College of Medicine and guest lecturer in the Wharton School's

Healthcare Management Program. 

He's also a personal friend. I first met Gurdane probably half a decade ago in New York, and he and another friend of ours, Zeshan Muhammedi -- his partner at FundRx and now MBX Capital -- were early investors in Osmosis back when we probably had less than 100,000 registered users, and now we have over three million. So, I'm personally grateful to him for believing in us from an early time, and it's been exciting to see how he's grown the fund since then. 

So, Gurdane, welcome to Raise the Line. 

Gurdane Bhutani: Well, thanks so much, Shiv, and right back at you, man. I think I actually still have all of the Osmosis swag on my desk right now. It was really a pleasure to work with you as an investor. We learned so much from you in terms of how you built the company and the community around Osmosis, which I think is so powerful and continues to be a really incredible resource for learners today. 

Shiv Gaglani: Thanks so much, and if you have all the swag on your desk, I don't know how you have any space for a laptop or anything else because I know we've sent a lot of swag over the years. So, obviously I gave quite a bio intro for you, but we like to ask our guests to describe in their own words some of their career highlights, and what got you interested in investing in health companies to start? 

Gurdane Bhutani: Yeah. So look, I think it's truly a privilege to get to work in and around healthcare. I studied healthcare policy in undergrad, and I was particularly motivated by comparative health systems work. I grew up between India and the United States. It was always fascinating to me to understand how do societies think about delivering care to those that need it most, and what are societies capable of and governments capable of in doing that? 

That experience spawned this interest in healthcare for me. I started my career out of undergrad as a musician very briefly. I realized I didn't have the talent to survive in the New York music scene, and so ultimately went and got “a real job” at Bain & Company. I learned a ton at Bain, but knew I wanted to ultimately leave to build something in healthcare, and that led to the formation of FundRx. The goal with FundRx was really to catalyze innovation that was coming out of some of the greatest labs and universities around the country that historically would get stuck in the kind of arcane tech transfer processes that many of these institutions have. 

So, the opportunity set for scientist-led companies in 2015 when we started FundRx was

there was a handful of very large venture funds that they could work with that would essentially buy their IP and build their companies for them. It was very challenging as a scientist if you wanted to leave your institution and go and start your own enterprise to go and do that.

Where we tried to focus at FundRx was how can we get great innovation that would otherwise be trapped in academia out into a commercial setting where hopefully it can reach patients more quickly? We did that over the course of several years there, and then ultimately launched MBX Capital where we have scaled our ability to invest in companies going after big public health challenges. 

Shiv Gaglani: Yeah, it's been quite an amazing journey. Before we get into MBX, one of the things that was unique about FundRx -- at least from the perspective I was sitting in as an entrepreneur founder -- was this community that you built of many physicians, including Veronica Diaz, an orthopedic surgeon, and Jordan Grable, a neurosurgeon, both in Florida. They were early investors and advisors in Osmosis through FundRx. Do you want to comment a bit about that? Because many of our audience are current or future healthcare professionals, some of whom are looking to diversify their asset classes as well, and certainly through FundRx, many of them have.

Gurdane Bhutani: Yeah, absolutely. That's a great point. So, one of the things that we identified early on in building FundRx was that many investors would run into a lot of difficulty investing in healthcare companies and in life sciences companies because the level of domain knowledge that's required to make investments in this space is incredibly high. Frankly, even if you are yourself a domain expert you likely know a heck of a lot about the area of healthcare or biotech that you work in yourself, but other segments of the industry may be opaque to you due to the complexity of this field. 

So, the idea we had at FundRx was if we build a community of like-minded domain experts, physicians, scientists, who themselves know a ton about their own area of this industry,

they could collaborate with us in order to identify really high-quality companies and support those companies effectively. The thread here is, of course, let's help people invest in what they know, but do it in collaboration with other people that also know enough about a segment of the business to be really high value. 

Shiv Gaglani: Yeah, it's definitely an awesome strategy and one empirically that we benefited from at Osmosis. So let's get into MBX. Talk about the fund and what your main theses are from a macro perspective.

Gurdane Bhutani: Yeah, absolutely. At MBX Capital, we invest in early-stage companies focused on big public health problems. We are fairly agnostic to how a company goes after a particular public health challenge, so our portfolio includes companies that are services companies, software companies, biotech companies and life science tools companies. But the unifying theme across our portfolio is that whatever a company is building can make a population level health impact, and for us, that means that what they're doing is going to lead to innovation that is ultimately accessible to huge portions of the global population. 

When we think about the areas within that sort of lens that we should focus on, we try to apply this framework of looking at disease areas that are large in their burden but, on a relative basis, underfunded. For instance, if you look at where biotech venture capital dollars go in general, the majority of those dollars end up in immuno-oncology companies. Now, that's not to say that's not an important area. It absolutely is. But on a relative basis in terms of the disease burden, it's actually overfunded. 

On the other hand, cardiometabolic disorders are underfunded on a relative basis and so that's an area where we want to spend more time. As we think about what can an investor do to be as useful as possible, I think it's ultimately a question of focusing on those problem sets that actually really need your capital today, and so we try to apply that as much as possible. 

Now, thematically, with those lenses in mind, there's a few areas that we're excited about right now. One is the field of the exposome. The idea here is that we have great tools to understand our genetics today, but we have, frankly, relatively mediocre tools to understand our

environmental exposures over our lifetime and the effect of those exposures on our biology and on our health. In fact, the majority of disease pathogenesis today is environmental in nature, not genetic. So, we're looking at tools companies that are developing essentially exposomic sequencing technologies that help us better understand these environmental exposures. 

The second area of interest for us is biosecurity and biodefense. I think the pandemic's revealed to all of us how important that is and certainly, as we enter an era of more multipolarity,

we do think bio threats will become something that we need to be very mindful of. So, there's a lot of interest in the defense space around making sure that we protect ourselves from biological threats. 

Then finally, the third area for us that's most important is healthcare infrastructure. We see providers getting burned out all the time by the immense amount of administrative load that they have to carry today. We want to invest in companies that are enabling our providers to spend their time doing the work that they love doing and are great at doing, and spend less of their time on things that, you know, aren't necessarily the most engaging for them. 

Shiv Gaglani: Yeah, those are some obviously incredible themes and safe bets, I think, for what society needs, but also hopefully safe bets for your limited partners, investors, and founders that you're backing. Because just in the exposome, we know the way climate change is going and wildfires and pollution... all these different things. There's a lot more public interest in this space, even though I think a lot of our audience probably have not heard that term before, exposome. I think it’s pretty cool how you guys are creating or helping create this category.

So, let's dive into a couple of specific companies within each of those three things you've invested in that you're really proud of or excited about within those categories, or other categories. 

Gurdane Bhutani: Yeah. So there's over 50,000 chemicals in use in the United States that have been grandfathered into our existing regulatory regime. For new chemical products -- pesticides, et cetera -- you have to go through an EPA process in order to be approved and ultimately used in this country. But there's a huge number of chemicals that are legacy chemicals that in some format are still in use today that really have never had an in-depth toxicological testing. 

As a result of that, we're exposing ourselves to potentially hazardous compounds all the time. We just don't know what's necessarily having the biggest impact. And the problem with the typical chemical testing paradigm is that you have to perform animal experiments to understand the toxicological effect of a particular chemical, and at that level of scale, it's just not feasible. It would require a huge amount of capital, time, number of animals, et cetera. It's just sort of not a realistic thing to do. 

So, one of the companies that we've most recently invested in is a company called Vivodyne, which is a spin out from the University of Pennsylvania, and they're developing high throughput human-relevant tissue models that can be used for a wide variety of purposes, one of which is testing environmental contaminants and environmental chemicals. You can do this on a tissue-level scale in models that are more relevant to humans than a typical animal model might be. 

The power of this is that hopefully we'll be able to not only better understand what our existing chemical exposures are, but as new chemicals are developed, to test that in a more safe and effective way. And of course, it has applications in drug discovery as well. So, that's one that we're really excited about within the theme of the exposome. 

Shiv Gaglani: Fascinating. Part of what I'm hoping the audience gets out of having someone like you on the podcast is many of them are interested not only in maybe potentially wearing the operator hats at companies or investor hats in healthcare VC, but just things for their patients and their families to be aware of as potential users, or beta testers of the product. I'm sure a lot of the companies I know you've invested in, including ours, have had chief medical officers or other medical personnel who become directors. So, looking at your portfolio, hopefully they get some interesting ideas. How about two other examples from maybe healthcare infrastructure as well? 

Gurdane Bhutani: Absolutely. So on the healthcare infrastructure side, a company that we're really excited to work with and have been very lucky to work with is a company called CareRev. which is building what I think will become, and in many ways already is, the de facto platform for nurses to find jobs within health systems that compensate them fairly, that give them flexibility over their schedule, and ultimately give them a community that is really high value to them as well. 

The way that CareRev approaches this is they partner with health systems in order to create a marketplace of jobs for nursing staff based on their particular skills. So a nurse that, for instance, is really great in the ICU can find shifts that are appropriate for them. Someone that might be wanting to work on the med-surg floor can do that as well. There's a lot of this sort of high-skill type of opportunities. But at the same time, nurses have the ability to control their schedules, pick the shifts that they want to work, and for those shifts that perhaps are harder to fill -- Friday night and overnight shifts -- they can get compensated more fairly as well. 

So, that's one that I think is really helping health systems on the one hand ensure that they have great patient-to-provider ratios at all times -- which has been a challenge throughout the pandemic and afterwards -- as well as giving providers a way to work that is more flexible and engaging to them. 

Another company on the health infrastructure side that we're really lucky to work with is

called Eva Technologies. This is a company based in Mexico City, and they're building a radiology PACS (Picture Archiving and Communication System) and LIMS (Laboratory Information Management System) specifically focused on emerging markets around the world. The challenge that we've seen in emerging markets is that a lot of the Gen 1 healthcare technology that's in use in the United States and Europe isn't really a great fit for these regions. 

So, it's simple things like, if you want to go put a Philips imaging system in, it has to be on-premises. It's going to be really expensive. It's not going to be cloud-based or the pricing won't be affordable for the vast majority of the region. It's also going to be built in a way that's compliant with the US regulatory environment. 

As an example, in Mexico, many patients like to interact over WhatsApp instead of email. Through the Eva system, you can send a report to a patient via WhatsApp. You can never imagine doing that in the US, but it's super high value in that region. So, they've quickly become one of the biggest providers of PAC software in the region and are growing really quickly. 

Shiv Gaglani: Yeah, super interesting. Very cool example of being translational. How something developed in the US or Europe needs this layer of translation or localization to reach as many people as possible. 

Gurdane Bhutani: Exactly. 

Shiv Gaglani: So, one thing I've really enjoyed is you started writing a lot more about your views on the healthcare system, and on investing. Talk us through some of the content you're producing, why you're producing this content, and also maybe some of the hottest takes you've had that could be interesting that maybe got a lot of reactions from people, positive or negative. 

Gurdane Bhutani: Yeah. So, I made a comment recently that 99% of consumer health companies out there are just shuffling the cards and not really making structural improvements to the healthcare system. What I really meant by this was that if you look at a lot of what's happened in the healthcare venture world over the last few years, it's a lot of, “let's build a nicer looking doctor's office with fancy furniture. Let's create an easy-to-use app that looks nice and is simple, and let's get our doctors available to patients over Zoom, and by the way, we'll tack on a membership so patients can spend a little bit more time with their doctors as a result of that.” 

And yes, this patient experience is absolutely better. I personally had a great experience with a physician at One Medical, and I don't mean to specifically call them out...there's a lot of companies doing this. But at the end of the day, is that really a structural improvement to the healthcare system that goes after some of the biggest root cause problems that we have? I would argue that it's not. 

I think if you look at sort of some of the biggest root cause issues that we have, it's that we have a provider shortage, both physician level and nurse level. Those providers are increasingly dissatisfied with the way they are forced to work in our healthcare system, and they are the most important people in the system. Without them, we have massive challenges. 

The second biggest root cause problem I see is that patients often don't have access to

really high-quality care. The way that many of these companies are solving the ‘time spent with physician’ problem is they're tacking on these membership fees, which enables someone to have a thirty-minute visit instead of a fifteen-minute visit. The problem is the number of patients you can serve in that environment is naturally going to be smaller. There's still only one provider. So, at the end of the day, I think what we need to be able to do is enable one provider to actually serve more patients but do so by taking away the administrative labor and a lot of the other time that's being spent on non-clinical activities. 

We're really excited to partner with companies that are working on those kinds of problems that are sort of going to make these big structural changes versus ones that are focused on the patient experience. Not that it's not important, I just don't see it having a generational impact on how people receive care. 

Shiv Gaglani: Yeah. Yeah. That makes sense. What was the response to that post? I'm curious. 

Gurdane Bhutani: You know, what was interesting was that for a lot of people in companies focused on patient experience, I think it really resonated with them and they really agreed. I think there is a recognition that this is sort of true, even by folks that are working in the field. We've actually backed some companies that are focused on experience ourselves. So, I think people are awake to this, and I think what I'm excited about is I think the next few years of health tech are going to be really focused on these structural problems, because I think what people have realized is that actually even on a purely economic basis, just improving patient experience is not enough to produce great financial outcomes. Really, if you're thinking about it from a purely capitalist lens, the structural improvements are the ones that will, I think, be the best investments. 

Shiv Gaglani: Yeah, that was super interesting. I mean, there's so many parallels between the health care system and the education system where we've seen traditional brick and mortar universities sort of add on different programs, add on different amenities, add more administrators. As a result, maybe the student experience is better because they can do XYZ -- they have a world-class gym, they have people flown in, they go to Italy for study abroad -- but they tend to just increase costs, and so the structurally different educational systems have gotten a lot of traction. It's vocational training programs or it's flipped classrooms, online learning. So similarly, it seems, I think your prediction is hopefully going to be one that pans out. 

Gurdane Bhutani: I hope so. What you're saying resonates with me so completely. I went to Duke for undergrad, and I remember visiting about five years after I graduated. I went to go get a meal in the dining hall and that day, Mario Batali was preparing food for the students, which blew my mind. On the one hand, I can see how if you're a student there, that seems really cool. On the other hand, I would probably much prefer tuition dollars get spent on enabling larger financial aid pools and a larger student body so that more people can receive the world-class education that they offer rather than amenities like that. So, it completely resonates with me. 

Shiv Gaglani: Totally. I don't know if you're a fan of him, but you've probably heard of Scott Galloway, the Big Dog. 

Gurdane Bhutani: Yes. 

Shiv Gaglani: He speaks a lot about how these universities have just become luxury brands, essentially, as opposed to trying to educate as many people with world-class education, which is why Khan Academy and all these other companies have started. 

Gurdane Bhutani: And Osmosis. 

Shiv Gaglani: Osmosis, yeah. Thanks. One thing I love about talking to investors who are also operators -- and you're academic in nature, I mentioned some of the universities you're affiliated with -- is a lot of your job is making a few right decisions every year, and those decisions rely on in-depth research, literature reviews, and then on the ground talking to customers, talking to founders and teammates. I'm curious...one of the biggest trends, obviously, in the last couple of months is generative AI, large language models. What is your take on this? I'm sure you're going to be writing something about this soon if you haven't already.

Gurdane Bhutani: I think I'm going to wait to write something about this because I think the next six months are going to be really interesting, and the rate of change is so fast that I think anything I say today or write today will probably be wrong in a few months. One thing that I hope I won't be wrong about, and the way that we're thinking about the field, is ultimately that we believe data generators will be the organizations that create the most value. 

If you look at a large language model in general, the quality of that model is a function of the data that it's trained on, and if you look at the evolution from GPT3 to GPT4, there was, I think, almost a thousandfold increase in the size of the training set that they used, and it got better. But the rate of improvement slows down at some point. 

What's interesting, I think, is that these models are generally going to be open and available and integratable. You can engage with APIs to leverage some of these world-class models created by companies like OpenAI or Google's BARD and so forth, but they're not trained in a way that is purpose-built for a particular use case. 

So, I think in healthcare specifically, people that are producing proprietary data and can leverage these models off the shelf to train them on that data that's proprietary can create a ton of value. Where we're spending our time is, “Okay, what kinds of businesses can create net new data lakes and as a result benefit from the revolution that's happening right now in AI?”

Shiv Gaglani: Yeah, I think that's a great take, and also being vertically specialized, right? Because some of these generic LLMs, if you can train it with the right vertical data sets and get enough throughput from actual humans giving feedback on those outputs so you're training at scale, that seems to be the consensus view around where the value is going to be created, since there's a thousand new AI-type startups every month that are being generated and coming out.

Gurdane Bhutani: I think that's right. 

Shiv Gaglani: I'm sure you're being pitched by a number of them.

Gurdane Bhutani: We've invested in a few, yeah. 

Shiv Gaglani: Oh, cool. Awesome. I'm excited to watch that space. Going back to, you mentioned that investing theme two for MBX Capital was biosecurity. The reason we even launched this podcast three years ago and called it Raise the Line, is because of the pandemic. Not many people talk about COVID at this point, which is a good thing -- it means we've gone past it -- but we know there'll be another pandemic in the coming decades. So, I'm curious, what are some of the core lessons you think we've learned from COVID that you hope or you believe will stick with us moving forward?

Gurdane Bhutani: One lesson for me is that it's really easy to look back on 2020 and 2021 with sort of a critical eye, but with the wisdom of where we are now, if I look back on that period, I actually feel quite optimistic in the sense that, man, healthcare providers really stepped up. The biotech industry really stepped up...the pace at which a vaccine was developed, the pace at which we were able to launch a clinical response to the pandemic was pretty incredible. I don't think you could imagine that happening in any prior decade. And so I think that actually gives me a lot of optimism that, you know, we can hopefully do that again. We can hopefully rise to the occasion as a society. 

Now, of course, it's not without its conflict. There were tons of conflict, tons of things to be learned. I think one of them is that if we chronically underinvest in our public health infrastructure, that will have real consequences for all of us. It's really easy to say that I really just focus on my local community and making sure we have a great hospital in my backyard, and if the hospital fifty miles away or hundred miles away or in another state is not so good, that's okay. Or the public health infrastructure in that state is not so good, that's okay. I think what we learned is that actually it's a big problem for everyone when we make that kind of chronic underinvestment. 

So, what I hope will happen is that we as a society recognize that this is an area that is worthy of significant investment. If you think of it really as a defense investment, then why is this not a big chunk of our defense budget? If you think about the dollars we're spending on physical defense, you know, I think we ought to be spending meaningful dollars on biodefense as well. So, I think for me, that's probably the biggest lesson. 

Shiv Gaglani: Yeah, I agree. I agree with that. And that echoes what some other public health experts like Dr. Ashish Jha, who we had on the podcast, have said too. But I like your optimistic take as well. I think we tend to be very negative about everything looking back and, you know, why we make this decision or that decision. But it's very hard to remember how scary things were three years ago. 

Gurdane Bhutani: Yeah. I mean, looking back on the first month, the number of errors that were made in communication, et cetera, at the time with the information that we all had...you know, everything seemed reasonable, right? And so I don't want to be too negative on that period, because I think there were a lot of people working super hard to get us to the other side. 

Shiv Gaglani: Yeah, totally. Well, I know we're coming up on time, so I did want to share just two last questions. 

Gurdane Bhutani: Sure. 

Shiv Gaglani: The first is, you mentioned your career began as a musician -- and I know Zeshan was running music venues back in the day, too -- so I think you guys were united by that shared love. But now you're investing in category-defining companies and health care technology, so your career has kind of evolved over time. What advice would you give to our audience, many of whom are also approaching their careers early on, about just that process of meeting the challenges of the coming decade?

Gurdane Bhutani: Yeah. I think the big lesson for me working in health care is that it's really important for all of us to mind our incentives. As an investor, I have tons of financial incentives by nature of my job that ultimately impact how I think about companies. That's often implicit, right? Everyone has these implicit incentives that sort of float around in the back of their mind and are easy to kind of ignore or rationalize, but ultimately may lead to decisions that, you know, could be problematic in the future.

So, one of the things that we try to do at MBX is to be really transparent and really reflective about what those hidden incentives that we have might be, and then as we make decisions on what kinds of companies that we work with or how we invest in companies to be mindful of those.

I think the reality of our health care system -- which is one where money is involved in it whether we like it or not -- is that every single person in the healthcare system is going to have some of those hidden incentives that they need to be mindful of. I think if we all do that and make a best-efforts sort of try at doing that, that will ultimately lead to better clinical care and better outcomes for everyone that uses the healthcare system.

That's probably the one thing that I've learned over the course of the last ten years that, you know, I think when I go to sleep at night, that is something that I think about when I wake up in the morning. It's something I think about and ultimately makes my day better because it helps me ensure that I'm working on problems that really matter. 

Shiv Gaglani: That's great advice. It's pretty unique. I don't think anybody on the podcast so far has mentioned that specific thing, just knowledge and transparency around incentives. And I'd build upon that by sharing the quote from Charlie Munger, “Show me the incentives, and I'll show you the outcome.” 

Gurdane Bhutani: Yes. 

Shiv Gaglani: He does that when he looks at any organization. You're likely also a fan of Naval Ravikant, the AngelList guy, and probably you read this book, The Almanac of Naval Ravikant. He specifically talks about knowing your internal incentives where I think a lot of people don't know the reasons they're doing X, Y, Z -- whether it's finishing their medical degree or starting a company or deciding to move to a certain place. 

A lot of these incentives we have -- or desires in his language -- are hidden and they're created by society or parents or some other group. It’s good to take the time to really reflect and think about those -- even just personal incentives, forget an organization, that's even more complex -- but your personal incentives and desires, which we know for a lot of our students affects what type of specialty they choose. If you have $200,000 of debt, you've got to choose a higher paying specialty. That's a more obvious example. But there's a lot of other examples...prestige, what my parents want, you know, those kinds of things that the sooner people can better understand their thought processes around their own incentives or desires, I think the better for them. 

Gurdane Bhutani: I think it's a great generalization of it. I completely agree with that. 

Shiv Gaglani: So, thanks for bringing that up. Again, we've had over 350 guests, and I think you're the first to talk about that particular thing. Is there anything else you want to bring up to our audience about you, MBX, healthcare that we haven't talked about? 

Gurdane Bhutani: All I would say is that if you're someone out there thinking about starting a company that's going to make a big impact on public health, our doors are open. Reach out to us. We're always excited to work with people that care about the problems that we do. And it doesn't matter if you've even formed a company yet. Come and find us. We'd love to talk to you. 

Shiv Gaglani: Awesome. Well, I highly recommend that too and echo that because, you know, I've lived through having Gurdane and Zeshan as investors and advisors and friends. So, hopefully, many of the people listening will at least take his advice and add him on LinkedIn. He has great hot takes and not so hot takes that are exciting to listen to. 

So, Gurdane, thanks so much for taking the time to be with us on Raise the Line and to share your wisdom and, again, for helping Osmosis become the success it did. 

Gurdane Bhutani: Thanks so much, Shiv, for having me on. I'm really lucky to have gotten to work with you through Osmosis. 

Shiv Gaglani: Awesome, and with that, I'm Shiv Gaglani. Thank you to our audience for checking out today's show and remember to do your part to raise the line and strengthen our healthcare system. We're all in this together. Take care.