Driving Innovation Through Regulation. Digital Health Interviews: Bradley Tusk

Greetings to all! This is our new episode of Digital Health Interviews, and we and our host Alex Koshykov are super excited to introduce today’s guest Bradley Tusk — an American businessman, venture capitalist, political strategist, and writer.

The Unconventional Path to Venturing

Bradley Tusk, a former political strategist for Mike Bloomberg and Deputy Governor of Illinois, transitioned into entrepreneurship with a consulting firm before becoming Uber’s first political adviser. His pivotal decision to accept equity in Uber led to significant campaigns to legalize ride-sharing. Partnering with Jordan from Blackstone’s Internal Venture Fund, Tusk co-founded Tusk Venture Partners in 2016, focusing on early-stage companies facing regulatory challenges. Their strategy has been successful with investments like FanDuel and Lemonade. Tusk also owns a bookstore with a free podcast studio, supports mobile voting and school meal campaigns, hosts the “Firewall” podcast, contributes to the Daily News, teaches at Columbia, and has authored books.

Strategic Investment & Regulatory Navigation

Bradley Tusk’s investment philosophy at Tusk Venture Partners hinges on two pivotal criteria: the potential of the business to return the fund’s investment and the firm’s ability to add substantial value through regulatory expertise. Tusk emphasizes that both conditions must be met for an investment to proceed. If a company presents an outstanding business model but does not necessitate Tusk’s regulatory acumen, or vice versa, Tusk Venture Partners refrains from investing.

Describing the rigorous assessment process, Tusk explains that the firm evaluates both the business fundamentals and the regulatory landscape. For instance, when considering a gaming and insurance company, Tusk’s team, led by Jordan, scrutinizes the business’s core aspects, while Bob Greenley’s team tackles the regulatory challenges, determining the legality of the product and the necessary licensing for U.S. operations.

Tusk Venture Partners aims for investments that promise a turnaround within a typical seven-year venture investment cycle. They focus on state and local government regulations, avoiding reliance on the unpredictable legislative environment of Washington D.C. Tusk candidly shares, “If the only thing they need from me is money, that means I’m in the wrong place.” This statement reflects his firm’s unique position in the venture capital landscape, where strategic regulatory intervention is as crucial as a financial investment.

The Uncertainties of Venture Capital

In the world of venture capital, Bradley Tusk acknowledges the inherent lack of guarantees. Despite the meticulous evaluation and belief in a startup’s potential to yield significant returns, Tusk is candid about the reality that most investments do not meet expectations due to various factors such as execution failures, lack of market fit, engineering issues, misjudged competition, or regulatory hurdles.

Tusk Venture Partners’ strategy is predicated on the conviction that with the appropriate regulatory environment, a company can thrive. Conversely, an unfavorable regulatory framework can be detrimental. Tusk places his bets on his team’s capability to influence and reshape the regulatory landscape to favor their investments. He illustrates this with a recent Series A lead in an ed-tech company, where success hinges on passing specific educational laws and winning Request for Proposal (RFP) processes against competitors.

When it comes to sourcing startups, Tusk describes a multifaceted approach. The process is a blend of inbound and outbound strategies, leveraging both personal networks and proactive outreach. Tusk and his partner Jordan’s extensive connections often lead to daily recommendations from trusted individuals. The investment team actively seeks out promising startups, although the conversion rate is typically one in a hundred.

Public visibility also plays a role, as Tusk’s frequent media appearances and thought leadership in areas like cryptocurrency regulation attract founders seeking his expertise. However, the most valued introductions come from within their portfolio, where existing founders recommend startups they believe in. Tusk values these referrals highly, considering successful founders as the best judges of potential in their peers.

The Intuitive Art of VC

Bradley Tusk’s approach to venture capital combines analytical rigor with a significant reliance on intuition, especially in the early stages of investing. He believes in the transformative power of exceptional founders and untapped markets, acknowledging that while due diligence is crucial, intuition plays a vital role in decision-making. Tusk admits that personal interactions with founders can influence investment decisions, as the relationship between investor and founder is a long-term commitment.

Tusk Venture Partners focuses on early-stage companies facing regulatory challenges. They specialize in two main areas: companies disrupting existing markets, like Uber or Airbnb, and those in emerging sectors such as cryptocurrency and AI, where regulations are yet to be established. Tusk emphasizes the importance of creating a stable regulatory framework for these companies to flourish.

Digital health is a sector of particular interest to Tusk Venture Partners due to its vast size, fragmentation, regulatory environment, and potential for improvement. Tusk is passionate about the sector’s ability to improve patient outcomes and the overall healthcare system, believing that successful investments in digital health can have a broader societal impact.

Reflecting on the balance between intuition and analysis, Tusk shares, “For early-stage seed Series A investing, intuition is a huge part of it.”

The Challenge of Systemic Change in Healthcare

Bradley Tusk’s personal view on the healthcare system highlights the complex interplay between political interests and the influence of powerful special interests, such as the insurance, pharmaceutical, and hospital industries. These entities craft laws and regulations that benefit their sectors but often result in a system that is inefficient and costly for consumers, especially when compared to countries with socialized medicine.

Tusk acknowledges the challenges faced by startup founders in the digital health space who aim to address specific problems within the system. While some may perceive that these efforts yield minimal systemic change, Tusk provides examples from his portfolio that demonstrate significant impact. For instance, Alma, a company in the mental health sector, provides backend support for therapists, automating tasks like insurance, billing, and scheduling. Tusk highlights, “We’ve made all 20,000 therapists on the Alma platform much more efficient, which means they can see more people, treat more people.”

He also references Ro, which began by offering medication through text consultations and has since expanded into various healthcare categories. Another example is Wheel, a telemedicine staffing firm that connects healthcare professionals with telemedicine startups, facilitating digital care delivery.

Tusk emphasizes the importance of these innovations in making the healthcare system more effective and affordable. While he does not believe any single startup can overhaul U.S. healthcare, he supports the idea of universal healthcare and a unified insurance system. His investments reflect a commitment to improving accessibility and affordability in healthcare, aiming for a broader impact on the system.

The AI Transformation in Healthcare

Bradley Tusk views artificial intelligence as a transformative force in healthcare from multiple perspectives, including investment and public policy. He sees AI as a powerful tool that can significantly enhance various sectors, particularly healthcare.

Tusk points out that his firm invests in digital health companies that leverage AI, like Elaborate Health. This company simplifies lab reports for patients, making them comprehensible and reducing the need for follow-up explanations from doctors.

He believes that AI’s potential to improve healthcare is immense, especially in drug discovery and personalized medicine. Tusk envisions a future where AI could enable the creation of customized medications tailored to individual health profiles, a concept he refers to as “medicine 3.0.”

Tusk also shares his personal experience with comprehensive health assessments, emphasizing the vast amount of information AI can provide about one’s health status. He hopes that such technology, currently accessible to him due to his resources and location, will become available to everyone, showcasing the democratizing power of AI in healthcare.

Navigating the AI Revolution

Bradley Tusk acknowledges the current hype surrounding AI, especially in healthcare. He admits that while AI applications like those used by Elaborate Health are operational, they are still in their infancy compared to the potential of personalized medicine.

Tusk emphasizes the need for regulatory adaptation, stating, “It’s real, and I do think that regulators and policymakers need to accept that and figure out how to deal with it.” He points out the European Union’s proactive approach to tech regulation, contrasting it with the United States’ lag in internet and social media governance.

He believes that ignoring AI’s rapid advancement is not an option, as it could lead to a social media-like crisis due to regulatory neglect. Tusk asserts that we are at the dawn of the AI Revolution, and resistance is futile. Instead, he suggests a balanced approach: “Some of it is now, some of it might be 5 years, some of it might be 50 years, but I think we’re in the AI Revolution now and just being against it doesn’t do you any good. You have to understand it and figure out where you should focus on harm prevention and where you should focus on opportunity.”

Bradley Tusk’s Guide for Founders

Bradley Tusk has shared a wealth of life advice, particularly for those in the digital health sphere. He emphasizes that happiness stems not from the accumulation of wealth, power, or status, but from meaningful relationships and a sense of fulfillment.

Tusk reflects on the findings of the Harvard Grant Study, which began in 1934 and revealed that relationships are a key determinant of happiness. He notes, “The people who had people in their life they cared about and they could count on and vice versa were significantly happier than the people who didn’t.”

He acknowledges the fundamental needs for survival, such as shelter and safety, especially in the context of the hardships faced by the people of Ukraine during the russian-Ukrainian war. He admires their resilience and advocates for greater support, recognizing that basic needs must be met before one can pursue fulfillment.

For startup founders, Tusk advises focusing on creating value and impact. He believes that fulfillment comes from being productive and achieving goals that contribute to the greater good. Tusk encapsulates this sentiment in a powerful quote: “But you also know that if you can take people whose ideas you think are worthwhile and get those to an audience, and those ideas can proliferate, that makes the world a better place.” While their primary objective is to achieve a successful exit, they should also seek personal satisfaction in their work. He emphasizes the importance of working with people who are not only skilled but also likable and caring. Tusk believes that finding meaning in one’s work leads to happiness, regardless of whether it changes the world.

He shares a poignant quote that encapsulates his philosophy: “If you feel unhappy all of the time over the years it’s better to quit, you’re in the wrong business.” Tusk encourages founders to be self-aware and to pursue ventures that align with their personality and values. He reminds us that life is short and that we should strive for happiness and thoughtfulness in our endeavors.

Our previous episode was with Amir Kishon: Founder with 25 Years of Experience in Digital Health