It’s all in the name for Sandbox Industries. While “Sandbox” captures the creative, innovative, and unstructured nature of innovation present in disruptive emerging companies, “Industries” refers to the expertise, operational know-how, brand, and business footprint of its corporate clients. Take for example its BlueCross BlueShield Venture Funds. This unique collaboration between 24 investing Blue Cross and/or Blue Shield Companies and the Blue Cross and Blue Shield Association invests in emerging healthcare companies of strategic relevance to the Plans. To find out more about the diverse offerings and programs run by Sandbox, Oliver Wyman Associate Terrance Wallace checked in with Managing Director Tom Hawes:
Terrance Wallace: You’re an MD by training. Tell us about your journey? What was it about healthcare that captured your interest?
Tom Hawes: The healthcare industry is full of opportunities to help improve people’s lives. I had several experiences as a young adult where I had some interactions with a few physicians that really inspired me. The first was after I broke my neck during a football game. I had the opportunity to meet Dr. Patrick O’Leary who operated at the Hospital for Special Surgery in New York City. He is a humble leader in his field. His bedside manner was so profound and calming that he really helped to heal my body and soul; he really inspired me. From there, I had several other experiences with physicians that tried their best to be healers. I wanted to be in that group and pursued that path and attended medical school. As I learned more about how healthcare is delivered during my time in med school and residency, I noticed that healthcare was at an inflection point. The opportunity to improve the delivery of care captured my interest. I looked for a spot in the world where I could help fix some of the problems and landed in business school, where I could take the time to think, learn, and create new networks. I absolutely loved my experience. While in business school, I also learned about the world of venture capital and how VCs have the opportunity to work with many smart and motivated people who want to improve the world. I spent time exploring the healthcare VC landscape and met the Sandbox team as the first BlueCross BlueShield Venture Fund was coming together.
TW: What is the mission of Sandbox?
TH: Sandbox is a venture capital firm, but our approach and mission is different than almost all other VCs. We focus on our corporate partners, investing in startups that advance and challenge their strategies while generating extraordinary returns.
TW: Tell us more about your healthcare platforms?
TH: We are the service provider of the BlueCross BlueShield (BCBS) Venture Funds. We are currently finishing our second fund and the third fund is starting to come together. The BCBS Funds are a unique collaboration between 24 investing Blue Cross and/or Blue Shield Companies, the Blue Cross and Blue Shield Association, and Sandbox Industries to invest in emerging healthcare companies of strategic relevance to the Plans. I joined Sandbox when the first BCBS fund launched. Over the years, we noticed a sweet spot in the market to be the bridge that would connect entrepreneurs with big companies. As we did our work sourcing companies for the first Blue fund we noticed a large number of very early stage companies that had great ideas and really savvy founders but needed more time and access to the strategic insight needed to succeed in a complex marketplace. That insight led to the genesis of Healthbox. Healthbox has created ecosystems of strategic partners that not only put money into the programs but actively engage with the startups and mentor them along the way. Nina Nashif, CEO of Healthbox, has done an amazing job expanding it. They have strategic partners which represent national players in the provider, payer, investor, and retail pharmacy spaces.
TW: You mentioned the investment ecosystem that Sandbox has created. How does your location support the development of that ecosystem?
TH: We work with many BCBS entities. Being centrally located in Chicago is advantageous because it’s relatively easy for us to visit our limited partners and entrepreneurs on either coast. Since our approach involves actively engaging the Blues in running the funds, our central location is a strategic asset.
TW: Can you tell us more about areas that you focus on or any of the portfolio companies that you work with?
TH: We invest in healthcare IT, service, and diagnostic companies. I work with many of our portfolio companies. One of those is HeartFlow, which has commercialized technology out of Stanford University that provides the best assessment of the physiological health of one’s coronary arteries. Current technologies that are used to assess coronary artery disease are not sufficient. HeartFlow’s CEO, Dr. John Stevens, says that, according to the data in current literature, you’d be better off flipping a coin to find out if you have heart disease than using existing tests (e.g. nuclear studies, stress EKG, or stress echocardiogram, etc.). So to our earlier conversation about the importance of cultivating an ecosystem that is looking for innovation, a disruptive technology like this can enter the market and have an impact faster if one can bring together a collection of payers, providers, and other stakeholders that are dedicated to improving how we deliver care. Unfortunately the healthcare system has generally been loathe to change. That’s why being able to create an ecosystem of willing partners is so key in driving innovation in this industry.
TW: This is a really broad question, but what does the future of healthcare look like to you?
TH: If I were to summarize what I think the future of healthcare will look like in one word, I would say “precision.” As we continue to innovate and develop new technologies and new ways of delivering care to people, we will be able to deliver care with more precision. By that I mean we will be able to customize and individualize care pathways according to a person’s genotype and phenotype. I envision a world where we will be able to customize the site of where service is delivered to drive better engagement and outcomes. More precise care will enable us to use our healthcare dollars more efficiently and get a better return on investment. We spend so much on healthcare in this country yet our yield is poor; we do not realize better outcomes on a per capita basis for our healthcare dollars. So I see a world where more is known about each individual and care can be customized and tailored to individual preferences and needs.
TW: What advice do you have for other healthcare innovators?
TH: Never give up. Innovating in healthcare takes a special degree of patience, tenacity, and perseverance. We need as many innovators as possible working to improve the system if we are going to bend the cost and quality curves in the directions that we would all like. It’s a great time to be an innovator in healthcare right now because there are enough institutions and enough people that are looking to improve. I feel privileged to do what I do because my job affords me opportunities to meet and work with true innovators.