The Investor’s View: Creating Value on the Way to Wellville
Beepi seemed like the perfect pitch—a peer-to-peer online marketplace for used cars, raising investment of $147.7 million on hopes of becoming a $2 billion company—before going bust just two and a half years into operation.
At the heart of every value proposition is a promise: a benefit offered in exchange for purchase, investment, endorsement, or some other commitment. In an ideal world, the promise would pay off exactly as intended. Products would deliver stated benefits to targeted customers; investors would get guaranteed returns.
But the case of Beepi is telling. While the founders were good at raising money, they were unable to overcome the challenges of selling online. It’s hard to close a deal when customers can’t kick the tires, especially on a depreciating asset like used cars. With so much uncertainty, customers need to look under the hood. Investors are the same; they need reassurance that your pitch is backed by a committed team with clear goals, accountability, and the ability to adjust because the real conditions in which real people operate are infinitely more variable and more confounding than we initially think they’ll be. Thank goodness!
Value Doesn’t Always Develop According to Plan
We have spent the past several decades as an investor (Esther), a former corporate strategist (Rick), and now together in the ever-unfolding, often improvisational work of community health and well-being. In 2013, we came together to launch Wellville, a national nonprofit that is working with five U.S. communities over 10 years to improve health and financial outcomes.
Experience has taught us important lessons: plans are provisional. Goals and tactics need to be adjusted in light of emerging opportunities and threats. And even the most sophisticated financial models are imperfect.
So, if results are ultimately unreliable, what’s the value of a value proposition? Can communities really promise better health, or simply the pursuit of it? And what do investors most care about?
As “investors” who selected and then made a 10-year commitment of time and support to five communities and their local health collaboratives, we’re betting on the long game: the ongoing creation of value as teams endure the inevitable twists and turns—and make the most of opportunities—along the way to Wellville.
Positioning for Success
While we don’t provide direct funding, much of our support focuses on helping the Wellville communities attract the kind of investment needed to scale, spread, and sustain impact over time. This need isn’t unique to Wellville. Long-term financing is the top challenge cited by the 237 multi-sector partnerships in ReThink Health’s 2016 Pulse Check.
Over the past few months, readers of The ReThinkers’ Blog have already learned the three parts of a well-crafted value proposition: the gap between aspiration and reality; the value of closing this gap; and the proposed solution. We saw how anchoring and storytelling can help us make the case. We even got some tips on where to find the money.
These are good guidelines for producing a value proposition, whether you’re a tech startup seeking venture capital or a community-based organization pitching prevention services to a health insurer. But let’s face it: articulating a compelling value proposition is new territory for many regional health partnerships.
If you want investors to listen beyond your elevator pitch, answer these questions:
1. Why should they believe you?
The quality of the idea needs to be sound and the business case is important, but ultimately it’s you we’re investing in. So, be open and honest about where you are and what you’ll need for success. Then invite investors to inspect what you’ve said they can expect from you.
For instance, when Wellville issued its call for applications in 2014, we received 42 detailed profiles of community collaboratives, most of which seemed promising on paper. Visiting in person gave us a clearer picture: did the decision-makers show up? How did residents perceive the work? Were the schools, parks, and community centers in their application representative (or exceptional) examples of the broader work in progress? Giving investors a look inside the actual, unfolding work—warts and all—builds the kind of trust needed for long-term relationships.
In an interview in Inc. Magazine, Esther recalled a story about Icon Aircraft, which she invested in. CEO Kirk Hawkins was presenting at an aviation conference, and some customers were disgruntled that production of the aircraft was delayed and costs were higher. Hawkins’ response was something like this: “Look, guys, I could sell this plane cheaper. I could rush it out. But you don’t want me to build you a plane. You want me to build a company that can repair and maintain your plane, and that can build a better version over the years. That is what I am doing.” He knew that commitment and transparency builds confidence, and he’s been delivering on his promise ever since.
2. How will you deal with uncertainty?
Savvy investors know that what you put on paper changes the instant things start happening in the real world. This is especially true with health, which depends on a complex interplay of factors. Some of these are in our control and some are not, while many others are still just a mystery. Even after decades of research on coronary heart disease, for example, all the risk factors we know explain only about 40% of the incidence of the disease.
The point is that while we can influence the conditions under which health is more likely to occur, we can’t guarantee a specific outcome. The availability of affordable nutritious food doesn’t guarantee lower obesity rates. And highlighting the “evidence base” for your home-visiting program doesn’t determine whether your nurse will knock once and go away, or knock twice and then ask the neighbors when Mrs. Thomas is likely to come back. Telling an investor how you will respond to breakdowns is more important (and more credible) than promising breakthroughs.
A good example is Rick’s project to reduce childhood asthma emergencies and costs in Fresno, CA, which deployed community health workers to help families deal with mold, dust, and other asthma triggers inside their homes. Sounds simple enough, right? But getting reliable insurance claims data was much harder to negotiate, and finding a critical mass of participants took longer than expected. However, because The California Endowment was a patient funder, the team persevered, and in the end this paid off in better health, fewer emergency room (ER) visits and hospital admissions, and net savings of about $2,200 per child. Project results have helped build the business case for home-based asthma services, which is key as California considers covering these services under Medi-Cal, the state’s Medicaid program.
Based on experiences like these, we didn’t look for the communities with the best programs or logic models to participate in Wellville. Instead, we picked the ones run by leaders with a track record of learning through failure and success, and a commitment to work through the nitty-gritty details on the sometimes-unpredictable path to health.
3. Can you deliver the goods?
The 2013 “HICCup Manifesto” that led to the Wellville project imagined “a benevolent but ultimately profit-driven billionaire or hedge fund, or a philanthropy that sees a way to do good while earning money for future goodness.” The premise was that the investor would buy the health risk of a community of 100,000 or so, and then finance a portfolio of improvements that would ultimately reduce that risk—and the associated health care costs—providing margin for reinvestment and profit.
Of course, landing a single investor is unlikely. Still, if you’re aiming for the kind of community-wide health transformation described in the Manifesto, investors will want to see that you have the experience and fortitude to deliver the multiple, mutually reinforcing interventions required. That means developing not just one but a pipeline of investable opportunities over time. As Robin Hacke of The Center for Community Investment says, communities need to develop capital absorption capacity—“a way to make resources go to places where they’re not going by themselves, to address the failures of mainstream finance.”
Today, the multi-sector team leading the Wellville effort in Spartanburg, SC, is developing an investment case for Hello Family, a continuum of evidence-based services, beginning with prenatal care and continuing through age five, for the 650 babies born in the city each year. If investors provide the upfront capital required, the effort could generate a sizeable return through improved health outcomes and reduced costs from fewer caesarean births, ER visits, and cases of abuse and neglect.
The numbers have to work. But what makes this a particularly interesting investment opportunity is the Spartanburg team itself. Even though they all work for different organizations, the team members meet like the staff of a business, every Tuesday morning, with a clear agenda and accountabilities. Their prior successes include lowering the county’s teen birthrate from 47.4 per 1,000 in 2010 to 23.5 in 2016, a 50% decline that outpaced approximately 40% reductions in the state and United States, and eliminated the disparity between black and white females that persists nationally. And, it’s obvious, members of this team really like each other—which means they’re more likely to keep each other accountable.
As investment disclosures typically state: past performance is no guarantee of future results— but it sure helps investors like us gain confidence that you can get the job done!
4. What’s the return on $3 trillion?
We asked this question at the beginning of Wellville, to raise awareness of our nation’s enormous annual health care costs—$3 trillion, spent mostly on illness after it occurs—and to challenge community teams to create better solutions. Since then, the social determinants of health have come to the forefront. New models for care encourage health systems to reach outside the clinic. And a host of nonprofit and commercial entities aim to capitalize, some with big funding, including a recent startup from Google parent company Alphabet.
As investors, we think communities have a unique opportunity here. Lost in the debate over health care costs is that health is an asset. The way to grow this asset is through the careful nurturing of community conditions, good use of resources, and the mutually supporting efforts of multiple stakeholders working together. That is the essential role of community health collaboratives.
For example, in the Wellville community of North Hartford, CT, a multi-sector collaborative has set its sights on improving overall population health, well-being, and “value of investment.” By measuring the per-dollar impact of investing in health, social services, and other support systems, this effort can highlight the best use of funds to achieve outcomes that matter most to the community. It’s a tall order that will take unprecedented collaboration. But it’s an idea with convening power that has gained the attention of government leaders, local funders, multiple health systems, community organizations, and residents. It’s also consistent with the state’s long-term vision of health reform, which calls for community-wide accountability for health, health equity, and related costs.
You Are Your Value Proposition
A good value proposition is not only about the pitch and the plan. Real value emerges in the work, in the pursuit of a meaningful and enduring purpose. That takes team members who are committed to each other, to learning, and to the results they continually produce over time. If you want investors to take notice, make sure your value proposition emphasizes your best asset: you!