Episode #84: Convicted vs. Disciplined Healthcare VCs, The Capitalist Multiverse, The Untrainable

**Charles Hudson** (0:00)
This is the lesson I think VCs always relearn. We relearned it with Google, we relearned it with Facebook, I think we relearned it with NVIDIA. The big companies end up being much bigger than you think, because usually there's some combination of tailwind and timing that pushes them to a place that was hard to imagine before. And I think so long as that's the case, there will be companies that are worth paying for, but I don't think that means that on average, pricing ownership don't matter. You know, we only have one SpaceX, we have one Anthropic and one OpenAI. I just don't know that you should just throw all of the playbook out of the window.

**Mia Farnham** (0:31)
It's the week of June 22nd. Welcome to The Learning Corner, a Precursor Ventures podcast.
Welcome to The Learning Corner by Precursor. I'm Mia Farnham and I'm joined by our GP and managing partner, Charles Hudson, where we will be talking through the articles and good reads that caught our team's attention over the past week. Our first piece this week is from Halle Tecco's substack, Massively Better Healthcare, and it explores one of the more contested questions in venture right now. Does ownership discipline still matter when AI is enabling companies to grow faster and raise at higher valuations than ever before? The piece maps out a really clear split between two camps of healthcare investors. The first are the convicted. They've essentially retired ownership thresholds as a binding constraint, underwriting each deal on its own terms and stretching if the conviction is strong enough. The second bucket is the disciplined. And they argue that when markets get frothy, the ownership bar matters more, not less. And they're sourcing earlier and writing bigger checks to hold the line. Where both camps agree is that no one is bark and hunting. Everyone believes this AI moment is structurally different from prior bubbles. And the clearest signal of a durable business is the multi-year enterprise contract in healthcare that's never changed. The open question here, neither side can fully answer yet, is whether healthcare's structural reality is the longer sales cycle, the complex calculations, finite market sizes will ultimately bound AI's upside in ways that make ownership discipline matter more here than anywhere else. Obviously, this piece focuses on the healthcare of it all, and it's just a different industry than I think what we see in the media when we see companies race to 100 million in ARR so quickly. They're typically selling to more traditional B2B customers with much larger budgets and room for experimentation than customers in healthcare who you and I both know from lived experience investing in those places where you're typically floating maybe a single digit to negative margin if you're on the health system side, you're a payer, there's just longer cycles. Maybe zooming out a bit more broadly, we can talk about the healthcare of it all, of what this dynamic looks like for that specific industry, but then how does this dynamic of the convicted versus the disciplined, does that take a different form in different industries as it pertains to AI and the pricing that we've been seeing?

**Charles Hudson** (2:47)
I think software has always had people in the like, price doesn't matter crowd and that you should just be in the hot come. I feel like healthcare, as someone who doesn't invest in as much healthcare as others, I've always felt like it was more of a monolithic community. It was like, hey, this stuff just moves slowly because it's regulated and because the big players can move slowly, that there were more guardrails on what you could pay, how much you need to own and the scale of outcomes. And I think AI has changed the math for those folks too.
Maybe not as much on the realized exit side like we've seen on ZAS, but I think on people's perception. I think this is the question in venture and I read through it and I was like, the place where I've landed on all this is if the outcomes are really going to be bigger and it appears that they will be at the extremes, if you find a truly great company, it's probably worth more than you think. This is the lesson I think VCs always relearn. We relearned it with Google, we relearned it with Facebook, I think we've relearned it with Nvidia. The big companies end up being much bigger than you think because usually there's some combination of tailwind and timing that pushes them to a place that was hard to imagine before. And I think so long as that's the case, there will be companies that are worth paying for, but I don't think that means that on average, price and ownership don't matter. You know, we only have one SpaceX, we have one Anthropic and one OpenAI. I just don't know that you should just throw all of the playbook out of the window. And I think what the Scrubb Capital folks said in the article makes sense to me, which is like for every deal, and what Hunter said too, for every deal you have to look at the combination of entry price, market size, team, ambition, all of these things, and figure out, do I think this one's going to pencil for me, yes or no?