For episode eight of season two of the PointHealthTech Podcast, we were joined by Payal Agrawal Divakaran, a partner at .406 Ventures where she co-leads Digital Health investing activity.  

Prior to joining .406, Payal was at Harvard Business School, where she co-founded a company called SpotRocket in the job recruiting software space. Before her entrepreneurial stint, she spent time in Corporate Development at Eventbrite, was an Associate at Spectrum Equity, and started her career pursuing technology investment banking at J.P. Morgan in NYC at the height of the financial crisis. Payal received her MBA, with Distinction, from Harvard Business School and her BS in Electrical Engineering and minor in Management from MIT.  

Our hosts for this episode, Steven Cutbirth and Mark Miles, discuss several topics with Payal, including her thesis on digital health investing, financial incentives for patients and payers, her role as a trailblazing female engineer and health investor, and much more.

You can listen to the whole episode here or on Spotify, Apple Podcasts, or wherever else you listen to podcasts. If you’re short on time, we’ve included a few highlights from our conversation below:‍

Mark: “So the question is, how can you get patients to figure out when they should be incentivized to shop for care and get more engaged in navigating the pulse of the healthcare journey; elective diagnostics, perfect example, that is appropriate for them. What do you think could be done? ‍

Payal: “I will say two, perhaps radical, points. The first is that I think this is partly why we don't do consumer facing digital health. The consumer could be one vector to solve this problem and we could empower the consumer, but ultimately if we want to really solve it in a big way, we have to figure out the right tools and the right incentives for those through which the dollars flow. And those are the payers or the hospital system. So my answer to, ‘how do you get the consumer to know when to shop around for services’ is actually, how do we deliver the right service to the payers to force them to give options to their consumers. So that would be sort of me turning it on its head. And the second radical point would be I actually, where you call it an agency issue between the patient and the payer, I actually think the payer has the most aligned incentives to change the delivery of care. Why? Because they ultimately hold the bag. They hold the risk. Should you go to the emergency room when you don't have to, the payer has to pay that bill. In a lot of cases there is a very low out-of-pocket cost for that. So for the payer that affects their medical loss ratio. At the end of the day, their insurance companies. Right? So they're incentivized to keep you out of high cost settings. And so a lot of our companies, therefore, actually have quite a bit of success. I'd say payers are adopting innovative solutions where they can give consumers more options. Where they can give them better quality options.‍

Steven: “You have a big focus on increasing access and opportunities particularly for female founders, and I've noticed just kind of a recent rise with some truly amazing women like yourself and Chrissy Farr, Julie Yoo, Alyssa Jaffe, and many others just to name a few, who are really creating this movement and a bit of a reputation around these women as thought leaders in investment. And I think too, like standing out as role models for other younger women who want to become investors. So I wanted to ask how your experience has been as a female investor. How are you able to help others who are looking to move into this field?‍

Payal: “Well, thank you for putting me in that category of investors and all of my peers that I respect very much. I think for me, I've often been used to being a trailblazer. When I was doing electrical engineering at MIT, I mean you can just imagine how many women there were there. And then it continued on in my career at each place that I was at. For me, I've not observed it as such, really, but more so it’s become apparent to me how it influences and impacts others in a positive way. I think one of the bigger contributions that I have is that I became a mother during the time of my VC journey. And not only just the first time, but a second too. So I've had two children during my sort of rise in venture capital. I think that I'm noticing the impact of that being pretty important and meaningful to the next generation of rising leaders in venture capital. So that's just been an interesting observation. The other observation is that I’m specifically seeking out female founders. I just think the reality  is that if you've got a female in the VCC or just anyone with diversity or a diverse opinion in the seat, you're going to attract or just have people be more comfortable with that. And that's what I've noticed. And I think there was a natural attraction and affinity between me, Christina, and Aaron. I've got Brooke Lavasa at Arista, Ashley Reed at Wellis, and I’m about to invest in a maternity company, which as one would hope and expected, there's a female CEO. So I think it's just, there's just the natural attraction and connection there. That's why it's so important for us to have diversity on both sides of the table.”

To hear the whole conversation, click here for the full podcast episode. You can also hear more from Payal by following her on Twitter and LinkedIn. You can also check out her company, .406 Ventures, by visiting their website.