Zach is an Investment Associate with Catalyst. He supports the investment team across the deal lifecycle, including sourcing and screening new opportunities, due diligence, and portfolio company advisory. Previously, he was a healthcare consultant at PA Consulting Group, advising provider organizations on how to adapt to the changing healthcare landscape through business unit strategy, cost reduction, IT transformation and operational improvements. Additionally, he completed an M.B.A. internship on Piper Sandler’s Healthcare IT Investment Banking team. Zach began his career in the Investment Management industry with a boutique investment consultant where he conducted performance analysis across all asset classes for institutional investors and high net worth individuals. Zach holds a B.S. in Business Administration from the University of New Hampshire and an M.B.A. from Cornell’s Johnson School of Management, where he was a Big Red Ventures Fund Manager.
Zach Leach was interviewed by Grant Rowlands, Fund Manager at Big Red Ventures, in December 2021.
How did your professional and personal experiences pique your interest in VC and startups in general?
I don’t come from a start-up background, but I grew up in a small-business, self-employed environment, which is very much a part of my DNA. Before Johnson, the majority of my career was in healthcare consulting, where I helped companies leverage technology. As a consultant I had the opportunity to work with a wide variety of companies but found myself gravitating towards the smaller companies as I found the ability to make an impact far more meaningful. I was also fortunate to start my career in investment consulting, where I gained exposure to all asset classes (conventional equities, fixed income, private equity, and venture). A combination of all these experiences ultimately guided my interest towards venture.
You joined Catalyst Health Ventures immediately after Johnson. What drew you to healthcare investing and more specifically Life Sciences/MedTech?
Prior to Johnson, my career as a consultant was generally on the Healthcare IT side and not clinically focused. What I believe MedTech offers in comparison to Healthcare IT is the opportunity to make a difference in patients’ lives. A lot of what we do is investing in clinical products (think heart valves), which will make a tangible difference in a person’s life. The draw to MedTech investing was the ability to make that difference while improving the healthcare system by offering innovative, cost-efficient care options to patients.
Can you describe your thesis in sourcing investment opportunities?
Our thesis is to invest in therapeutic medical devices which are typically mechanical and target indications where drugs have failed or can’t work; we gravitate towards cardiology and oncology as there are large unmet needs. Catalyst has also invested in diagnostics, and we are excited about current opportunities in digital health, specifically technologically enabled devices in comparison to apps in behavioral or mental health. Our investments are typically in Seed to Series B funding rounds and in late pre-clinical or early clinical from a development standpoint, where we can identify the first de-risking event (i.e., when the device will be safe and effective in a human).
Nearly a decade ago, venture funds favored biotechnology over MedTech. What caused this “sluggishness” in MedTech compared to biotechnology?
Drugs have some inherent benefits over devices: commercialization of a drug is easier, and reimbursement is a lot more straightforward as well. Devices have a much more challenging, data-oriented reimbursement pathway. For new novel devices, the reimbursement pathway may be just as difficult, if not more so, than the regulatory process. There has also been a historical public market for pre-approval biotech companies where that generally doesn’t exist for device companies.
Reversing trends, MedTech funding has exploded over recent years with $6.2B in 2020 and over $4B in the first half of 2021. Do you expect this to continue and what are the driving factors?
I am hopeful and optimistic that this trend in MedTech funding will continue. There has been an emphasis from the FDA to make the regulatory process more friendly with their breakthrough device designation, which is granted to about 8-10 companies a month. This is a way to give an expedited, guided process to navigate through FDA approval. There has also been a realization that investors need to pivot away from drugs as there are many large unmet needs that MedTech can address.
Although every situation is unique, does the current influx of venture funding into MedTech mean more potential M&A targets for blue-chip companies? Or will it pave the way for more IPOs?
I do believe we will continue to see more of both moving forward. In general, there will be more M&A in MedTech, and there were 288 deals in June YoY. Because of the unique commercialization pathway in the industry, it is difficult to build a company around a single device. Therefore, MedTech startups that address unmet needs in novel ways become prime acquisition targets for the large strategic players, who look to M&A as a way to outsource R&D.
What disease/therapeutic areas are you most excited about? What is the investment horizon for these areas?
I’ve mentioned cardiology and oncology have a lot of opportunity and decades of innovation to come. Personally, I have developed an interest in an area that combines devices with software. We can bring together these devices and algorithms to treat patients in novel ways, enable them to recover at home, or take a non-pharmacological approach which has broad appeal.
Catalyst Health Ventures recently led a $12.5 million Series A financing for Epitel— a wearable, wireless electroencephalography (EEG) monitoring system. This device received US FDA clearance in 2021 and allows hospital emergency rooms and critical care units to detect seizures from brain wave activity.
What aspects of Big Red Ventures helped you most in your role at Catalyst Health Ventures? What advice would you give to Cornell Graduate students interested in venture capital and how to best capitalize on resources afforded to them?
BRV is a fantastic opportunity to get a taste of venture: learning how to interact with founders, conducting diligence, the ability to source deals, and become an asset allocator. Anyone can learn to perform diligence, but the ability to come up with a differentiated idea or having a thesis and being able to convey that can make you stand apart for those interested in venture.