I’ve met many entrepreneurs and executives who have built impressive businesses by employing a wonky concept called “Activity-Based Costing,” but Avant-garde Health co-founder Derek Haas is the first founder I’ve met who brought its creator, Professor Robert Kaplan along on a sales call. When I saw that Robert, at age 77, had cut short a vacation to help close a deal with a top-flight hospital, I knew this was a team and product that justified our serious consideration.
Avant-garde has developed a SaaS tool that allows hospitals to track and tally the effectiveness of surgical teams, down to their use of bandages, in an effort to cut costs while improving the quality of care. The Avant-garde product tracks a variety of metrics and presents them as a dashboard that can be used by the health care providers and hospital administrators alike. Avant-garde skillfully combines Time-Driven Activity-Based Costing while also playing off the ego and natural competitiveness of surgeons to improve outcomes.
These improvements are substantial. In its launch cohort, Avant-garde Health found that it reduced readmission rates by 33%, decreased patient’s time in the hospital by 13% and reduced costs by $2,100 per patient.
Plenty of startups attract impressive advisors, but it was clear that Robert didn’t see Avant-garde as an enjoyable diversion, as so many advisors do, but as a commercial application of a life’s work in research.
The Most Scholarly Team We’ve Ever Backed
Avant-garde may be the most scholarly team we’ve ever backed. Derek has worked on President Obama’s Council of Economic Advisers and advised the Massachusetts Inspector General on health policy issues. He’s published technical papers with titles like Measuring Time-driven Activity-based Costing in Computed Tomography in technical journals as well as studies on the power of doctor/patient dialogue in the New England Journal of Medicine. In addition to Derek’s CV, his advisors, Robert Kaplan and Michael Porter, have authored a combined 32 books and 275 articles. There is no question this team has a surplus of intellectual horsepower.
Paired with Commercial Traction
A long paper trail of publication is nice, but Derek isn’t an ivory tower academic. He pairs a keen intelligence with strong entrepreneurial instincts. The scholastic approach to health software usually takes the form of something like IBM’s Watson, which aims to be a generalized platform for healthcare. Avant-garde takes the opposite tack. It isn’t a product meant for use in all hospitals, all surgical theaters, or even all orthopedic practices — Avant-garde is focused on providing the actionable insights that physicians and hospitals need to improve how they deliver care. At its outset, the company was laser-focused on improving care for patella and hip replacements, and only after orthopedic surgeons thought it was the bee’s knees that it was expanded to spine surgery, then across the rest of orthopedics, and now cardiovascular care.
This commercial savvy is also evident in Avant-garde’s marketing. The Avant-garde product uses advanced machine learning techniques to suss out actionable stats, but “AI” is never mentioned in the marketing copy. The team knows it doesn’t matter to surgeons or anyone else who uses the software whether the software relies on deep learning or more conventional algorithms. Every bit of messaging is targeted towards the user, not the technology.
As a result, Avant-garde’s product has been adopted by dozens of world-class medical institutions.
And a Co-Investor Who Helped Clinch It
Derek’s vision and demonstrable progress convinced me to invest, but I was heartened to learn that General Catalyst’s Larry Bohn was looking at the deal simultaneously. His prior efforts in SaaS, Hubspot and DemandWare, are two of the most important B2B startups of the last decade. I was sure his mentorship would add tremendous value to the team. I’m tremendously grateful to Nitesh Banta, CEO of our portfolio company B12 and Derek’s former roommate, who was kind enough to introduce me to Derek!