Hangar Capital managing partner Josh Mendelsohn joins the show to discuss the possibilities and limitations of digital contact tracing during COVID-19. We're also joined by Alex Haefner and Matt Harris from Envoy, a workplace management startup whose app has evolved to include a contact tracing feature. Plus, we catch up again with PitchBook analyst Kaia Colban—an expert in health and wellness tech. For additional reading, check out Kaia's recent report on how tech companies are helping employers prepare to reopen their offices safely and effectively.

Explore more of Season 2 and subscribe to get new episodes of "In Visible Capital" every Tuesday on Apple Podcasts, Spotify, Google Podcasts or wherever you listen. For inquiries, please contact us at podcast@pitchbook.com.

Transcript

Jen Germain: We're going to go to 12. 

Lee Gibbs: I recently went into the PitchBook headquarters in Seattle, along with our producer, Jen, for the first time since probably March, when quarantine first began in our area and the company shifted to working remotely.

Jen: It's very eerie and quiet. I'm not used to this.

Lee: It is a little bit eerie. I'm used to a little bit more hustle and bustle.

Lee: As of September, when this podcast is being recorded, employees are still mostly working from home. However, in June, when certain regulations were lifted, PitchBook did open its offices to a limited number of volunteer employees who preferred the option of working in the office over working remotely.

Sarah Craft: On average, we have about seven or eight people coming in per day to the office, in comparison to around 475 [people] normally.

Lee: That was Sarah Craft, the Seattle office manager for PitchBook.

Sarah: For all of us in Facilities, who are all planners, it's been really difficult because we're like 'We just want a solid plan' and we can't do it right now.

Lee: As a rule for being admitted into the office, employee's must first download and sign into an app on their phone and answer a series of health-related questions before receiving approval to go in.

Sarah: You'll see a little radio button that says 'Check In'. You just tap that. It'll take you to the page with the registration questions.

Lee: The app includes a contact tracing feature as part of a digital toolkit from an Envoy called Protect. Envoy is a workplace management company that provides digital solutions around workplace safety and efficiency. And according to PitchBook data, in May of 2020, Envoy raised $31 million of debt funding to develop new market solutions for bringing employees safely back to the workplace.

Alex Haefner: So Protect's been in beta since around May, and we've been testing it with a variety of different companies.

Lee: Alex Haefner is head of product at Envoy, where he leads development for their workplace platform, which includes Protect.

Alex: What the product actually does today is it helps companies manage an initial screening of employees to make sure that they're okay to come into work. And then on top of that, it integrates with the bunch of the physical workplace systems to make sure that, you know who is actually coming into the workplace and who's not, and making sure that they have completed those screenings before they come into work. For companies, especially after shelter-in-place, the workplace changes from being this awesome experience to potentially a liability. And so they moved more to thinking about how do we make it feel safe and be a healthy place for people to return to work.

Lee: Welcome back to "In Visible Capital."

In this season, we're diving into emerging technologies to explore how those technologies are being leveraged during the COVID-19 pandemic. I'm your host, Lee Gibbs. As someone whose job it is to stay up to date on industry trends, I work closely with PitchBook research analysts and industry professionals to understand drivers across private and public capital markets.

Continuing our coverage in the health and wellness space today, we're diving into digital contact tracing to explore its potential for success during the COVID-19 pandemic, as well as some of its limitations.

Matt Harris: So contact tracing has become a critical piece of the puzzle of returning back to the workplace.;

Lee: Matt Harris is the head of workplace & technology at Envoy.

Matt: What that means is that I am trying to identify the technologies and systems and tools that we need to put in place to support our employees and all the folks who come into our front door, or now our virtual front door.

Lee: Envoy officially launched Protect in early October of 2020. And according to a press release from Envoy, they had more than 5,000 companies sign up. I wonder if you could talk a bit about that product itself. And maybe more specifically, what are some of the problems that you're hoping to solve with that solution?

Matt: The way we see contact tracing working is, you want to answer the question at a basic level, "I know someone who is infected, and I want to know who was also in that place at the same time." At an office environment, in some cases, you do have a lot of consistent individuals coming in every single day. In an office environment, you also have visitors, you have contractors, you have consultants, you have building staff. You want to know all of the individuals who were there that day and could have had an interaction with that person who's now been found to have COVID. Apple and Google both released a contact tracing API for their platforms. They're working with government health teams to try and create something that works regardless of the location. What we're hearing from our customers and what we've heard as we were talking with folks is that being able to be as specific as possible is kind of the key differentiator for a contact tracing solution.

Lee: Envoy says it's planning to raise a Series C once more employees have returned to the office. As they believe higher office usage rates will facilitate their ability to demonstrate product viability to investors. But they aren't the only company to add a contact tracing feature to its workplace toolkit. Similar companies that provide workplace management software like Condeco, CareValidate and Hipla Technologies have all added contact tracing to their suite of tools.

Kaia Colban: So right now we see a lot of startups trying to focus on returning your employees to work and contact tracing.

Lee: Kaia Colban is an emerging technology research analyst with PitchBook, who focuses primarily on health and wellness markets.

Kaia: Initially, it looks like a really profitable industry, but eventually COVID is going to go away. And while we might have a pandemic in the future, I think the government is building a strong pandemic response infrastructure that's going to, hopefully, minimize the risk and limit the chance of this happening again. And once that vaccine is created, these returned to work startups and technological platforms are not going to be able to create the same level of benefit that they are now. So we really do not see a huge long-term market for contact tracing and return-to-work solutions. Even Envoy doesn't believe this to be a huge profitable service in the future. Instead, it's an add-on to the workplace management solution that they already offer. And right now it's bringing in new customers. They just signed their largest contract to date and that client was interested in Envoy Protect, but they didn't sign with Envoy exclusively for Envoy Protect. They signed with Envoy for the holistic suite of products that Envoy offers that span outside the health and wellness space.

Lee: So perhaps COVID won't be with us forever, but it's likely not going away any time soon, as many health experts predict, it could take years for life to return to something resembling a pre-pandemic normal. And that outlook continues to drive demand for contact tracing solutions. But those waters continue to be a bit murky.

Lee: Alex, I wonder if you could just hone in on some of the primary obstacles to implementing technology as a solution in this situation, specifically contact tracing.

Alex: There's a ton of obstacles with implementing contact tracing. There is adoption; there's accuracy; there is privacy. You can't do a good contact tracing solution if not everybody adopts it. It's kind of like wearing masks. If not everybody wears masks, people are still going to get sick. If not everybody is willing to submit to a contact tracing solution, then you're going to miss some of the data. And then on the accuracy piece, if you look at different solutions ... So if you have like a sensor that you attach to a worker and they're moving around the workplace and everybody's sensors are talking to each other all the time, and you're building up this massive data set to do contact tracing on, it may not actually be the right approach to notify every single person in the workplace when a device says it may have been within 30 feet of someone. You could end up creating a scare that does not create a better environment for people and doesn't optimize for stopping the spread of coronavirus. That's a big challenge around accuracy is, how do you pick—and it's very many colors of gray here—but how do you pick the right approach for who to notify around privacy, like some legal issues depending on where you're located. And then on top of that, depending on what solution a customer or workplace goes with, what type of data they're collecting, who needs to access it?

Matt: COVID has done a great job of elevating some of these, kind of, consistent challenges for every company. And I think the legal side opened up a lot of questions around risk, company risk, company liability. Make sure that you've thought through the implications of contact tracing.

Lee: Alex and Matt just outlined some fairly significant challenges around using contact tracing in the workplace. Kaia, what additional considerations might we be missing?

Kaia: You know, the question is who is going to be able to mandate this? I think some companies may say "If you want to work for us, you need to use this contact tracing application. You're not permitted to enter the office without using it." But then the question is, do employees have the right to give the same mandates? And is there a potential for the government to tell employers you can't require your employees use a contact tracing platform? I don't know if employers can't require all the employees to use the contact tracing technology, then I don't see being fully functional because you might be missing a large proportion of the data.

Lee: So there's still quite a bit of uncertainty around accuracy, legality and privacy that companies are still trying to figure out. And if that's the case for something like a workplace which is very localized, what does that mean for the greater community? Well, our next guest weighs in.

Josh Mendelson: My name's Josh Mendelson. I'm a partner at Hangar. Hangar is a firm where we specifically build in and invest in companies focused on the public sector market. We work with government policymakers, regulators [and] key constituencies to understand their greatest needs and look for ways to use technology to answer those needs.

Lee: And that is a unique investment strategy and an approach to executing. How did you just, more practically, come into forming Hangar in that way and in finding that focus?

Josh: This is a huge marketplace. Government is this broadly defined public sector market is one of the last markets, I would argue, that hasn't really been touched by 21st century technology. When you look across the arc of my career—my time in government, my time working at Google in Silicon Valley, making the change that so many do—and I still have trouble admitting of going from being an entrepreneur to being a VC. But it was really hard to be an observer for so much of it, to know what I knew about government and how it worked and not want to apply a bunch of the skills that I'd like to think I accumulated in tech world and bring them over to the marketplace. We understand how government, again, broadly defined, works, and we ought to use that.

Lee: Given that history, it's no surprise, then in March of 2020, Josh founded the COVID-19 Technology Task Force, a volunteer coalition of leaders across public health, tech and business sectors aimed at providing the public sector with engineering and resources to accelerate society's recovery from COVID-19.

So, Josh, what did you see from your time on the task force about the potential for tech to work with government, in specifically the health care field, to address this pandemic?

Josh: At the beginning days of the task force, I don't think any of us understood the scope and the scale of what was going on. But what we did know from all that experience is that technology can play a really substantial role in helping governments respond. And by their very nature, when there is a disaster of such magnitude, it really does fall on governments to coordinate the response. In fact, one of the challenges I think we found in the United States is what happens when the usual frameworks, notably a federal-led response, aren't necessarily there, how do you empower decision-makers, whether those are policymakers or public health officials in this case. How do you empower them to have all the information they need to make the right call? And then how do you give them the right tools to take a limited set of services and expand them to touch as many people as possible? So that was the genesis of the task force. It was taking something very informal and really [helping] it achieve an impact in real time, dynamically in an insane situation, you know—one we've never really found ourselves in before.

Lee: Josh is no longer leading the task force, but an early focus area for the group was contact tracing. With tech giants Apple and Google coming on the scene with their exposure notification app, the task force is focused on developing privacy solutions around contact tracing.

Josh: The privacy implications are vast. You know, as you get to some of the more digital implementations of contract tracing, which many hope is the faster way to do things, folks are really unified around a standard that Google and Apple have promulgated. There's this question about uptake and trust and what does that look like. Will folks, in fact, use these apps? Will they feel comfortable using these apps? What are the risks and consequences of using these apps?

Lee: But as Kaia points out, many of us are already being tracked by our devices in our day to day lives.

Kaia: People can tell Google, "yeah, track my location," and you can go back and you can see exactly where you've been. You can see, did I go there a plane? Did I walk? Did I bus, or did I bike? All based off of the speed you've been moving. They can determine your pace. So since your phone is already with you all the time, it's constantly tracking you if you enable these services. And there are so many other programs that are already doing that; I don't think it'll be difficult to add in contact tracing abilities. But the question is, Is that something people are going to want and going to be comfortable using?

Josh: Our mobile devices are communicating with each other to let us understand and have a canonical reference point of who we've interacted with so that once, you know, somebody is tested positive, you can both look at it retrospectively, but you can also be more proactive. Done right, in many ways, it is really special because it can create a new standard for privacy. You don't need to know who might have gotten you infected; you only need to know that you might be at risk, and there may not be any real record of exactly how the spread was, which reduces a lot of the social stigma. On the other hand, it requires wide-scale adoption in order to be useful. Given that digital contact tracing is largely about a smartphone with a set of apps installed, with data stores that lie with public health authorities checking persistently, poorer communities are less likely to use them. Immigrant communities are less likely to trust their data being, risk being promulgated. It actually takes our most vulnerable populations in a society and has them least likely to be able to access that, a given resource. To really grapple with those issues is going to continue to be a challenge of our generation, because I don't think we have very concrete answers. We still have this problem of policymakers who don't really understand the technology better, but are being asked to be the adjudicators; and we have a bunch of technologists who don't really understand the public policy pressures or implications or considerations. And we've got to get better and better at that or it will always feel binary. We'll always be trading something for something else. So in this case, privacy for what feels like potential health outcomes. But I'd offer it doesn't need to be that way. We can use better privacy techniques. It can be done. That should be what motivates those of us on the technology side, those of us on the investment side. It's that both, and because that's what really has those beneficial outcomes that create new markets, that create new ways of thinking, that create new opportunities. And it's totally achievable, hard as it feels in a moment like this.

Lee: And while public trust of tech giants may be shifting...

Kaia: Tech firms are increasingly entering the health space, and if they're able to establish themselves as a health firm that people view in a safe manner and not just the Facebook and the Googles of the world, people are going to be much more comfortable sharing the information with them, even though these companies were previously known as Big Tech.

Lee: But the question still stands, Is government ready to embrace a shift or even an evolution to how solutions are broadly provided?

Josh: I think COVID presents a ton of opportunity for technology to really help evolve how society responds to disease. COVID has created an insane amount of incentive for everybody to be innovative and break out of their boxes. And it's taken a marketplace, notably health care and health tech, which is incredibly slow, incredibly gummed up. Some of that is regulatory, but often I find regulation is used as the excuse; it's because there's a ton of incumbency and little incentive to move off the incumbents. And COVID has simply forced us to not have that orthodoxy. It's forced us to say, "What can we do that can help?" And for policymakers or the large players to finally be willing to say, "Okay, the stakes are too high; we have to do it." And you can look at that through all sorts of lenses. But certainly from an investment perspective, it's really encouraging to see that willingness to now reduce the barriers to entry, to allow new technology-forward teams enter the marketplace. You know, before, if you were a technology company, really you were like a health care company that needed to have a deep bench of health care expertise and your technology was something you threw in the back and didn't really want to talk about as much. And there are exceptions, but they are generally exceptions. Now, it's actually okay to be an engineering-first company and want to do something in the medical space. And I think what we're going to see, on the investment side, I think we're going to absolutely find a whole bunch of venture investors who might have pooh-poohed health care or were intimidated by health care, now wanting to look at the space and hopefully make investments. I think we're going to find new structures. Private equity firms are going to recognize that there's a lot of incentive to roll up innovative entities that just don't have the capacity to deploy their solutions at scale. And so that'll be something to watch in the next couple of years.

Lee: Our analyst shares that optimistic outlook.

Kaia: Before coronavirus, we didn't really realize there's such a big need for contact tracing devices and software. And now it's a very new segment that's the less mature than many of the other segments within Health and Wellness. And every time we see a new segment pop up, there's a lot of investor interest. Everyone's trying to figure out who's going to be the next big player. So I do foresee a lot of small series coming our way, especially for contact tracing devices aimed at enterprises and workplace solutions. However, over the mid- to long-term, I do think this contact tracing and return-to-work solutions will struggle once a [COVID-19] vaccine is developed. While these tracing applications can apply to common illnesses such as the flu, it isn't clear that such precautionary measures are needed and consumer privacy concerns may dwarf enterprise tracking for common diseases. However, we do think certain industries may present more viable long-term markets, such as senior homes or prisons, where frequent contact with high-risk populations is more common. It's also likely that automated temperature checks will gain popularity over daily self-assessment questionnaires as they are less subject to user judgment and honesty. And for enterprise-focused contact tracing solutions, I think integrating into workplace management is going to be really important. So having contact tracing solutions that may not be integrated into the typical health ecosystem, but instead integrated into workplace automation - that area could see a lot of growth. We also think that even though a substantial market for contact tracing may never fully materialize, we do think enterprises will invest in developing a disease prevention and response infrastructure, because if another pandemic like COVID was ever to occur in the future, they want to have the system in place.

Lee: Many of the current systems in place are fragmented and don't really work together as well as they could; whether it's government response and regulation, the health care industry or workplace environment, these areas need to be better bridged in order to help create healthier, safer ways of living. Let's go back to Matt and Alex at Envoy to understand this a bit better.

Matt: It's not just about providing the tool and the product, it's also about providing the ecosystem of resources that can help companies and customers really succeed here.

Alex: I think when we look at the return to work over the next six months, a year, I think we've really woken up to the fact that health in the workplace is really important.

And you know, previously, I had the benefit of working in Germany, and in Germany, if you got sick, people would tell you "Do not come into the office" and your coworkers would tell you, "Do not come to the office". I'm not expecting a huge cultural shift in the US, but I think people are taking it a lot more seriously, especially with coronavirus.

And so as the return to work happens, especially around health in the office, I think people will take it a lot more seriously, and they'll probably employ a bunch of different tools that they didn't before to do that. If you think about the flu season, I mean, imagine what it would be like if we just dramatically cut the spread of the flu in the next couple of years by changing some of our health practices and offices. And so I think given that there's a real risk that we've all now seen, I think there is a real benefit that you could potentially see into workplaces as we start to go back to the new normal.

There really isn't one answer for all of this. And there's not just one tool in system that's going to solve the problem and it's going to be about integration and partnership. And so I think as we look ahead, and as I look at trying to think about returning to our own workplace and all of our customers who are doing the same, I think we're going to be less siloed than we used to be. And I think the technology allows us to integrate a lot of this more than we have in the past. And so I think that's one thing that I'm kind of excited about. The return to the office has kind of opened the doors for a lot of companies to rethink a lot of their work, I guess. And so that integration piece, you know, as you talk about our specialty is one piece of that pie, but by integrating with other tools and systems, we're going to be able to create a better overall experience. I think just as we move forward, you know, thinking about how, and I guess encouraging all of those companies out there who do solve the other pieces of the pie, let's work together, let's try and make workplaces better as a whole, more healthy and safe along the way. And I think at the end of the day, that's going to be important as we go into 2021.

Lee: Is it possible that in the future we might be able to create a more integrated, less fragmented way of living at home, at work and anywhere else that better connects different systems and industries? If anything, our conversations have made it clear that the future requires better partnerships and more holistic data management for the greater good. A big thank you to our guests, Alex Haefner, Matt Harris and Josh Mendelson, as well as our own Sarah Craft and Kaia Colban. In our next episode, we'll be looking at how COVID has rapidly spurred the growth and expansion of telehealth and walk through some of the challenges and opportunities around digital health.

In this episode

Josh Mendelsohn headshot

Josh Mendelsohn
Founder and Managing Partner of Hangar

Josh Mendelsohn is the founder and managing partner of Hangar, a New York City firm that launches high-growth technology companies that tackle problems governments can't solve alone. Mendelsohn was a co-founder of Hattery, which, prior to a 2013 sale to Google, invested in early-stage startups. While at Hattery, Mendelsohn was part of a group of startup founders and investors who formed Engine, an organization focused on bringing policymakers and high-tech, high-growth technology startups together. Mendelsohn managed Engine for its first three years and remains on the organization's board. Previously, Mendelsohn worked with Sequoia Capital while holding several operating roles, including director of business operations at TuneIn and helping to create Colligy.

Mendelsohn started his career with the federal government at the Department of the Treasury and Department of Defense, and worked as a PM at Google for four years. He created the Google Disaster Response Program, now part of Google.org, as well as the @Google Talks program. In 2016, Mendelsohn was part of the senior leadership team that advised Mike Bloomberg on a potential Presidential run. Mendelsohn has served as an advisory board member and mentor to Project Entrepreneur, an effort built by UBS and Rent the Runway to foster female entrepreneurship. He serves as a board member and advisor to a number of companies and nonprofits, including Bloomberg, Google, NASA and the Department of Defense.
 
Matt Harris headshot

Matt Harris
Head of Workplace Technology at Envoy

Matt Harris is the head of workplace technology at Envoy. An engineer at heart, he uses iteration and feedback to make Envoy's workplaces work better for all employees, whether they're on-site or remote. He brings a wide range of experience from software engineering, event production, and data systems to solve daily office challenges in creative ways. He's always on the lookout for interesting new tech, excellent craft beer and excuses to move back to Paris, where he and his wife lived before making San Francisco home.

 
Alex Haefner headshot

Alex Haefner
Head of Product at Envoy

Alex Haefner is the head of product at Envoy, where he leads the development of its workplace platform. Haefner previously served as a product leader at Yelp, where he led a team of 90 engineers on Yelp's trust and safety and content teams, and at Apple, where he worked on Keynote.

 
Kaia Colban headshot

Kaia Colban
Emerging Technology Analyst at PitchBook

Kaia Colban is an emerging technology analyst at PitchBook, where she contributes to the company's emerging technology research covering the digital commerce and wellness tech markets. Prior to joining PitchBook, Colban was an associate at Boston Consulting Group and a financial analyst at Amazon and Citi.

Colban received a bachelor's degree in psychology, applied economics and management from Cornell University. She's based in PitchBook's Seattle office.

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