Venture Capitalism and the Telehealth Industry

The Creation of "Transgender Healthcare"

Those who have been alarmed to see the emergence of companies selling cross-gender hormones may be dismayed to discover that these companies are backed by venture capitalist (VC) firms. In February 2020, Plume received $3 million in total from a group including General CatalystSlow Ventures, and Springbank Collective. In February 2021 it received a further $14M from Craft Ventures. Folx Health received $4.4 million in December 2020 in a funding round led by Polaris, and Define Ventures. In February 2021, they received a further $25M funding from Bessemer Venture Partners

Alarm bells become clamorous when companies share their predictions for the potential size of the market. Press releases for Plume assert that 1.4 million people in the US identify as transgender. AG Breitenstein, the founder of Folx Health, estimates that between 4.5% to 20% of the US population (5 to 22 million people) are "LGBTQIA+.” This acronym defies specificity because the loose-fitting definitions depend upon anti-science notions of sex. For example, "L" may stand for heterosexual men who identify as "trans-women" and describe themselves as "lesbians.” Bessemer Ventures describes it as a “multibillion-dollar” opportunity. 

Plume positions itself straightforwardly as “an internationally renowned centre of excellence of gender-affirming care.” Folx Health, however, describes itself as “an LGBTQIA+ healthcare service provider built to serve the community's specific needs.” At launch, however, it was only selling hormones and hormone blockers with drugs to counter their side effects such as hair loss, skin problems, and erectile dysfunction. Through the evidence available within their online presence, both companies' business focus is selling cross-sex hormones.

Are Venture Capitalists Investing in Cross-Sex Hormones?

Say the words “Venture Capitalism,” and many people think of capitalism at its most ferocious. It is easy to imagine a tenebrous group of men in suits flicking through Reddit and Tumblr feeds conspiring on how to make money out of this new transgender fad. However, the truth is more complex. 

Venture capital (VC) companies exist to fill a gap. They usually support companies that have proof of concept but that have not yet built a solid business. Start-ups need funding to grow their business, but they are inherently high risk and so banks will not provide loans to them because to offset the risk the interest rate would have to exceed legal limitations. In return for a share in the company, VCs support the fledgling business with money and advice until it has proven itself commercially and can be sold on. If their bet pays off they can make huge profits. 

All of the firms that have invested in Plume and Folx have interests in health care technology having portfolios that contain other similar companies that provide healthcare subscription services to a very well-defined market segment using video apps to communicate with their patients. For example, the portfolio of Define Ventures includes 9amHealth Inc., a company specialising in diabetes care; Found, a firm specialising in weight loss aimed at women; and Hims, a company that at launch sold drugs to counter sexual dysfunction and hair loss to men. This is a segment known as telehealth, and it is a growth industry. 

Because of the inherent risk of investing in start-ups, VCs look to invest in fast-growing industry segments, rather than individual companies. When lots of companies are competing to establish themselves in a new market it is hard for VCs to distinguish between the companies that will eventually dominate the market from those companies that will fail. So they spread their bets by investing in a number of similar companies. They also mitigate risk by investing together, with one company taking the lead and several others 'following' with smaller investments.

Articles promoting Plume health often emphasise their use of Spruce Health, an app built for patient consultations over the internet that offers features such as screening quizzes, team communications, and payments. To run a telehealth business at scale companies need other services, for example, platforms to integrate data from multiple sources (e.g. healthcare records and wearable devices); the organisation and presentation of the data; databases, payments, insurance claims; and the coordination of workloads between cross-disciplinary, geographically distributed teams. In addition, big data, machine learning, and artificial intelligence present new possibilities for innovative services and products. Unsurprisingly, all of the VC firms that invested in telehealth have also invested in companies that are developing these new services as there are potentially huge profits to be made from these innovations with some even holding the potential to improve billions of people's lives. 

When a company is backed with venture capital it is often presented in popular culture as if the VC firm has almost magical competence that they will transfer to the company and turbo boost its profitability. This, however, is not quite the reality of the situation. In some cases, VC firms provide advice, but overwhelmingly they prefer to invest in companies with founders that already have the skills and experience to deliver a successful business. 

Partners within VCs are not always knowledgeable about the industry and the technology in which they are investing. A recent Harvard Business Review article estimated that on average, VC companies employ just 14 people. They are usually juggling several companies and don't have much time to devote to individual businesses. It is also likely that VC firms are led by people who are disinterested—as opposed to partisan, uninterested, or indifferent—in the debates around transgender healthcare. It may be that as heterosexual men and women they prefer to be led by medical experts or those who are part of the "LBTBQIA+ community" and present themselves as experts on the issues. 

Unsurprisingly, many of the people behind Plume and Folx are transgender. Morgan Cheatham, the associate of Bessemer Ventures who appears to manage the Folx account is a trans-identified woman in her mid-twenties. Plume was founded by Jerrica Kirkley, a trans-identified male doctor, and his business partner, Matthew Wetschler, also a physician. They were supported by Soltan Bryce, another young trans-identified woman and Harvard Business School MBA candidate. Watching them discuss their business, they present themselves as idealists who believe that they are providing a much-needed service. 

AG Breitenstein, a lesbian, is promoted as a “healthcare veteran" as she portrays herself as someone who has contributed to grassroots community health services for LGBT people throughout her career. In an interview with Harper's Bazaar, Breitenstein claims, “I’ve spent the last 30 years in health care. I started working with queer and trans kids in the streets of Boston right out of law school.” This interview, (published by Gayety, a Facebook channel run by a PR company called Leviathan) pitched at Folx's potential customers, focuses on AG Breitenstein's "grassroots" work of the late eighties and early nineties but it doesn't mention that her specialism is in health data and health care finance. She co-founded the Institute for Health Metrics, was a director for a healthcare investment bank, Leerink Swann, and founded the company Humedica, a health care data analytics business. Humedica was bought by Optum Care, a company with annual revenue of $15 billion, and a subsidiary of the giant health insurance corporation UnitedHealth Group. AG Breitenstein ran Humedica, renamed Optum Analytics, within Optum, creating products such as Optum Integrated Data, a data set of patient records and insurance claims sold to companies to help them make investment decisions. After this, she cofounded Optum Ventures, a Venture Capital firm funded by Optum. Their portfolio includes several telehealth companies, specialising variously in behavioural health, mental health, eating disorders, opioid addiction, and cardiology. Breitenstein left Optum Ventures to start up Folx Health in 2020. 

Jerrica Kirkley, a co-founder of Plume said that to secure funding “it involved a lot of education about the status quo and convincing investors of the power of a relatively small but increasingly visible community and a drastically unmet need.” He talks of "inflexible systems that were prioritising stakeholders other than patients and clinicians.” He elaborates that people who take cross-sex hormones lose access to prescriptions if they lose their health insurance, for example, if they change jobs or move house.

AG Breitenstein also argues the following which creates the perfect supply and demand endgame: that the US healthcare system is broken for “LGBTQI+ people” people and that Folx will help fill the gap. She argues that the core problem is the way healthcare is funded and that the wants and the needs of the patients are ignored in favour of larger interests such as governments and insurance companies. She claims:

The only way we're going to build something that works for this community is if we control the money... if we make it affordable for a person to pay out of pocket and then we can just dismiss the government regulators and insurance company functionaries... who say we're not going to cover this because it is an elective procedure... If we take control of the situation then we get something that looks like, feels like, and reflects us.

The slogan that “LGBTQI+ people” can finally "take control" of their healthcare is a very seductive idea, particularly in the long shadow of the AIDS epidemic. But “take control" is also a slogan used by other telehealth start-ups. Hims, expanded to provide 100 services including one specifically for women, was valued at $1.6 billion when it went public in January 2021. Its founder, Andrew Dudum also says that the telehealth industry will “put the consumer in control, and in the driver's seat.” What they actually mean is that people will pay out of pocket, and thus will no longer be tied to insurers and their ecosystem. Hims also provides sexual health services in addition to a much wider range of primary health care and plans to introduce Prep to its offer. At $20-30 per month, it is much cheaper than the subscriptions to Folx and Plume which are $59 and $99 respectively. Yet, gay and lesbian people are a subset of the general population and arguably don't need specific services. The fact is that LGB healthcare has been conflated with and subsumed by transgender healthcare. 

If these companies were simply providing cross-sex hormones to adults who had carefully chosen the path after long deliberation with the help of healthcare professionals it would be less worrying. However, these companies are using the language of transgender ideology for their marketing, promoting the fabricated “transgender community” while actively targeting their marketing at young gay and lesbian people. Unhappy, alienated young people who do not feel they fit into the rigid gender roles in the society in which they swim, may fix upon an inchoate analysis of their predicament as being on the other side of the binary and so “identify as” the opposite sex. Furthermore, there is a distinct youth culture that has arisen in the past couple of years, where friendship groups of young teenagers—mostly girls—are suddenly identifying as trans men or non-binary. In the UK this is newly prevalent in the 13-16 age group. To unquestioningly affirm that identity and set these children on a medical path that will make irreversible changes to their bodies is a failure of duty of care.

Transgender ideology is misogynist, homophobic, and culturally conservative as it reinforces the very binary that it claims to undermine. It encourages gender non-conforming people to become life-long medical patients. It replaces social structures of control of homosexual bodies with the medical/capitalist constraint of regular hormone medication and sells this as "freedom." It is an ideology that suggests that if women's bodies aren't available as a receptacle or affirming reflection of male desire then they should remove their breasts and cast themselves into early menopause. It is an ideology that pretends to be "sex-positive" whilst promoting hormone treatments that atrophy vaginas and abate the libidos of young lesbians and gay men. As such, it whips away the possibility of coming to know oneself and one's sexuality unimpeded by hormones that are alien to the body.

Postscript: So Who Invests in Venture Capitalist Funds? 

The fact is that VCs get funding from big entities such as insurance companies, pension funds, university endowments, and other financial companies. These parties put a tiny proportion of their capital into high-risk, high-yield investments. This capital may be made up of funds that may come from private pensions, savings and investments. The group of people who are funding Folx and Plume may ultimately include those who do not support this ideology. Venture capitalism is just part of the machine of capitalism, and we are all caught within it. The reason why venture capitalists are investing in companies like Plume and Folx is not because they want to sell hormones in particular but because “LGBTQIA+” healthcare represents a sizeable specific market.