Bridging Finance and Healthcare: A Conversation with Sheetal Nariani, CFO and General Partner at Global Health Impact Fund

Sheetal Nariani brings almost 20 years of experience in venture capital and corporate finance to her role as CFO and General Partner at Global Health Impact Fund (GHIF). With a unique background bridging microbiology and finance, Sheetal offers a distinctive perspective on healthcare investing, emphasizing not only financial returns but also ethical considerations and a commitment to driving positive change in the industry. In this interview, Sheetal discusses her journey into healthcare investing, the challenges of transitioning from structured finance to the world of startups, GHIF's unique approach, and her commitment to supporting women in both venture capital and healthcare.

Interview

Q: Sheetal, with your extensive experience in VC and corporate finance, what drew you to the world of healthcare investing?

A: My path wasn't straightforward. Twenty years ago, with an undergraduate degree in microbiology, I envisioned myself as a  scientist. However, the lengthy and challenging path of academia in India led me to explore management. Unlike my peers, I wasn’t particularly drawn to marketing or advertising, I found my passion in finance, specifically forensic accounting. The ability to understand how corporations structure their finances and derive insights from financial statements fascinated me.

Combining my microbiology background with this newfound interest in finance, healthcare investing became the natural intersection. I wanted to be in finance, but specifically within the healthcare sector, without being a scientist. It's an industry that truly needs finance managers who understand the core business. My strength lies in bridging that gap – understanding both the financial aspects and the intricacies of healthcare, like the FDA approval process and the unique timelines of health tech companies. It's not just about the numbers; it's about understanding the underlying value, the product-market fit, and the potential for impact.

Q: Your background in structured finance contrasts sharply with the often-unstructured world of early-stage startups. What was that transition like?

A: It was difficult, a real learning curve. I came from a world of established corporate pharmaceuticals, where everything was structured: budgets, systems, and processes. Any deviations required substantial justification, and hitting the numbers was the primary goal.

In the startup world, I had to relearn some fundamental things. Financial statements are not necessarily the best benchmark for assessing a startup's value. You can't hold them hostage to historical data that doesn't exist. Instead, I focus on "financial hygiene." Do they know how to manage cash? Do they understand budgeting and allocation?

My perspective shifted. In corporate finance, I'd analyze historical data to forecast and model. In startups, I look at their forecasting ability, their financial modeling skills, and their adaptability. It's about assessing the founder's capability, the team they've assembled, their understanding of the market, and the potential value of their idea. It's a move from hard skills to softer skills, evaluating their approach and their ability to bridge the gap between their current valuation and the market potential.

Q: How do you, as a CFO, assess a start up's financial hygiene?

A: I look at the financial models. How have they structured it? Will they go through the regulatory process? How do they plan to generate the revenue and take their product to market? I'm looking at their forecasting and their capability to do financial modeling. I definitely give them the leeway that everything is not going to be picture perfect. 

Q: GHIF's first fund has been quite successful. What factors contributed to that success, and how do you intend to replicate it?

A: The biggest factor to our success is the presence of a clinician in the boardroom. Our portfolio companies actively involve clinicians, either as founders or key team members. Clinician input is integrated from the very beginning, even before building the MVP. This is crucial in healthcare innovation.

Our fund philosophy is clinically driven. Our due diligence, our Founding Partner – we all prioritize the technology's feasibility from the end-user perspective, which is often a clinician. We assess whether clinicians will accept and utilize the technology, and that's a key factor in our investment decisions.

Q: Both Lisa (Kinsella) and Mary (O’Connor), founders we've interviewed, spoke about the alignment of values with GHIF. Have you found this alignment to be a significant draw for founders or investors?

A: Absolutely. We don't just bring money to the table; we often aren't even the lead investor. We're among the top VC funds they approach because of the clinical expertise and support we offer. We brainstorm with our portfolio companies, even on their fundraising strategies, even if it potentially means dilution for us. Our primary goal is their success, and this alignment of goals is fundamental. We're not competitors; we're collaborators, providing support, making introductions, and ensuring access to clinical expertise.

Q: GHIF has unique access to GHIN's network of over 2000 clinicians. How does this influence deal sourcing and investment evaluation?

A: It's integral to our due diligence. We leverage this network to gain insights from experts in specific fields. If a company in neuroscience approaches us, we can consult with 10-20 experts on the network to assess the product-market fit, the clinical need, and the likelihood of adoption.

Many of these advisors are also our limited partners (LPs), giving our investors a voice in the investment process. They provide valuable input, although they aren't the final decision-makers. This level of LP involvement is rare in the VC world and is a key differentiator for GHIF.

Q: How does the involvement of LPs and VPs in sourcing deals change your investment strategy?
A: Even when they're sourced internally, the process doesn't change. The fact that it is coming from a trusted source definitely gives an additional layer of comfort. We definitely give a little more attention to something that comes with a warm introduction.

Q: As a female GP and CFO in a healthcare fund, you're in a relatively rare position, given the underrepresentation of women in both VC and finance. How do you see your role in addressing this disparity, both in terms of funding women and supporting women's health?

A: I'll address those separately.  I've often been the only woman in the boardroom. It's not unique to VC; it's been a consistent experience throughout my career. However, things are changing. I'm seeing that change, and I want to be part of it – not just for my own benefit, but to pave the way for the next generation of women. That was a major motivation for moving to the US and attending Stanford Business School. I want to make a mark and clear the path so that other women don't feel limited by their gender. The path is widening, thanks to both my efforts and the mentorship of many others.

Regarding women's health, it's a significantly under-invested area. The standards of care in many areas, like maternity and childcare, are archaic. I'm committed, both personally and through the fund, to making strong investments in women's health to address this disparity. There's tremendous innovation in other areas, and women's health needs to catch up. I'm encouraged to see dedicated funds and general partners allocating resources specifically to women's health.

Finally, there's the issue of investing in female founders. While not always directly linked to women's health, there's a strong correlation. Many women's health startups are led by female founders. Supporting either often means supporting both, which is a positive outcome.

Q: What do you see as the key factors needed to accelerate progress in funding women's health and supporting female founders?
A: It won't be one single idea, but a combination of factors. Women are already helping each other, the sisterhood is very strong, but let's not forget the support of our allies. One of the strongest allies is my own business partner, Gary Goldman (GP and CEO at GHINF). The power of allies is getting stronger and stronger. Gender inequality is not going to change overnight, and it's not going to change by only women doing it. We need all genders to be a part of the story. Choose the right partners. It doesn't matter what gender. That is most important.