Steve Brotman: Hi, my name is Steve Brotman. I’m the founder and managing partner at Alpha Partners, and joining the Driving Alpha show today is Garheng Kong, founder and managing partner of HealthQuest Capital, one of the leading growth equity firms backing transformative healthcare companies that both improve patient outcomes and bend the cost curve for the system. A physician, a scientist, and an engineer by training, Garheng hails from Duke, my alma mater, where he earned many of his graduate degrees—an MD, PhD, and MBA from Duke. He is also a Stanford engineer and graduated with biology degrees from Stanford. He has parlayed all of this multidisciplinary background into a multi-decade investment career with more than 40 IPOs and M&A exits across medical devices, diagnostics, biopharma, and healthcare services. Before launching HealthQuest in 2012, he honed his craft as a partner at some top-tier venture firms and as an operator and strategist inside global healthcare organizations, giving him a rare vantage point from the bench to the bedside to the boardroom. Garheng serves on the boards of Duke University and LabCorp, as well as Smith & Nephew—not to be mistaken for Smith & Wesson. He has been repeatedly recognized as one of the top healthcare investors in the world. Truly a perfect guest for Driving Alpha, where we explore how exceptional investors consistently generate outsized returns. Welcome, Garheng.
Garheng Kong: Steve, I appreciate the kind introduction and I’m looking forward to the discussion.
Steve Brotman: Amazing. You’re not only a polymath, but you’re also an athlete. How did that happen?
Garheng Kong: It’s funny. It turns out my family is relatively athletically inclined, and my mother was actually a world-class table tennis player in her prime. We grew up with everyone in the family being pretty athletically inclined, and maybe it’s the classic immigrant story—we were also very focused on academics. I did learn a lot playing team sports. One of the things that has been really valuable, especially in volleyball, which happened to be my sport of choice, is that even the very best player can’t take over the game by themselves. It requires a full team effort. It’s a little bit different than basketball, where you can give the ball to Michael Jordan and clear out. In volleyball, you actually need the entire team to be successful. That certainly shaped the way I’ve developed my career and how we approach things at HealthQuest as well.
Steve Brotman: You grew up in a family of physicians. Is that right?
Garheng Kong: In my family, I’m actually the only not-real physician. I don’t practice medicine. I have the letters, but everyone else in my family is a real doctor, as they say. If you get sick, you probably need to talk to somebody else in my family.
Steve Brotman: So you were the disappointment.
Garheng Kong: The black sheep in the family.
Steve Brotman: When did you realize that you wanted to impact healthcare from the investment side rather than the clinical or lab side?
Garheng Kong: I actually enjoyed seeing patients quite a bit. As I was going through medical school, I thought it was such a great profession. If you think about it, it’s one of the professional relationships that is quite intimate. The physician knows a lot about the patient that they probably wouldn’t share with other people, and that’s really a privileged position. But the flip side is that it’s a very one-on-one relationship. My father, for example, who’s a cardiologist, and my wife, who is also a cardiologist, might see 50,000 patients in their life and know them intimately—their kids and families. For me, even though I enjoyed it, I was really interested in impacting healthcare on a larger scale. After doing my MD, I ended up also doing a PhD. In that situation, I worked on something that happened to work, and research doesn’t always work. In my case, I was fortunate that it did. I learned about patenting and licensing and realized that nothing goes from the bench to the bedside unless it gets commercialized. That’s when I got into business and went to business school. It was really a gradual transition from seeing a patient, to trying to reach more patients, to ultimately doing business. Then I had the privilege of starting a couple of companies as the founder and CEO. I got lucky twice and realized that instead of doing one company at a time, maybe I could do 50 companies. The only way to do that is if you’re an investor. It was a gradual transition from physician to investor.
Steve Brotman: Amazing. I’ve met a few MD-MBAs, but very few engineer PhDs as well. Would you recommend that career path?
Garheng Kong: I certainly had the opportunity to learn a lot. We joke about this sometimes. Technically, I have two undergraduate degrees, two master’s degrees, and two doctorates. My investors think it’s great, but really at the end of the day, it comes down to how good of an investor you are. The rest of those are simply biomarkers.
Steve Brotman: That’s exactly right. It took me a while as well. I got a JD-MBA and thought I was overeducated, so you make me feel a lot better. Getting back to HealthQuest, given the lack of time, take us back to the moment you decided to start HealthQuest. Was there a problem in healthcare you wanted to solve? It sounds like you started a company and did some research along the way. If you could share a little about that genesis, that would be great.
Garheng Kong: When we think about healthcare at HealthQuest, we start with the fact that healthcare matters to everyone. Whether it’s you or a loved one, you’ve probably interacted with the healthcare system in some way. There are a lot of positives, but there are also a lot of opportunities for improvement. To be fair, it’s one of the most inefficient systems out there.
If you think about it, if you went to any other set of services as a customer, no retail group would make you wait three hours in a waiting room. Imagine walking into a hotel and they tell you they’ll check you in three hours from now. Somewhere along the line in healthcare, efficiency has gotten quite low.
The opportunity for better patient outcomes and better health economics is actually quite significant. When we started the firm, we asked ourselves a fundamental question. Less about modality and more about outcomes. Can we improve patient outcomes? That’s a function of both technology and delivery. And can we improve the health economics of the system?
In the U.S., healthcare represents almost 20% of GDP. That’s a huge number. The demand for healthcare is growing not just in the United States but globally. Whatever socioeconomic status you were 20 years ago, that same group now wants more and better healthcare.
Demand continues to grow, but unfortunately the inefficiency in the system is significant. That means the opportunity for innovation—both in outcomes and economics—is very large.
One thing we did that might have been a little different is that we are modality agnostic. For us, the key question is whether something improves outcomes and economics. Not whether it has to be a medical device, a drug, a diagnostic, or healthcare services.
One of the phrases I like to share with our team is that we are happy to invest in Nobel Prize-level science, but we are also happy to invest in what I call the “paper clip of healthcare.” It may not be high-tech, but if it gets used ten billion times a year and you make it a little bit better, that can be incredibly impactful.
When we started the firm, we believed there was a huge opportunity to improve healthcare in a holistic manner rather than being siloed into devices, diagnostics, or software alone.
Steve Brotman: Is that one of the edges you have compared to other healthcare venture capital or growth equity firms? Many investors get siloed. They might say they only do software or only medical devices.
Garheng Kong: Yes, I think healthcare is a very broad ecosystem. One analogy I like to use is that no physician says they are a “drug doctor” or a “device doctor” or a “diagnostic doctor.” They say they are an oncologist. They treat cancer patients.
Sometimes they use a drug. Sometimes they use a diagnostic. Sometimes they use a device.
Even though the financial system tends to silo healthcare into categories, that’s not how medicine is practiced in real life.
At HealthQuest, we think it’s important to see the whole ecosystem because it gives you an edge. For example, if you find the world’s best medical device for a certain procedure, but you miss the fact that a new diagnostic reroutes patients away from that procedure entirely, then it doesn’t matter that you found the best device.
Understanding the interconnectedness of healthcare is critical. The only way to understand where the trends are going is to see how the entire ecosystem works together.
I would say that’s one of the areas where we believe we have an advantage as investors.
Steve Brotman: Got it. As you think about improving outcomes, which sounds like one of the filters you might use before investing, do the economic outcomes and healthcare outcomes have to be connected? How do you measure that? Is it lives saved per procedure, or how much money can be generated from it? I’m curious how you think about that in practice.
Garheng Kong: In the environment we live in today, improvement actually needs to be quantified. It’s interesting because my father is a physician and my wife is also a physician, but they practiced in different eras.
Back in the day when my father practiced, the physician would say, “Mrs. Jones, I think you should do this.” Mrs. Jones would say, “Great, I’ll do it.” Then the physician would go to the insurance company and say they were doing it, and the insurance company would simply pay for it.
Today, my wife speaks with Mrs. Jones and, first of all, she has already gone to Google and looked up a hundred things. Second, the physician now has to get permission from the payer to do almost anything.
That dynamic has caused everything that gets adopted to be measured. You have to show that because of this treatment, the patient gets out of the hospital faster. Or because of this innovation, they spend less money on medication. Or objectively, they live longer. Or their quality of life improves based on some measurement instrument.
The specific metrics can vary, but in the current healthcare system, to achieve real adoption you must show measurable improvement.
The other part is that the dollars attached to healthcare decisions are now very clear. It’s possible that when my father practiced, someone could spend $50,000 or $100,000 for an extra week of life. Today, it’s much harder to justify that.
If you look at the United Kingdom, which is a modern developed country, they have their version of the FDA that approves whether something is safe and effective. But they also have something called NICE, the National Institute for Health and Care Excellence.
NICE evaluates whether something is cost-effective. They’ve determined that roughly 30,000 pounds per quality-adjusted life year is the threshold. So you can convert the currency, but essentially there may be treatments that help you, yet if they cost more than that threshold per quality-adjusted life year, they will not approve reimbursement.
That’s a very black-and-white calculation. In modern healthcare, most things that you spend money on need to demonstrate some measurable return.
Steve Brotman: Let’s switch gears a little. A founder walks into the room and you have ten minutes. In those first ten minutes, what are you trying to assess that isn’t already in the deck?
Garheng Kong: At the founder level, those individuals are quite special. They’ve decided to do something that is inherently very difficult. Starting a company from scratch is hard, and in many ways it’s a privilege to meet founders because they’re often presenting one of the most important ideas of their lives.
The first question we ask is whether they truly have differentiated insight. Are they experts in this field? Do they have an insight because they’ve spent a long time working on the problem and realized there’s something they can solve?
Founders don’t typically have a resource advantage when they start a company, so they need to have some sort of insight, technology advantage, or perspective that others don’t.
The second factor is whether they have the resilience to be a founder. Starting a company is incredibly challenging. No company grows in a straight line. It’s always up and down.
A founder needs the ability to handle those challenges.
The third aspect is balancing conviction with the ability to take feedback. Entrepreneurs often have incredible drive and optimism, which is necessary. But they also need to work with investors, partners, and teams.
There’s a balance between unbridled optimism and practical reality.
Some entrepreneurs are brilliant and driven but only want to do things their own way. That may work for them, but it can be difficult for investors who want to contribute as partners.
Founders are a very special breed of individuals.
Steve Brotman: What’s the best way for founders to reach out to you?
Garheng Kong: Most entrepreneurs are entrepreneurial in how they reach investors. Sending a business plan to a general inbox probably isn’t the best way.
The best founders network well. They find connections, referrals, or introductions through people who know both sides.
Another important factor is context. Different investors focus on different sectors and stages. For example, if someone brought me a semiconductor investment opportunity, that simply wouldn’t be a fit for us.
Entrepreneurs need to understand what the investor actually focuses on—whether that’s stage, category, or sector.
When founders demonstrate that they’ve done that homework, it’s very attractive. It shows they’ve been thoughtful, and it suggests they’ll be thoughtful when dealing with customers, partners, and the broader ecosystem as well.
Steve Brotman: Maybe if they listen to this podcast, they’ll come in a little ahead.
Garheng Kong: Exactly.
Steve Brotman: They can say, “My product delivers a tenfold reduction in cost and a tenfold improvement in outcomes,” and you’ll have them at hello.
Garheng Kong: That would certainly be a good start.
Steve Brotman: Going out a little bit bigger to the healthcare system, there’s a lot going on. About 17% of our portfolio is healthcare. What do you think is the most underappreciated structural problem in the U.S. healthcare system that investors don’t talk about enough?
Garheng Kong: I wish it were just one problem, but there are several things built into the system. I’ll give you a few examples to consider.
First, in a healthcare system that is supposed to provide care for patients, there are actually more administrators than healthcare providers. If you go into a health system and count how many nurses and doctors—people who directly touch patients—there are versus administrators handling coding, billing, legal, and compliance, it’s surprising that there are more non-providers.
That’s largely a function of how the system is structured. The reimbursement system is so complicated that you need a large number of people to deal with it. There’s also a lot of legal liability, which requires additional administrative support.
The result is that the healthcare system has accumulated many layers of complexity. That costs a lot of money, slows things down, and also contributes to provider burnout. Physicians and nurses aren’t just seeing patients—they’re navigating a very complicated administrative environment.
The second structural issue is that the system is extremely disconnected. The consumer, or patient, usually does not know how much the service they are receiving actually costs.
When you buy something like a pair of shoes, you know exactly how much they cost. You might compare several options and choose the one that fits your needs and budget.
In healthcare, when someone gets a chest X-ray or a surgery, they often have no idea what the cost will be. They’re not directly paying for it in most cases, and they usually didn’t comparison shop. They simply went to the hospital that was nearby or recommended.
That disconnect between the patient, the provider, and the payer creates a system that is inherently inefficient.
There are many other issues as well, but those two are major structural challenges that the system continues to deal with.
Steve Brotman: It’s almost impossible to talk about investing today without mentioning two letters: AI. We’re investors in a company called EliseAI that focuses on scheduling across several industries, including healthcare.
Even scheduling something as simple as a dentist appointment can be incredibly inefficient. You might have to call during certain hours, verify information, wait on hold, and deal with multiple steps just to book a time.
Do you think AI services applied to healthcare operations represent a fertile ground for investment opportunities?
Garheng Kong: AI affects every sector, and healthcare is no exception. The number of potential use cases for AI in healthcare is almost infinite.
Broadly speaking, we categorize the applications into two areas: saving time and saving lives.
The “saving time” category includes operational improvements—things like scheduling, billing, coding, documentation, and administrative workflows. These processes can become significantly more efficient with AI.
One interesting example involves chemotherapy infusion chairs in hospitals. These chairs are actually some of the most valuable real estate in a hospital system. Patients sit in them while receiving chemotherapy or other infusions.
Historically, scheduling these chairs was done on a simple first-come, first-served basis. A patient might be scheduled for Monday, Wednesday, and Friday at the same time each week.
The problem is that when a patient arrives, you don’t know exactly how long they’ll occupy the chair. One patient might need two hours. Another might need seven hours if additional treatments like blood transfusions are required.
That unpredictability made the system extremely inefficient.
With AI, hospitals can analyze patterns and optimize scheduling so that infusion chairs are used much more efficiently. That’s beneficial for both the patient and the hospital.
Another category involves ambient listening technologies. A physician can simply talk with a patient, and AI can automatically document the interaction in the electronic medical record and generate follow-up notes.
Then there’s the “saving lives” category, which is more clinical. AI can read chest X-rays, pathology slides, and other medical images with incredible accuracy.
One insight I had a few years ago is that AI isn’t just trying to become the perfect physician. In some ways, it can be better than the perfect physician.
A human radiologist is limited by what the human eye can see. AI can analyze pixel-level differences that no human eye could detect.
Steve Brotman: It can also review thousands of images very quickly. So it’s not just efficiency—it’s actually improving diagnostic capability.
Garheng Kong: Exactly.
Steve Brotman: So who’s laughing now?
Garheng Kong: I have a sister and a sister-in-law who are radiologists.
Steve Brotman: Do you tell them that this means radiologists are going out to pasture?
Garheng Kong: In defense of radiologists, some of them are interventional, so they perform procedures. But pure diagnostic radiology—AI will eventually become better, faster, and cheaper in many of those cases.
I’ll tell you something that is both promising and a little bit scary. One of the areas where demand is increasing rapidly is behavioral health therapy—particularly for children on the spectrum and similar conditions.
The challenge is that we simply do not have enough therapists. If a child needs therapy, it can take six or nine months to get off the waiting list before they can begin regular sessions.
If you look at the technology today, you or I often cannot tell whether we are talking to a human being or a computer. When you combine that with the fact that AI can be available 24/7, never has a bad day, and can adapt its communication style to the individual patient, it becomes very powerful.
For example, AI could communicate differently with a seven-year-old child from a disadvantaged background compared with a thirty-five-year-old professional adult. A human therapist is limited by their own background and style.
It’s not unreasonable to imagine that in the near future, AI could provide certain types of therapy in a way that is more accessible, more cost-effective, and potentially even more therapeutically consistent.
There are many applications like this. AI probably isn’t going to remove someone’s gallbladder tomorrow, but there are many areas—like reading medical images or certain forms of therapy—that represent relatively lower-hanging fruit.
Steve Brotman: It’s a brave new world.
Garheng Kong: Absolutely. This is a bit of a side tangent, but if you think about it, AI is very good at taking in a large amount of information and making decisions based on many variables.
In some sense, that’s what investors do. We analyze a lot of data and patterns before making decisions.
At some point, AI may be able to process enormous sets of investment-related information and identify conclusions that humans might miss.
I’m hopeful that on the private investing side, relationships and networks will still matter. But on the public markets side, where the information is theoretically equal for everyone, it will be interesting to see how AI changes things.
Steve Brotman: There was a time when people said, “Don’t become a plumber—become a knowledge worker.” Now it might be the other way around.
Garheng Kong: Exactly.
Steve Brotman: At least until robots take over that too.
Some of those robots are already impressive. Robotic surgery is already happening today. I was speaking with someone this morning in biotech who mentioned that robotic surgery can sometimes be even better than human surgery.
Garheng Kong: If you look at robotic surgery, one of the most impressive advancements is the precision scaling.
In earlier systems, when a surgeon moved their hand, the robotic instruments inside the body moved exactly the same amount. But human movement only has so much precision.
Now there are systems where a surgeon’s hand can move three inches, while the instrument inside the body moves only three millimeters. That allows for extremely fine procedures that would be impossible to perform manually.
Another benefit is that some surgeons develop small tremors as they get older. Robotic systems can completely eliminate those tremors.
Eventually, robotic systems will likely perform certain procedures even better than humans. We’re not fully there yet, but it’s not difficult to imagine.
Steve Brotman: Epic. That’s pretty amazing.
If you could go back in time and talk to your younger self, what advice would you give? What lesson would you want to share with yourself thirty years ago?
Garheng Kong: One thing I would say is that there are things you can learn by yourself, and there are things that only experience can teach you.
Instead of learning everything through your own personal experiences—which can take decades—it’s much more efficient to learn from people who have already gone through those situations.
I’ve been fortunate to have mentors throughout my career, and if anything, I would probably have leaned into those relationships even more.
Younger professionals who seek out experienced mentors can gain insights and perspectives that they simply wouldn’t have access to otherwise.
Another lesson is that things are rarely as good or as bad as they feel in the moment.
When something great happens, it might feel extraordinary. When something difficult happens, it might feel devastating. But often, a week or a month later, it turns out not to be as dramatic as it seemed at the time.
Maintaining that perspective is important, especially in high-volatility environments like entrepreneurship or venture investing.
Steve Brotman: That mentorship point really resonates. I think it takes a lot of humility to admit that you don’t know everything and that you need to reach out to others. Do you ever look for that quality in entrepreneurs—whether they have strong mentors or advisors around them?
Garheng Kong: I actually think the really talented entrepreneurs actively seek that out. I’ve met a few founders who use a framework they call a “personal board of directors.”
It’s essentially a group of mentors they trust. When they’re facing a major decision—whether it’s taking a new job, raising capital, or making a strategic shift—they go to that group and gather input.
They’re not asking the group to vote, but they’re sampling perspectives. I know a few people who have done that very effectively.
Many of the best entrepreneurs realize that seeking advice isn’t a weakness. In fact, it’s a strength. There’s wisdom in being able to learn from others who have already been through similar situations.
Steve Brotman: In my first startup, I did that fairly well. It can be painful, though, because those mentors tell you exactly how much you don’t know.
It wasn’t until I started Alpha that I built a full board of advisors and venture partners who are deeply engaged. It makes a huge difference. I don’t think many venture firms do that.
Do you have a group of mentors you turn to?
Garheng Kong: I do. I have a handful of mentors who are a generation or two ahead of me. I’ve been investing for about 27 years, but some of these individuals have been doing it for 40 years.
They’ve seen entire cycles play out and have experienced situations that I may only encounter once or twice. It’s always incredibly valuable to speak with them and get their perspective.
Steve Brotman: Have you thought about succession planning?
Garheng Kong: I think you always have to. I’ve been doing this for 27 years, but I don’t consider myself that old. Still, succession planning is important.
We have some amazing colleagues on our team. We’ve tried to diversify both in terms of capabilities and age.
It’s important to build an organization that can continue to grow and evolve over time.
Steve Brotman: Some venture capitalists say that when they retire, the firm retires with them. Others think about building a long-term legacy. How do you think about it?
Garheng Kong: It’s definitely not the former. I know some people who name their firms after themselves, and that’s just not how I think about it.
My hope is that we’ve created a culture and an ecosystem that can continue long after I’m involved. We have incredibly talented people on the team, and I’m optimistic that the firm will continue to grow.
Steve Brotman: This might be a tougher question. If you had to identify the one thing that generates your alpha as an investor, what would it be? What’s the superpower that you think you do better than most?
Garheng Kong: I would say it’s the ability to take disparate sets of facts and integrate them together.
For example, we might meet someone working in one category and remember a conversation we had with someone in a completely different category who had a related insight. Being able to connect those dots can lead to unique investment opportunities.
This also shows up in how we invest. If I simplify it with an analogy, we’re not trying to make peanut butter better or chocolate better. We’re putting peanut butter and chocolate together to create something new.
In healthcare, that might mean combining a device with AI, or pairing diagnostics with new delivery models. Integrating historically separate ideas into something new is where we often find our edge.
Steve Brotman: Outside of work, what keeps you grounded? What gives you energy that people in the industry might not know about?
Garheng Kong: I have a great wife who is not only a physician but also incredibly talented in art and music. She really brings balance to our lives.
We also have three children. I have twins and another child, and interestingly they all share the same birthday. That makes for one big celebration each year.
My wife and I were married for quite a while before having children, so in some ways we’re slightly older parents. Many of our peers are empty nesters, while we still have young kids at home.
That definitely keeps us active and energized.
Steve Brotman: Let’s do a quick lightning round to wrap things up. One healthcare technology you think is overhyped, and one that you think is underhyped.
Garheng Kong: One technology that I think is somewhat overhyped right now is gene editing.
Gene editing is extremely powerful scientifically, but the number of people whose lives it has impacted so far is still relatively small compared to the level of excitement surrounding it.
It’s an incredible scientific breakthrough, and over time it may become transformative. But at the moment, the practical impact is still catching up to the hype.
Steve Brotman: That makes sense. What about something that you think is underhyped?
Garheng Kong: It’s difficult to say something is underhyped, but one area that may not receive enough attention is the dramatic decline in the cost of genetic sequencing.
When the human genome was first sequenced around the year 2000, it took about ten years and billions of dollars to sequence a single genome.
Today, you or I can have our genome sequenced in a few days for a few hundred dollars.
That cost reduction means sequencing can now be used across a wide range of diseases, not just specialized cancer cases. It’s becoming accessible to the broader population.
It’s similar to how satellite phones used to be extremely rare and expensive, but now everyone carries a smartphone in their pocket.
Lower costs unlock massive new applications.
Most technologies go through a cycle where there’s a lot of hype, then disappointment, and eventually real impact. Sequencing has now reached the stage where the real impact is beginning to emerge.
Steve Brotman: Very cool. If you had to recommend one book or resource for someone who wants to understand healthcare better, what would it be?
Garheng Kong: There’s a book called Breathe that I’ve enjoyed. Breathing is such a basic human function, but there’s actually a lot of science behind doing it properly.
The book explains why breathing through your nose, for example, can have meaningful physiological benefits.
It’s a fascinating read that highlights how something we take for granted can have a big impact on health.
Steve Brotman: Finally, what’s the best piece of advice you’ve ever received that changed the way you invest?
Garheng Kong: The advice is quite simple: always start with the person.
Regardless of the technology, valuation, or market opportunity, the first judgment call is about the people involved.
If you find yourself having to think too hard about whether you trust or want to work with someone, that’s usually not a good sign.
Warren Buffett has said something similar—that if you partner with the wrong person, no contract will fully protect you.
In venture investing, even if the technology and market look amazing, if something feels off about the people involved, we choose not to pursue the investment.
Steve Brotman: That’s amazing. At Alpha, we do a lot of co-investing. We work with over a thousand venture firms, but there are about thirty that we rate at the highest level.
When people ask us where HealthQuest ranks, I tell them it’s at the top. I hope that after today’s conversation people understand why.
Thanks so much for joining us today.
Garheng Kong: Thanks for having me, Steve. This was a lot of fun.
Steve Brotman: Thanks for coming on the show.
Garheng Kong: I appreciate it.
