This health tech start-up refused to take money from VC firms unless they had a female partner

Key Points
  • Ooda Health has an ambitious mission and a founding team with decades of experience in health care.
  • It had its pick of venture capital firms that wanted to invest.
  • It chose strong female leaders, including Oak/FT's Annie Lamont and DFJ's Emily Melton.
Ooda Health

When some well-regarded health-tech entrepreneurs decided to start a venture dubbed Ooda Health, they had their pick of venture capital firms.

So they made an unusual step of narrowing it down to investors at firms with strong female leadership. That's a small group, since only about 8 percent of partners at venture firms are women. And many of them do not have a background in health and technology.

After a months-long process, co-founders Seth Cohen, Giovanni Colella and Annie Lamont, an investor who also led Ooda's $2 million seed round, opted for Emily Melton, a health investor from the venture firm DFJ, to lead the first institutional round. Among other qualifications, Melton is involved in an initiative called All Raise, which aims to increase the number of women in the senior ranks of venture capital.

Melton told CNBC she heard about the venture through the grapevine and was impressed with the team. So she reached out to Colella, a doctor whom Melton has known since her early days in venture; Colella previously sold a patient-doctor communications start-up, RelayHealth, to medical distributor McKesson.

Cohen and Colella hail from Castlight Health, which went public in 2014. Ooda hasn't shared many specifics about its plans, but the founders said they're hoping to rework the broken health-care payment system. It is honing in on the billions of waste that racks up when money shifts from insurers to health providers, including doctors.

The founding team is looking to use its connections in the industry to reform this system of payment, starting off by paying doctors much more quickly than usual after they see a patient.

"There's so much opportunity through economies of scale and efficiencies to fix health care, which I see as a social and moral imperative," Melton said.

Cohen agreed that the mission is big, explaining that the founding team came together to "go into battle and do something compelling."

Along with DFJ, the company also received an investment from Lamont's fund, Oak HC/FT, as well as from some insurer customers, including Blue Shield of California. The company has now raised a total of $32.5 million.

Ooda's investors agree that the company's decision sends a powerful message, but that they ultimately came on board because they see a strong investment opportunity at a time when insurers are looking for new models, consumers are increasingly paying health expenses out of pocket and large employers are fed up with the status quo.

Both agree that diversity in venture could improve when entrepreneurs care about the issue — and when they have the power to insist on it in their funding partners.

Lamont, who also invested Castlight and in other health-tech successes like Athenahealth, said she hopes other entrepreneurs will follow suit.

"In some ways, [Cohen and Colella] have the luxury of doing this," said Lamont. "But I certainly think it sends a message, and I feel like the industry is sitting up and taking notice."