Webinars & Videos

AJ Loiacono & Holly Maloney (Part 1): Navigating 2022 - A Recap of Top Challenges Faced

February 9, 2023

Capital Rx

AJ Loiacono, Co-Founder & CEO of Capital Rx & Holly Maloney, Partner at General Catalyst, sat down at the end of 2022 for a candid discussion about several topics, which we’ve been able to break into a 6-part video series covering a recap of investment and business management challenges faced in 2022, the impact of regulatory progress on the pharmaceutical supply chain, General Catalyst’s decision to support CapitalRx’s mission, Capital Rx’s expansion into Medicare, suggestions for entrepreneurs and startup leadership in the current business environment, and, of course, their respective outlooks for 2023!

Part 1, Navigating 2022 – A Recap of Top Challenges Faced, includes AJ’s and Holly’s reflections on the top challenges they faced throughout the year, including investing thoughtfully and strategically in the healthcare sector throughout capital markets uncertainty, inspiring innovation in health care, and navigating rapid growth and national expansion.


Lightly edited for length and clarity.


AJ Loiacono - Capital Rx

I’m AJ Loiacono, the CEO of Capital Rx, and I’m joined today by Holly Maloney, a Partner with General Catalyst.


Holly Maloney - General Catalyst

Hey! Hi, everyone. Good to be here with you.


AJ Loiacono - Capital Rx

We've had a very interesting 2022 with a combination of interest rate changes, geopolitical affairs as well as just changes in general to the investment sector. So, what are some of the things you've seen with 2022?


Holly Maloney - General Catalyst  

Yeah, 2022 has certainly been an interesting year for all the reasons you mentioned.


But the reality is, is that as we think about our investing at General Catalyst in healthcare, healthcare is secular, not cyclical. So regardless of what's happening with inflation and geopolitical challenges. People are still sick, and our health care system is still broken, which is why we have a clearly defined thesis around Health Assurance, which is: making our system more personalized, proactive, at a lower cost, and more accessible for the most marginalized communities. All those statements are still a work in process, but it's why we have a dedicated team. We have a dedicated fund that invests in companies of all stages that are really addressing this thesis area and we're still actively investing. So even though if you look at the stats that Rock Health will release… the third quarter of this year was the lowest funding quarter in 11 quarters that they've seen. We've still been really active.


I recently made investments in companies like Maven Clinic in the women's health space, Ripple in the senior behavioral health space, and Cartwheel in the K-12 behavioral health space. So, we're still actively looking for exceptional teams that are building enduring companies because, you know, enduring companies should endure. And that means lasting through many different market cycles. And it's certainly why we invested in Capital Rx in 2022. I think it was May or June when the investment closed; it was because Capital Rx is so aligned with our Health Assurance thesis.


We've been studying the pharmacy benefit management (PBM) market for a really long time and have never found the model and the team that felt compelling to invest in; understanding the nuances and all of the challenges with that space, from a transparency perspective, from a technology perspective, there really is no modern infrastructure to support a fully transparent lowered drug pricing that we all need and should expect as consumers. So, once we met you and your team, we just knew that this was absolutely the opportunity that we wanted to meaningfully invest in, again, regardless of the backdrop of the market.


AJ Loiacono - Capital Rx

And obviously, we're incredibly appreciative because, without strong partners, companies like us can't tackle some of the biggest problems in healthcare.


Holly Maloney - General Catalyst  

Well, speaking of 2022, what did you, as the co-founder and CEO of a really fast-growing company in the healthcare space, see as your biggest challenge over the last year?


AJ Loiacono - Capital Rx

Yeah, I think for us, let's start with the growth factor. Whenever you grow over 100% year over year, you obviously have a host of challenges in general with staffing and operational support, your go-to-market strategy is refined as well, but I think it's also kind of leftovers from the pandemic. Where we were originally 100%, or close to 100%, a New York City-based organization, and we came in five days a week. It didn't matter if you were an engineer, a salesperson, or a pharmacist. And then, we look at the accelerated growth and suddenly, we're in 31 states, and we're only about 35% New York metro region. And so, we grew rapidly but apart, but how do you stay unified?


So I always say that's one of the biggest challenges because, throughout my career, I always feel like staying in touch with all of your colleagues is so important because you're constantly looking for who are your next-gen leaders, who are your “A players” that are going to stand up and take on new challenges and oftentimes these become your peers over time in the organization, which is absolutely true historically for this organization, and for other firms I've worked with. And so, I think the greatest challenge for us is hyper-growth in this disparate office environment that's also hybrid. So even when you can come into the office, you don't have to.


And I think that's an important part because I will say, even for myself on work-life balance, I was reintroduced to my family. I think it’s amazing that you do have that opportunity, and you do gain efficiency, but there is something missing, and I think that's something that we worked very hard through communication and training, and we're still solving for as we move forward. It's something we will probably still have to address in ‘23 and beyond.


AJ Loiacono - Capital Rx

So, what are your “biggest challenges that you faced” in 2022?


Holly Maloney - General Catalyst  

Yeah, it's a really good question.


Despite the tornado that is having two babies under two, which is a whole different set of challenges, as I think about the business that we're in, one of my partners always says, “You need to define reality but give hope.” And so, really, using that in the context of the environment that we're in, where you do really need to define reality for the companies that you're invested in, partnered with, and in the trenches with in terms of the economic backdrop of a shift from the focus on growth at all costs to what are the actual what is the stability and, you know, operating overall operating leverage of a business.


We've definitely had to kind of shift and sometimes educate younger first-time founders on what that really means and how to set up the company not just for the immediate term but for long-term success. Because as I mentioned, we look for companies that will endure, and the only way you'll endure is if you kind of survive this time and can prosper under a slightly perhaps different financial model, but then also give hope, right, because there is still no better time to be building a company than today, especially in healthcare given the enormity of challenges that we're trying to solve. And so, still making sure we're inspiring people to innovate, even if it might be again, under a different set of circumstances, but to still e willing to take risk and be willing to push the boundaries of the art of what is possible.


It can be a tricky dance to navigate. But it has to be the focus for us as a partnership and we have that fiduciary responsibility to our LPs, which includes some of the health systems, endowments, and pension funds to ensure that the companies we're investing in can thrive.

If you'd like to watch any of the other videos in this series:

Part 2: Outlook for 2023 – What to Watch For

Part 3: Capital Rx’s Expansion into Medicare

Part 4: Regulatory Progress – The CAA & IRA

Part 5: The Decision to Back Capital Rx

Part 6: Suggestions for Entrepreneurs & Startup Leadership

Click here to get in touch with Capital Rx and learn more about our full-service PBM and PBA solutions.

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