Investor Q&A: Jeff Haywood on Pattern Recognition, Team DNA, and the Personal Side of Healthcare Investing

Jeff Haywood has co-led Spectrum Equity’s healthcare investments with Managing Director Steve LeSieur since 2015, a vertical the two started building together nearly 20 years ago when neither of them was particularly senior. We sat down with Jeff to learn how he thinks about healthcare investing, what he’s learned from close to two decades on the job, and what he actually wants to hear from founders.

You took an unusual path into investing. How did you end up here?

In school I studied political science, not finance. After college I spent some time in real estate development, which I found interesting but not quite right. I eventually made a deliberate choice to go into investment banking later than most of my peers. Not because I stumbled into it, but because I felt like I was missing a real analytical foundation, and I wanted to build it.

So I joined Goldman Sachs and spent a few years working on large transactions. That was a rigorous environment. But growth equity offered something different: you could watch how decisions accumulated over time. You could see what separated the companies that broke out from the ones that didn’t, over years, not months.

I also grew up watching my father run a forklift distribution business in Maine. That’s a very different world than private equity, but it left me with a real appreciation for what it takes to actually build something. My mother is a nurse. So healthcare wasn’t just a sector I landed in. It was familiar to me in some personal way before it became a professional focus.

Healthcare was, in your words, “the road less traveled at Spectrum” when you started. What did that mean in practice?

When Steve and I started building out the healthcare vertical, we were an associate and a senior associate, or VP — I can’t remember exactly where Steve was at that point. But we were not the most senior people at the firm. And healthcare was not a heavily covered area at Spectrum in 2007, 2008, 2009.

So we gave ourselves the job of figuring it out. We built market maps. We developed themes. We made it our responsibility to become, to a reasonable degree, the subject matter experts the firm could rely on.

That’s what I mean by entrepreneurial environment. Spectrum gave us the space to go do that. Nobody handed us a vertical and said, “Here’s your lane.” We identified the opportunity and went after it. That’s something I don’t take for granted about Spectrum.

What made healthcare specifically compelling from an investing standpoint?

Healthcare was, and still is, somewhere around 18 to 20 percent of GDP. And it was running years behind other industries in how it used technology. That’s a large, durable market with a real adoption gap. From an investment standpoint, that combination tends to be interesting.

The specific lens we bring is that business models that have worked in other end markets often translate to healthcare, sometimes with a lag. We’ve watched these patterns show up in fintech, in edtech, and then see similar dynamics emerge in healthcare a few years later. Two-sided networks are a good example — connecting two distinct groups who need each other, with the platform sitting in a valuable place in between. That model has shown up in a lot of end markets before healthcare caught on to it. When you’ve seen a model work elsewhere, you can sometimes take a position on a healthcare company before the broader market has conviction.

“When you’ve seen a model work elsewhere, you can sometimes take a position on a healthcare company before the broader market has conviction.” - Jeff Haywood, Spectrum Equity

You’ve said you’re willing to invest in companies with smaller TAMs when others won’t. Why?

Smaller total addressable markets get companies shown the door in a lot of investment conversations. I understand why. But our entry points in healthcare are typically specific enough that we don’t need to create a billion-dollar exit to generate a great outcome for everyone involved.

If a company has a genuine right to win within a defined market, and there’s a realistic path to expanding use cases or customer types over time, a smaller starting TAM isn’t the problem it looks like on paper. Some of our best outcomes came from markets that looked narrow on a slide deck. What mattered was that the company had a real defensible position position and a right to win as the market evolved.

“Some of our best outcomes came from markets that looked narrow on a slide deck. What mattered was that the company had a real defensible position and a right to win as the market evolved.” - Jeff Haywood, Spectrum Equity

What patterns show up in your most successful companies?

It almost always comes back to team. Not just who’s on it at the time we invest, but how the team evolves.

What we’ve found is that the companies that really perform tend to do two things well simultaneously. They identify and move internal people into bigger, more impactful roles as the business grows. And they bring in external people with very specific skill sets to fill the gaps that internal promotions can’t. It’s not one or the other.

Companies that go almost entirely external, bringing in a lot of new faces at once, tend to struggle with the culture and institutional knowledge that made the business work in the first place. The people who’ve been there since early days often understand the end market and the company’s DNA in ways that new hires can’t always absorb quickly. The goal is to preserve what’s working while adding what’s missing.

Team questions from founders are common when a new investor comes in. What are you hearing most often?

The most common one is some version of: is the person who got us from $2 million to $20 million the right person to get us from $20 million to $100 million? That comes up constantly, and there’s no universal answer. Sometimes the answer is yes, with real support. Sometimes it’s not, and having that conversation honestly is part of the job.

The other one that comes up often, especially in healthcare, is how much direct subject matter expertise a specific role actually requires. Founders understandably worry about hiring someone without a deep healthcare background. And there are certainly positions where that background matters. But I push back fairly often on the idea that every impactful hire has to be a healthcare lifer. We’ve seen people come from outside the sector and have real impact, precisely because they bring a different frame to problems the industry has stopped questioning.

Can you give a concrete example of how your talent network works across the portfolio?

Sure. The new CEO of VBA is Daniel Laroue. He was VP of Finance with some operational scope at PWNHealth, a previous portfolio company. Actually, very early in our involvement at PWNHealth, the founder flagged him to me. He said, “Keep an eye on Daniel. He has what it takes.”

After we sold PWNHealth to Everlywell, Daniel stayed on there for a while, then went and became a COO at a company we had no connection to, but we stayed in touch. He stayed in our network. When the opportunity at VBA came up, it made complete sense. He’s off to a strong start.

That’s not a straight line. It took years. But it’s a pretty typical example of how we think about people: you find someone with the right qualities, you keep that relationship, and eventually the right situation appears. We’re very deliberate about who we stay close to, because those relationships compound over time in ways that are hard to manufacture.

How is AI changing what you look for in healthcare companies?

The honest answer is that the questions we’re asking in diligence have changed pretty materially in the last couple of years.

AI in healthcare is genuinely exciting, but it’s not a peanut butter spread that works the same across every application. The stakes in healthcare are so high and auditability matters. You can’t just generate an output — you need to be able to test and explain that output. That’s a real constraint on where AI applies cleanly, and where it requires more care.

So the specific questions we’re now asking: how can this company use AI to accelerate product development and expand what they offer customers? That’s different from just asking whether they can cut costs and run leaner. Both matter, but the second one tends to be table stakes while the first is where the real upside lives.

The other big one is moats. AI is sharpening everyone’s focus on what actually protects a business long-term. We’re asking: can AI deepen this company’s differentiation? And we’re also asking the harder version: could AI erode it? Both are fair questions now.

“We’re asking: can AI deepen this company’s differentiation? And we’re also asking the harder version: could AI erode it?” - Jeff Haywood, Spectrum Equity

What do founders not ask you, but you wish they did ask?

I think founders want to know — but don’t feel like they can ask — what will happen if things don’t go as planned. And they might avoid that question because they don’t want to introduce doubt into the room early. But our hold periods run three to six years. Over that time, things happen. Markets shift. Execution misses. The macro does something unexpected. A company that’s never dealt with adversity is unusual.

Understanding how an investor behaves in those moments is actually more revealing than understanding how they behave when things are going well. Our approach when a company hits a rough patch is to help the team focus: figure out what the real problem is, strip back the things that aren’t core, and execute well on what matters. Growth-stage companies often feel pressure to launch new products, enter new markets, expand in every direction at once. That impulse gets worse under stress. The companies we’ve seen work through difficult periods tend to be the ones that had the discipline to narrow their focus and do the core thing really well before expanding from it.

“Our approach when a company hits a rough patch is to help the team focus: figure out what the real problem is, strip back the things that aren’t core, and execute well on what matters.” - Jeff Haywood, Spectrum Equity

You’ve been at Spectrum for almost 20 years. What’s changed in how you think about this work?

When I was younger, investing felt closer to a math formula. Business model, financial performance, TAM, competitive dynamics — you could almost build a checklist.

What I’ve learned is that those things matter, but the DNA of a company and its team drives outcomes in ways that are genuinely hard to model. Early-stage investors often say it’s all about the team, almost nothing else. That’s not exactly right in our stage, where you need real product-market fit and defensible differentiation. But the way people operate, the culture a company has built, the instincts that got it to the size it is when we invest — those things determine what happens during our hold period as much as anything in the model.

That took me a long time to fully internalize. I think it takes most investors a while. You have to see it enough times to believe it.

What do you want a founder who’s considering Spectrum to know about working with you specifically?

I have a genuine admiration for people who build companies. Turning an idea into an organization of any real size takes vision, tenacity, a set of skills that doesn’t stay constant over time, and a tolerance for uncertainty that I don’t think outsiders fully appreciate. That’s actually interesting to me — not interesting in a professional sense, but personally interesting. I want to hear those stories.

So when I’m across the table from a founder, I’m trying to understand how the business really works, and I’m trying to establish whether I have anything useful to add to what they’re already doing. Not by listing credentials, but by connecting something I’ve seen before to their actual situation. That’s what I want the conversation to be.

Jeff Haywood is a Managing Director at Spectrum Equity, where he co-leads the firm’s healthcare investment practice. He joined Spectrum in 2007.