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Illustration: Sarah Grillo/Axios

Bernie Sanders still may eke out a win in Iowa, and is the consensus front-runner in New Hampshire. But most venture capitalists investing in America's health care industry — the primary target of Bernie's ire — have shoved their heads so deep in the sand that they've found water.

Why it matters: At some point, it could become a failure of fiduciary duty.

The big picture: Health care accounts for over 20% of all U.S. venture activity.

  • A majority of that is in biotech/pharma, which last year saw 866 deals raise around $16.6 billion.
  • Investors view many of those deals as binary: Either the drug doesn't work, resulting in a total write-off, or it does work and the financial sky's the limit. Strike out or grand slam.
  • Sanders pledges to limit the upside, either by limiting drug prices under the current system or (if he gets Medicare-for-all) by establishing a single, centralized buyer.

Few health care VCs I speak with are working on a Plan B in the event of their risk/reward models being made obsolete, nor are they hearing such concerns at the portfolio company level. Three main reasons:

  1. They don't believe Sanders will win. One investor told me he's "not electable." When I asked if he felt Trump or Obama were "electable" early in the campaign, he took a very long pause. Another said that contingencies will begin if Sanders gets the nomination.
  2. Even if he does win, they don't believe Sanders will get Medicare-for-all. This is the "Senate firewall" theory, and will probably prove correct. But it ignores that a Sanders victory likely comes with electoral coattails down-ballot, and the typical rule that new presidents get at least some version of their flagship policy. In this case, that could be drug price caps, which already has bipartisan support.
  3. If Sanders wins and implements his full plan, then it's such a revolutionary shift that there's not much health care VCs can do to counter it. As a Boston biotech investor told me, it's kind of like worrying about the size of your fund if the dollar begins hyper-inflating. Why bother? At that point, the whole thing is chaos.

Health care VCs also argue that industry concerns about a President Sanders will first be reflected in public market valuations, with private market valuations to follow. And one mentioned that there could be fewer deals in areas like ultra-rare disease drugs, which come with ultra-high prices, because of fears that Sanders could call them out by name.

The bottom line: For now, health care venture's strategy is see no Bernie, hear no Bernie. We'll see how long that's viable.

Go deeper: Venture capital has no guesses as to what 2020 has in store

Go deeper

Buffett eyes slow U.S. progress, but says "never bet against America"

Warren Buffett in New York City in 2017. Photo: Daniel Zuchnik/WireImage

Warren Buffett called progress in America "slow, uneven and often discouraging," but retained his long-term optimism in the country, in his closely watched annual shareholder letter released Saturday morning.

Why it matters: It breaks months of uncharacteristic silence from the 90-year-old billionaire Berkshire Hathaway CEO — as the fragile economy coped with the pandemic and the U.S. saw a contentious presidential election.

Restaurant software meets the pandemic moment

Illustration: Annelise Capossela/Axios

Food delivery companies have predictably done well during the pandemic. But restaurant software providers are also having a moment as eateries race to handle the avalanche of online orders resulting from severe in-person dining restrictions.

Driving the news: Olo filed last week for an IPO and Toast is rumored to be preparing to do the same very soon.

Bryan Walsh, author of Future
5 hours ago - Technology

How the automation economy can turn human workers into robots

Illustration: Sarah Grillo/Axios

More than outright destroying jobs, automation is changing employment in ways that will weigh on workers.

The big picture: Right now, we should be less worried about robots taking human jobs than people in low-skilled positions being forced to work like robots.