NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

By Elizabeth MacBride

I felt bad asking Zack Gray to repeat his story. He was used to it, he said. It’s the founding tale of his startup, Ophelia; he’d already told part of it in his commencement speech at Wharton, and to potential investors.

“There was a girl in my life,” he started. “I call her my girlfriend. We met when I was 14.” They dated, on and off, and stayed friends.

She was one of a generation who slid into opioid addiction through painkillers. A user for five years, she had the means to seek treatment after her addiction grew, but she didn’t want rehab or therapy.

Then, last spring, the call came: she had overdosed. By the time Gray got to the hospital, she was gone.

“I just started thinking, ‘What could I have done to prevent this?’” he said.

To answer that question, he researched. Since he was finishing up his MBA, the approach that seemed obvious was to build some kind of business or service. What if his friend had been able to get medicine to treat the chemical condition of addiction, without the embarrassment and hassle of group therapy? Would insurance companies buy in to his concept? Could he build a big company to help a lot of people like her? He’d need investors to believe in the idea.

As I listened to Gray explain what he was doing, headlines were washing over America. “A Torrent of Job Losses Threatens to Overwhelm the US Economy.” “Doctors Say Shortage of Protective Gear Is Dire.” “Coronavirus Hitting Homeless Population.”

It didn’t seem like a great time to be raising money.

I had originally planned to meet Gray in person. I was scheduled to fly out to California in March to attend the startup accelerator Y Combinator’s famous Demo Day. The event would host 1,000 investors and introduce them to nearly 200 vetted and prepped startups from around the globe. Ophelia was one of those startups.

I was going to Demo Day because venture capital had been America’s financial engine of innovation for years, and I wanted to see if that was still true. Many stats suggested it was: the number of venture capital firms in the US had risen from 946 in 2007 to 1,328 in 2019, and the amount of money they were managing had swollen from $170.6 billion in 2005 to $444 billion in 2019.

Venture capital has been the engine of US innovation for years. But investors are finding fewer ideas that fit their preferred pattern.

Photo courtesy of Amy Hirschi.