We addressed it in previous parts of the Collaborative Investing blog, but physicians don’t get involved in medical or healthtech investing (in mass) for a few consistent reasons:
1. We don’t hear about compelling opportunities until it’s too late or the initial investors are exiting their early positions.
2. Private market gatekeepers (VCs, PE firms, asset managers).
3. High minimum investment
4. High fees
Example: If you did have access to a private market deal or to a VC fund, the minimum is often $250K or higher. You have no input in portfolio design and you will likely pay a 2% annual management fee and a 20% success fee. The success or performance fee can often be assessed annually based upon “write ups” or on-paper valuation gains of portfolio companies.
Merge Medical is working with a partner to bring DAO (decentralized autonomous organization) concepts such as voting, democratized management and code-driven efficiencies to a community with the purpose of idea vetting and venture portfolio design. Four states, including TN where Merge Medical was formed, have DAO laws allowing a DAO to be an LLC. This means that the entity can have employees, a bank account and run like any other LLC.
We call this “Collaborative Investing” (CI). While we use DAO principles, we are NOT using a public blockchain, “tokens” or anything else that would be considered “Crypto”. Collaborative Investing and the first vehicle, CI Medical Venture Portfolio 1 (CI MVP1) will function with full legal clarity and 100% within the dollar-denominated banking system.
The CI SaaS helps a group of investors manage a portfolio autonomously through code and by member vote as needed. If there are unintended consequences or unforeseen circumstances, member voting can resolve.
Instead of being a passive LP (limited partner), investors are both an LP and the GP (general partner or manager). Money that would have gone to the GP stays invested within the projects, enhancing the potential return.
Fixing the high recurring fee problem: Your work, your profits, 100% There is an upfront fee for use of the CI SaaS, but management and performance fees go away.
Fixing the access and high minimum problem: What is being built by a strategic partner is a software platform and app that will allow a community to enter an investment vehicle with a low minimum of $25K (1 unit = 1 vote) and then be involved in vetting / choosing the investments within that vehicle. Target participants = 99. Maximum number of votes is capped at 5 per person. Target # of companies is 10 to 15.
The group, organized by the CI SaaS, would raise something between $2M and $2.75M to be be placed across a basket of investments. This is not a ton of capital, but ALL of the companies that we have talked with see the value in the medical network, user base and marketing arm that sit behind the investment.
Is this involvement by the medical community important? Where appropriate, should physicians and healthcare providers be more involved as advisors and/or investors within companies bringing innovative solutions, products or care delivery models to market? Perhaps this is a multi-billion dollar question. Here’s a link to an interesting article with some parting thoughts.
Why the Healthtech Revolution is Failing. In this article by Jordan Teicher, a recurring theme is exposed. After raising billions of dollars across the healthtech sector, many startups are void of healthcare professionals on their board or advisory committees. Smart? We think not!
In this author’s view, “Healthtech is plagued by execs who only talk with other execs.” “During my stint in healthtech, my company ($200M raised) had a problem: We spent an overwhelming amount of our budget and time trying to woo healthcare executives, but once deals were official, there was little to no buy-in from people who actually had to use the software…Our execs seemed to operate with the mindset of: Get bigwigs to sign the deal and figure out the rest later.”
Merge Medical Partnerships and Collaboration
Because we don’t directly compete with many other formed communities, it’s our hope that we can partner and/or collaborate with numerous individuals, communities and companies that are pro-physician and pro-healthcare provider. To this point, many companies that we have spoken with love this message and totally get it. They support us…and see how we’re getting totally screwed by big pharma, E H R companies, health systems and the insurers.
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