The Wisdom of the Crowd?

This is the second in a series of articles where we examine the macro-level trends that support the thesis of our business.

The wisdom of crowds is a well-studied business phenomenon chronicled in a book by James Surowiecki. He makes the case that, under the right circumstances, groups are remarkably intelligent and outperform the smartest individuals in the group. AngelMD believes that our digital network is the best mechanism for identifying the best healthcare innovations.

Not everyone agrees in the power of the crowd. Charles Mackay published a book Extraordinary Popular Delusions and the Madness of Crowds. The book could serve as in strong indictment of Twitter in spite of it being published in 1841. The fact is that groups, when properly organized, can perform at an extraordinary level.

There are a number of examples where the crowd’s wisdom outperformed smart individuals. In 1968, Naval Officer John Carven was responsible determining what happened to the US submarine Scorpion. The vessel disappeared on its way back to Newport News, VA from a tour in the North Atlantic. The Navy started a search in an area 20 miles wide and in water many thousands of feet deep based upon the recommendation of a few experts.

After a fruitless search, Carven assembled a team with wide knowledge including mathematicians, submarine specialists, and salvage experts. He did not allow the group to meet together but rather to provide their best estimate of where the submarine might be based upon limited available knowledge. Carven utilized Baye’s theorem (probability of an event, based on prior knowledge of conditions that might be related to the event) to process the individual recommendations. The group pinpointed the location of the sub within 220 yards of where it was located. No individual in the group had performed to the collective wisdom of the crowd.

A fun example is the old TV show Who Wants to be a Millionaire. A contestant was asked multiple choice questions that got progressively more difficult. If stumped, the contestant could have two answers removed (odds now 50%), call a friend who they had designated as the smartest person they knew, or ask the studio audience. Over time, experts provided the right answer 65% of the time while the audience picked the right answer 91% of the time. Contestants soon learned that the crowd was the best choice for the most challenging questions.

There have been a number of research projects conducted by experts that have validated the power of the crowd. Each of these studies identified that groups performing independently of each other came to the best answer. We also see this played out daily through sporting lines generated by casinos in Las Vegas. The bookmakers publish the initial line for the game and the crowd can then move the line based upon their “individual” wisdom. In the end, the casinos make money because the line evenly divides individual wisdom between winners and losers.

James Surowiecki determined that there are four required elements to form a wise crowd:

  • Diversity of Opinion – Each person should have private information…even if it is just their interpretation of the faces.
  • Independence – People’s opinions aren’t influenced by the opinions of others in the group.
  • Decentralization – People are able to specialize and draw upon local knowledge.
  • Aggregation – Some mechanism exists for turning private judgements into a collective decision.

At AngelMD, we believe in the power of the AngelMD digital network. Our model for evaluating startups closely follows Surowiecki’s recommendations.

  • Diversity of Opinion – AngelMD scores startups in the network by individually polling physicians and experts electronically.  
  • Independence – The scores from AngelMD members are captured independently of one another.
  • Decentralization – The AngelMD members that score companies are geographically disperse and represent a number of healthcare delivery mechanisms including teaching hospitals, community hospitals and physician practices.
  • Aggregation – The AngelMD Metis scoring engine provides the mechanism for turning our member judgements into a collective decision.

AngelMD believes that our network is the best platform to source, score, and finance the best healthcare startups. The most critical role, however, may be the function that our network plays in advising the companies after the investment event. Whether it be providing product feedback, tuning the go-to-market model, or unlocking access to healthcare buyers our members are actively involved in helping startups achieve the best possible outcome for patients, investors and startups.

In our next article, we will discuss the proven power of digital networks and multi-sided markets. Ready to get started? Become a member of AngelMD and impact the trajectory of healthcare by scoring startups in our network.

Recommended reading: The Wisdom of Crowds by James Surowiecki which served as the basis for this article.

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Investing Catches Up to the Technology that it Funds

As we discussed in a recent blog post, naming your company can be one of the biggest, early challenges. But long before you settle on a name, you first need to find an area where the market could use a better answer. This is the same process that we went through as we founded AngelMD. In this post, the first in a series, we will examine one of the macro-level trends that helped form the thesis of our business.

Digital technologies have transformed a multitude of analog industries that Americans rely on daily. We skip teller lines by banking online, conducting transactions on our mobile devices and securing cash across a connected a globally-connected network of ATMs.  We avoid travel agents by shopping for tickets online, bypassing security lines with fingerprint scans and boarding planes with barcodes on our phones. We eschew stock brokers to make stock trades on our mobile devices while managing our 401K online via access to a wide range of investment options.

With all of this progress, why haven’t angel and early-stage investing followed suit? Angel and early-stage investing are processes that continue to rely on analog methods, with deal flow localized to limited geographies.

AngelMD is transforming angel and early-stage investing. We are doing this by building a digital platform that brings scale and efficiency to this neglected investment category.  The goal of this multi-sided market is to source, finance, and support the world’s leading healthcare innovations. We accomplish this goal by driving healthy returns for investors, successful outcomes for entrepreneurs and industry, and ensuring that patients receive the most effective new advancements possible.

AngelMD is the online community for physicians to connect with their peers to identify, evaluate, invest, and advise healthcare startups. The 42 investments made by AngelMD thus far were sourced by physicians on the platform. No longer are physician/investors limited to healthcare innovations from locally-circulated business plans. The funnel of startups on the network is curated for potential investment by online scoring tools completed by physicians and experts.

Physicians and accredited investors have participated in 29 funding syndicates or as limited partners in the 13 investments made by the AngelMD Catalyst fund. The online community has finally become a platform for physicians to learn about early-stage investing while growing their business skills and professional networks.

Startups are able to digitally promote their company across the ten thousand plus members on the network. They are able to validate the fit and finish of their product via surveys pushed to physicians in the AngelMD community. The best companies receive funding with a single item on their cap table from the AngelMD network.   Finally, companies are able to leverage the network for advice on how to best grow their companies.

Industry merger and acquisition teams also benefit from early deal flow becoming digital. They can measure and test out physician affinity for new product categories. The digital platform allows potential acquiring companies to test, within the AngelMD network, the choices that they are making when it comes to spending their generational cash reserves. In summary, industry players will bring efficiency to their M&A teams by subscribing to the AngelMD platform.

Fundamentally, AngelMD is a technology company focused on transforming early-stage investing much like technology has disrupted other analog industries.  Our roots in Seattle allowed us to benefit from watching Amazon transform shopping, Expedia change travel, and Zillow provide transparency to real estate values.  Our vision as a business is to redefine and own the global healthcare investment ecosystem.

In our next article, we will discuss the power of crowds as it relates to investing. Ready to get started? Become a member of AngelMD and join our journey.

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OKRs: Fad or a Foundation?

John Doerr, a renowned venture capitalist at Kleiner Perkins, gained insights to the concept of OKRs early in his career from Andy Gove at Intel in the 1970s. After John left Intel and later joined Kleiner Perkins, he utilized the 30 slides that Andy had built to introduce the OKR concept to his portfolio companies.  

The concept of OKRs is relatively simple in design and powerful in its impact.  The Objective is what we want to have accomplished. The Key Results are how we going to get it done. The objectives are typically longer lived. They’re bold and aspirational. The key results are aggressive, but always measurable, time-bound, and limited in number.

One of Doerr’s portfolio companies was Google and the founders quickly implemented the management tool with great success. Eric Schmidt in this book “How Google Works” claimed that the introduction of OKR’s in 1999 “changed the course of the company forever.”

There are only three to five objectives for the organization. For each objective, there are three to five key results. The discipline of the system is determining what are the most important things for the business.  Each employee should then create their own OKRs tied to the same “True North” objective for the company. The system also should be transparent to the entire organization. Even today, Google employees can look online at any of the OKRs for each employee in the organization.

We believe that OKRs can be implemented with great success from small startups to large organizations.  John Doerr has recently written a book “Measure What Matters” which should be a must read for startup CEOs.  In the book, John identifies the five key benefits of the OKR system.

  1. Focus –formalizes the most critical objectives for the organization.
  2. Alignment – the entire organization is aligned around common objectives
  3. Commitment – transparency creates accountability
  4. Tracking – measuring progress is critical
  5. Stretching – set 10x’s goals, if you shoot for Mars and fall short you make it to the moon!

The above spells out FACTS which makes it easy to remember.

During the December annual planning summit for AngelMD, we went through a process of determining the OKRs for our company. The objectives centered around membership growth, member online engagement, and growing assets under management. Each team created a series of key results that aligned to these true north objectives. In the next month, we will bring up an online platform for making the OKRs transparent across the organization.

We believe so strongly in the power of OKRs that we will begin encouraging our own startups to use the system. We believe that the best ingredient to a great idea is great execution. In our view, this is not a fad but rather the foundation to a successful startup.

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Building Your Brand: What’s in a Name?

At AngelMD, we see a bevy of new startups each month. As part of the AngelMD network, you see many of them, but some startup profiles never reach approval. Often times, that’s because someone wants to create a profile for an idea rather than a company. Part of building a company is choosing a name and then starting to build a brand. For many aspiring founders, these starting points become stumbling blocks.

Over the next few months, we will discuss what goes into building a brand. Our first stop? Choosing a name. While the brand isn’t the company name, the company name is certainly part of the brand. But the entirety of the brand goes far beyond just the name. Your brand is a purposeful mosaic of the name, your logo, imagery, color schemes, positioning, your voice, the language that you use, and ultimately the promise that you’re making.

Naming a company can be the most frustrating part of a forming your new venture. The trademark and URL search almost always uncover that your first choice of company name is not available.  Although time consuming, it is important to get this right. Changing you name downstream can get very expensive.

So how do you decide what to name your company? Here are some points to consider:

  • The name describes your business.  We selected AngelMD because we thought it best described our business.
  • The name should not be limiting as your company grows.  Including the name of your city in your company name will not travel well to a nationwide launch.
  • Don’t name the company after yourself.  Sure, it might have worked for Henry Ford, but that is certainly the exception and not the rule.  
  • Avoid names that are hard to pronounce or spell.  A good start is to test the name out on your mom, spouse, sibling or children.
  • Limit yourself to 3 syllables.  The longer the name, the less likely that it will be memorable or readily shared.
  • Secure the trademark and URL. It is cheaper to start your search with a domain registrar rather than your local trademark lawyer.

While all of these points are easy to put into words, they’re more challenging to set into action. Don’t let that be a sticking point that keeps you from moving forward with your company. To point out an example of good branding, look at AngelMD portfolio company VICIS. VICIS has done a masterful job of integrating their brand into all facets of their company. They are a great example of a startup simultaneously building their brand while they perfected their product and go to market.

If you are a startup and made poor branding choices, you are not alone and it’s not too late to correct your course. Here are some well-known companies and the early mistakes that they made choosing a name:

As you look at the above list, it is hard to believe that these companies would have achieved the same level of success without undergoing a name change. That said, changing the name of a company is a delicate process and should not be taken lightly.  

Another challenge that startups have is that their product “brand” supersedes the company brand.  A great example of this in healthcare IT is QSI whose portfolio product NextGen was better known than the corporate brand of QSI. Ultimately, QSI rebranded the company NextGen rather that absorbing the cost of building two brands. Ideally, you want to bundle the corporate name into your branding choices. Allscripts is a HCIT company that did not fall into the same trap as QSI/NextGen. Their leading portfolio product names were Allscripts Touchworks and Allscripts Professional.  

Naming your company, and building the associated brand, is not about your ego. It’s about building a foundation for your future success.

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What is Impact Investing?

There is a definite buzz around the term “impact investing”, and it’s only gotten louder over the past few years. The idea behind impact investing is that, as investors, we should put our money into projects that we believe have a net positive impact in the world around us. The idea itself isn’t new, but it has certainly gained traction.

One prominent example of impact investing emerged in 2016. The Rise Fund was started at an exclusive gathering held at Richard Branson’s Necker Island. The event was hosted by Jeff Skill, eBay’s first employee. The conference held a simple agenda — to define big ideas to save the world. The Rise Fund was one such idea. The premise behind The Rise Fund is that it would invest profitably, but would only do so while having positive social and environmental impact. Two years later, parent company TPG is looking to raise $3 billion for its second Rise Fund.

It is a generally-accepted idea that, in impact investing, the expectation of financial return is relaxed in order to allow for investments that have greater impact. That said, at AngelMD, we believe that you can still have a significant impact without having to sacrifice alpha. In fact, we branded our annual meeting for physicians and investors as The Alpha Conference for that very reason.

While we understand that newer investors may be focusing less on impact than returns, we’d like to challenge that way of thinking. For example, look at this list of problems:

  • Inoperable brain cancers
  • Scoliosis impacting young children
  • DNA-specific medical treatments
  • Global vaccine delivery
  • Concussions in sports and in combat
  • Drug delivery for the ears and eyes
  • Oxygenation monitoring in preterm neonates

It doesn’t take a stretch to say that these are impactful solutions to big problems. But what do they all have in common? They’ve all been sourced and funded by AngelMD.

One lingering problem with impact investing is that it will reach into investment classes for which there is very little data. AngelMD is matching the leading startups in the world with physicians and investors to help de-risk these ventures and accelerate their path to market.

The market for healthcare innovation is highly fragmented, and lacks the structure required to optimize for speed. Innovators often find themselves spending too much time and energy chasing capital instead of developing and commercializing their products. By getting the right physicians and advisors involved early in the process, AngelMD helps to accelerate progress, avoid roadblocks, and thus maximize investment returns.

Our goal at AngelMD is to provide better returns for investors. But ultimately this requires that we provide better economics, results, and a better quality of life for patients.

There are painfully few areas in life where you can have your cake and eat it too. We have taken great care to provide a way for investors to not only have an impact, but also realize returns that any investor would be happy to see.

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