The Rise of the Family Office as an Investor

Three main drivers for macro-economic growth for any country’s economy include accumulation/deployment of capital, increase in labor outputs, and technology advancement. AngelMD is focused on driving healthcare growth by both unlocking access to capital and supporting the very best healthcare technology advancements.

Family offices today are playing an increasing role in deployment of capital on a global scale. In 2008, an estimated 1,000 single-family offices were in the world. Less than a decade later,  Ernst & Young reports the number has grown to more than 10,000 family offices globally. Family Office Exchange says that, while most estimates peg the current number of family offices in the United States to somewhere between 3-5,000, the real figure could be closer to 6,000.  

Research conducted by Dominic Samuelson, CEO of Campden Wealth, suggests family offices currently hold assets in excess of $4 trillion. Family offices are now capable of making transactions that were traditionally reserved for big companies or large venture and private-equity firms, therefore making them a notable force in the marketplace.  

The Global Family Office Report shows more than a quarter of family offices (28%) report being engaged in impact investing (i.e. investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.) Two-fifths plan to increase their allocations this coming year, a push largely attributed to ethically-minded millennials moving up through the family ranks.

A major trend affecting future growth of family offices is to balance changing investment strategies for increased emphasis on direct minority-stake investments, yet more active participation in the strategic management of these investments versus rising operational costs and the need for specialist, more scarce talent.   

Impact investing by Family Offices is a natural fit on the AngelMD platform. Rather than building up staff to evaluate healthcare investment alternatives, Family Offices can rely upon the AngelMD network to source, evaluate and deploy capital to the best healthcare impact investments.

The JOBS Act created the regulatory framework for AngelMD’s syndicated investment model for accredited individuals. To be considered accredited, an investor must have a net worth of $1,000,000, excluding the value of their primary residence, or income of $200,000 each year for the past two years. In just over 24 months, AngelMD has been able to leverage our digital platform and network of accredited investors to execute 30 syndicate investments in leading healthcare startups.  

AngelMD physicians are able to play a key role in our syndicate investment vehicle by sourcing, vetting, scoring, and advising the best healthcare startups. A portion of the AngelMD physician membership also participates as investors and leaders in syndicate opportunities. This proven model, however, is materially enhanced when complemented by funds that are available to precede and/or follow-on to syndicated investments. This rationale underlies the creation of AngelMD’s Catalyst family of Funds.  

The Catalyst I LP fund leverages the network as an input to investment decisions made by each Fund Manager. Rather than investing in individual syndicates, family offices, institutional investors, and sovereign funds view AngelMD funds as the more efficient model for capital deployment. Over time, AngelMD will create a number of thematic funds that will deploy significantly more capital than our syndication model.

The AngelMD network of family office membership will continue to grow as they seek platforms that provide returns while simultaneously providing societal impact. Over time, we believe that the majority of our deployable capital will come through those relationships.

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Lessons Learned from Amazon’s Entrance into Healthcare

Amazon is the disruptive threat that is considered by many healthcare corporate strategists during their annual planning cycle. Amazon is a threat because they have a demonstrable track record of wringing out the inefficiencies in markets.

The acquisition of Whole Foods terrified the traditional grocery chains — and the market agreed driving down their stock prices the day of the announcement. A year and a half later, Amazon has shown the ability to grow their Prime membership via their Whole Foods channel. They are capturing “big data” shopping habits which will ultimately fuel the pivot to the grocery home delivery market. That is the nightmare scenario for grocery stores looking at becoming the next Borders bookstore.

That transition will be driven by improving the customer grocery shopping experience.

Amazon’s first significant foray into healthcare is the acquisition of PillPack, an online pharmacy company. PIllPack simplifies medication management for consumers by delivering packets with presorted does. A person receives a packet with all of their day’s pills in a single pouch.

The interesting part of the strategy is that they are effectively targeting the small population of individuals that consume the vast majority of prescribed medications.  

The acquisition of PillPack gave Amazon a foothold in all 50 states. This foothold will greatly accelerate its entry in to this regulated space. The stock prices of CVS, Walgreens, and Express Scripts immediately took a hit the day of the announcement. CVS has since launched next-day prescription delivery services in an effort to fend off Amazon’s approach.

Amazon chose this healthcare entry point because of the inefficiency of the current market, as well as the poor customer experience. This approach is in keeping with Amazon’s relentless focus on customer as they transition into new markets.   

It is interesting to revisit the 1999 CNBC interview with CEO Jeff Bezos in light of the above two transactions. That theme is repeated again in the 2018 letter to Amazon shareholders. If you look back at all 23 letters to shareholders, the word customer appears 443 times making it the most common word in all letters.

By contrast, Amazon is mentioned only 340 times.  

How does Amazon achieve their focus on customers without having direct dialogue? Have you ever been able to get someone on the phone at Amazon? Universally, the answer is no.

  • They accomplish this by leveraging their digital platform to observe online behaviors.
  • They experiment relentlessly to improve workflow.
  • They leverage data and AI to anticipate their customer’s needs.  

This sounds like a great model for AngelMD. Our digital platform will scale to 100K physicians by restlessly improving the user experience and anticipating their needs related to insider access to information and education.

Later this year we will be introducing the concept of community leaders focused around specialty groups. Their role will not be to call every physician but rather monitor signups, site traffic, conduct small focus groups, and feed product improvement recommendations to the software team.  

Are you ready to be a part of the future of healthcare? Join AngelMD today to connect with, advise, and invest in early-stage medical startups.

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Healthcare and the Age of Data

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

There are so many incredible ways in which big data, artificial intelligence, and machine learning are used behind the scenes to impact our everyday lives. The technologies are frequently used to inform business decisions and optimize operations.

AI, machine learning, and big data have become ubiquitous. You’ve spent years feeding data into your phone, so now it forecasts your commute time. Amazon uses purchase and demographic data, combined with machine learning, to automatically recommend products you might enjoy.

The following excerpt from a Hacker Noon article helps to further explain the concepts:

Artificial intelligence is the technology that allows computers to do things that were once only the domain of humans. For example, computers have always been able to calculate. With AI, they can learn and draw conclusions.

AI can be roughly divided into two disciplines. These are machine learning and deep learning. Machine learning involves the creation of computers and software that can learn from data, and then apply that knowledge to new data sets. Deep learning creates neural networks, designed to resemble the human brain. Deep learning is used to process data such as sounds and images.

AI doesn’t work without data. It consumes data in order to learn. Big data refers to the massive sets of data that are now available for this purpose. These sets of data can be analyzed by machines. This can reveal patterns and trends and facilitate making future predictions.

For healthcare specifically, Medical Economics identified artificial intelligence as the top trend for 2019 in their March 1 article.

Artificial intelligence (AI) technologies should give us great hope for the near future. The technology will enhance, not replace, human efforts. AI promises to alleviate repetitive burdens and provide more accurate tools, so that the medical community can offer better care. Its explosion onto the funding/startup scene is both indicative of its potential and the reason less tech-savvy people feel overwhelmed. 

There is a large greenfield of healthcare opportunities as AI and machine learning are applied to healthcare. HITECH, the Health Information Technology for Economic and Clinical Health act, mandated the use of datasets, which are now being used to feed machine learning and AI.

As one example, HealthPals is an AngelMD portfolio company that leverages big data to help provide population insights. The company’s use of big data allows it to optimize medical, quality, and cost considerations in ways that we have not seen before.

We see significant portfolio investment opportunities in a wide degree of areas that machine learning and AI can impact. Imaging, population health, and even marketing for large healthcare organizations are some of the more obvious choices. But medical billing, EHRs, and medical devices are all ripe for disruption by data as well.

We are just starting to scratch the opportunities for big data and AI in both healthcare and AngelMD. The AngelMD platform benefits from the application of big data and artificial intelligence principles through our Metis Engine. As participation grows on the network, we are able to identify patterns that can be leveraged to grow the membership, inform portfolio choices, and coach portfolio companies to a better, faster exit.  

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A Guide to Implementing OKRs

This is the second part in our series on OKRs. To read the first part, click here.

OKRs are a proven tool for managing organizational performance as chronicled in John Doerr’s book “Measure What Matters.” Over the past few years, I have been able to exercise this management platform as a business leader, investor, and consultant at seven different companies. Each company has been a bit different in its implementation of the tool. All were able to dramatically improve their business performance. One of the best ways to embed OKRs in the fabric of the organization is to make them the foundation of your planning. You should address the OKRs at annual planning and during monthly business reviews.

One of the first challenges that companies face is the planning horizon associated with OKRs. In general, I would suggest that the objectives are annual, and the key results are a mix of monthly and quarterly measures. The CEO plays a key role in establishing the objectives for the organization while each functional area owns the key results.

The CEO should distribute the objectives a couple of weeks in advance of the annual planning meeting. Each functional area should then develop their key results, aligned to the corporate objectives. The sequence of the review of OKRs should follow “digital production line” of the organization. They should start at product creation, carry over into commercialization, play a key role in execution, and also embedded in the business support functions of the organization . The management team should use this process to ensure that the inputs and outputs of each function align to the greater objectives for the organization.

The OKR system should be a foundational part of the monthly business review. Each functional area should recap their performance based upon their function’s OKRs. This streamlines the monthly business review while focusing the management team on improving performance across the organization. The sequence of your review should follow the “digital production line” much like the annual planning process. An OKR dashboard should label those key results in green that are on track and those not achieved in red. Yellow is not allowed. If a team must mark a key result as red, then that team or individual should develop a corrective action plan. The corrective action plan should include the following sections:

  • Problem statement
  • Reflection on prior activities
  • Root cause analysis
  • Recommendations
  • Action plan

If you follow this planning discipline, it will be relatively easy to embed the OKR system in the fabric of your company. At AngelMD, we encourage our startups to leverage this powerful management tool. The best ingredient to a great idea is great execution.

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Multi-Sided Platforms: The Future of AngelMD

A multi-sided market is one in which two or more distinct companies benefit each other by the presence of a common customer. Diners Club is a prime example of this type of business. Diners Club provided a charge card which could be used to charge meals at a network of restaurants. The restaurants benefited by having access to Diners Club members, and Diners Club benefited by having customers that paid to use the card. As technology has overtaken much of our daily lives, multi-sided markets have expanded dramatically.

Today we interact with multi-sided digital platforms that enable transactions at a scale previously not thought possible. When we order an obscure product from Amazon, it ships from a seller that we might not have known about otherwise. Posting your resume to LinkedIn allows employers to find you, while helping to grow the active user base of the LinkedIn network. ln most of these cases, we would refer to these companies as B2B2C, though there are exceptions such as AngelMD in which there are many parties involved.

For example, AngelMD connects startups, physicians, investors, and advisors. In our early days, it was important to grow both the “buy” and “sell” side of our network to make it viable.  In just over 24 months from digital launch, we have over 10K physician/investors connected to over 1,200 startups resulting in over 42 investments.

Over the next year, our focus  is on scaling the network. One goal within this focus is to gather 100,000 physicians. Physicians add scale to the network by sourcing early stage startups, scoring the best companies, supporting the investment syndication process, and advising the startups post-investment.  

One way that we will help grow the number of physicians on the network is by organizing them into specialty communities. In collaboration with national societies such as the American College of Cardiology, we will be rolling out specialty homepages, online surveys, daily news feed content, and startup deal flow.

To meet the requirements of a multi-sided market, we have to do more than just cater to physicians. In view of this, startups will have access to a wide variety of services that help accelerate their success. In the next few months, the first AngelMD Boot Camp will be held at our new Denver facility. This boot camp will provide access to our new production studio for video pitches, in addition to expert instructors to sharpen the skills of our member CEOs. We are also finalizing an ecosystem of partners for regulatory, compliance, accounting, legal, go-to-market, and strategy development.  The final piece of the puzzle is our annual event that we will hold each fall. This event will provide AngelMD portfolio companies the opportunity to learn, grow, and share best practices.

An area that few people expect is AngelMD’s collaboration with the healthcare industry. Industry players will be able to expand their participation in targeted specialty communities while leveraging our network of experts to score potential acquisition targets. This scoring is further bolstered by access to physician affinity metrics that can be aligned to an industry player’s portfolio strategy. Alpha Conference 2020 will be a prime opportunity for the industry to connect to members of the AngelMD network to build their brand and market reach.

This multi-sided platform enables us to expand our market globally as well. While there are more details to come soon, at this point we will say that we are having conversations with a wide range of geographies about opening up new global markets to the AngelMD marketplace.

This series has covered the transitioning from analog to digital, the wisdom of crowds and the power of multi-sided networks. The next article will focus on leveraging big data and AI (Artificial Intelligence) on our platform.

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