The Alpha Conference – What You Need to Know

Dear Friends,

Last week I spent a little time in Napa preparing for Alpha Conference with our event team led by Mark Mescher.

First off, it’s going to be a lot of fun. The Westin is as centrally located as you can get. It’s a short walk to the Oxbox Market (incredible foods, Ritual Coffee and more) and right across the street from the wine train…our venue for Friday night. The Wine Thief is hosting a wine tasting during our Saturday evening program which will also be a lot of fun. We have also asked the hotel to keep the wine bar open later on both nights should you want to hang out and relax after our events. The mix of fellow attendees is turning out to be pretty amazing.

Alpha Wine Train

We have added some additional speakers and talks to the agenda, making for an even denser and faster-paced experience. Among the additions, I will now be moderating a panel that includes legendary entrepreneur, investor and philanthropist Jack Gill, Ph.D. and Larry Lawson, a very successful entrepreneur, and active angel investor. I guarantee you will get insights from these two alone that will make the trip worthwhile.

I have included some pictures so you get a sense of the magical nature of Napa and the venues we have selected. The wine train is going to be a really unique experience. We’ll enjoy great food and wine as we trek through Napa and see wineries lit up en route to Krug. The Krug winery is one of the most beautiful in Napa and it will a great stopping point on our wine train journey. The Krug folks are going to make some of the “library” wines available to our group if you want to purchase these difficult to find bottles.

Napa Wine Train

We are getting confirmation that spouses will be joining you and we are really excited to share this experience with them. They are welcome to join any of the talks and panels on both Friday and Saturday as they wish. They are also welcome to relax and enjoy the local amenities. There are some world-class spas nearby, such as Spa TerraGreenhaus Day Spa, and Napa Valley Massage & Wellness. We recommend making reservations early. Others may want to do some wine tasting during the day. We are happy to coordinate with the Westin concierge and get folks from our group paired, so spouses are not with total strangers. Feel free to reply if your spouse has an interest in the wine tasting on Friday or Saturday during the day and I’ll get our event team to help coordinate.

Oxbow Market

Given that the event is in Napa and we want this to be very comfortable, the dress code is very much business casual… sports coats, sweaters, etc. are all welcome. Jeans are perfectly fine. Ties may inadvertently get cut off. :)

As of today, we have used up all of the hotel room block discounts. There are still rooms available at the Westin, but at their normal rates. We have additional capacity at the River Terrace Inn just behind the Westin which is really nice and less than a minute walk away.

Finally, I would like to thank our sponsoring partners for their support:

Insperity
IPC
F50

If you need anything, have questions etc, don’t hesitate to let me know. We want our time in Napa to be a great kick off for 2018!

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Healthcare Innovation Is Not for the Faint of Heart

The statistics are clear: fewer than 1 in 10 startups will succeed. Healthcare is even more complex; so that number is likely even lower. While innovation in any industry is challenging, healthcare holds a unique set of traits that demand a particular type of team to overcome. For the winners, the outcomes can be significant.

Facing the Giants

In addition to the normal hurdles to starting and growing a successful business, healthcare adds a lot of regulatory hurdles and comes with immense inertia. For those prepared to take the journey, it plays out as follows:

It starts with finding a unique idea. Is there a disruptive market opportunity? Can the status quo be replaced? Will the solution require overcoming regulatory hurdles? If so, this could lead to years of work and millions of dollars spent before the product ever hits the market. Who is going to finance these efforts, with the understanding that every step could kill the idea, and every day could change the window of opportunity?

It’s no surprise that securing funding for healthcare innovation is very difficult. Funding is difficult in any sector, but it can be managed.

Investing in Opportunity

Friends and family rounds often make up the early funding of a company. These folks know you. At this stage, they are betting more on the people than the idea. But beyond this stage, things get tougher and competition for capital is fierce.

At AngelMD, we know the marketplace for both investors and startups is inefficient. We knew we could build something better. Raising capital should not be an easy task, but it can be managed more systematically and efficiently than we see across the industry.

In order to meet those goals, we built AngelMD around the premise of “invest in what you know.” We have gathered physicians, scientists and other subject matter experts from every field of healthcare to help evaluate the companies in the network. We add seasoned investors to the mix to augment the entire process. The resulting formula mitigates risk for all. Then we organize investors into syndicates. There is power in numbers and syndicates are far more efficient for both startup and investor in the near and long-term.

For startups, we provide tools to help them tell their story and to generate interest. Once connected, potential investors will be kept up to date with every piece of information that the company adds to their profile. But that’s just the start. We believe firmly that savvy investors don’t predict winners, they create winners. To this end, the AngelMD is positioned to advise and support its portfolio companies all the way to exit. In fact, we work to help expedite those exits.

It takes a specific kind of person willing to take on the risk of building a company with no certainty of a positive outcome. Yet we work with thousands of entrepreneurs who are taking their shots. By improving the funding cycle, fostering open communication, and allowing experts to evaluate, invest and advise, AngelMD is improving outcomes and speeding up the process of getting the technology to market. And this ultimately serves the patient.

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5 Reasons Why Today is the Best Day to Start Investing

Investment advice on the Internet usually comes in one of two forms. It’s either a blog post parroting generic facts and figures related to investing early for retirement, or it’s a horror story concluding that you should just put your money into a low-interest low risk bearing account and call it a day.

AngelMD team members interact with investors across the country and invariably people ask our thoughts on startup investing. Below are a few reasons why we believe today is the perfect time to start angel investing.

1- A Solid Market

As of the time of this post (Fall 2017), the overall economy in the United States is healthy. There has been talk of a significant crash since the Dow Jones Industrial Average crossed 15,000 points, but that was in 2013 and we’ve seen only minor dips since then. The S&P 500 Index, a key bell-weather for many investors, has held strong. Interest rates and volatility are both at historic lows.

But what does this mean to you, as an investor curious about the potential associated with early-stage private companies? Most people who are looking to dip their toes into alternative investments (including “angel” investments) are doing so as a small portion of their overall portfolio. When there is stability in the balance of your investment portfolio, you may consider trying some new things with a portion of your investible capital.

2 – New Rules

Before the JOBS Act of 2012, early-stage private investing was limited to a very small audience of people referred to as “accredited investors” and an extremely small percentage of the population had ever taken advantage of the opportunity. There is a shift underway with the introduction of the JOBS Act because it both opened the door to a broader base investors but also helped create more visibility to angel investment opportunities.

For those of you curious…here are a few key elements of the JOBS Act: First, Rule 506 of the JOBS Act is split into two parts. Regulation B allowed for companies to sell an unlimited amount of securities to accredited investors, and up to 35 “unaccredited but sophisticated” investors. Regulation C allowed for companies to advertise their funding round, a practice known as general solicitation. For many in the AngelMD network, these changes were paramount because they allowed for a wider group of interested parties to have a shot at investing in early-stage companies.

These so-called crowdfunding regulations often get conflated, since platforms like Kickstarter and IndieGoGo were around long before 2016. But those platforms only allowed a backer to give money in exchange for a product once it was launched, whereas the Title III rules give an investor the opportunity to buy equity in an early-stage company. Bottom line, angel investing is moving from a previously very niche investment category to a legitimate asset class with enormous “Alpha” or upside potential.

3 – Changing Technology

It wasn’t long ago that private investment deals were largely circulated through cocktail parties and the like. These days, with a wealth of new technologies at our disposal, our access to information grows and so do our networks. The impact of being able to instantly call upon a wide and geographically-disparate group of like-minded investors can’t be overstated. As this capability grows, individuals can leverage technology platforms where they can store and share their knowledge.

Today’s investments can be guided by a wealth of information that has been distilled into actionable information. While machine learning isn’t a tool to eliminate your involvement in investment decision-making, it can absolutely help to guide choices. Investment managers may be stuck in the technology of the 90s, but the data that they’re using is being influenced by modern-day advances.

4 – Shaping the Ground Floor

As a VC friend once told me, it’s never too early — or too late — to start investing. Specifically, there has never been a better time to invest in healthcare innovation. Giants such as Apple, Alphabet (the parent company of Google) and Amazon are all betting big on healthcare, further justifying the activity that we’re seeing from private investors in the market.

But it’s not just the giants of technology who are putting their money on the table. Everyone from wealthy individuals to large hospital groups is betting on the future of the industry. For example, Houston Methodist Hospital has earmarked a large percentage of a recent $101 million donation toward an innovation fund, and smaller companies are increasingly seeing funds gathered from high net worth individuals versus traditional VC methods.

With all of this activity, it may seem as if an investor would be jumping on the bandwagon rather than blazing a trail. But it’s worth bearing in mind that healthcare is a $3.2 trillion annual market in the United States alone. That is to say, there is a very big pool of possibilities for savvy investors.

5 – The Power of Exposure

At AngelMD we have a mantra of “invest in what you know.” Knowledge of a market is important to the success of an investment. But there’s a broader meaning to this statement as well.

The math of investing is clear — the larger the pipeline of deals you draw from and the larger the portfolio you put together, the more volatility levels out. In finance, there is a concept that the only free lunch is the one you get from risk mitigation through portfolio diversification. Not only does this lessen the risk from any one deal, it also (and perhaps more importantly) gives you the opportunity to learn more. Whether it’s knowledge of deal flow, a specific corner of the market, or the steps of a deal from start to finish, that experience is incredibly valuable to the success of any investor.

We like to say that we don’t invest in winners, we help to create them. The same holds true for our network of investors. By doing smart deals, leveraging technology, getting involved early, and leaning on the wisdom of the network, we’re able to find, evaluate, and transact with emerging companies that are building the future of healthcare. Join us and benefit from this emerging new asset class.

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Invest or Sink – Advice from Jason Calacanis

A few years ago I attended an angel investment conference and a workshop led by a retiring investment banker. He asked the audience who wanted to make money as an angel investor. Everyone raised their hand. He said he was glad to see all the hands because if people were investing without a concern for returns they shouldn’t be investing.

A recent article in The New York Times featured thoughts from well known Silicon Valley investor Jason Calacanis. Jason is one of the more outspoken leaders in Silicon Valley and isn’t afraid to challenge the status quo. He seems to have zero interest in being politically correct — a quality that is rare in the Valley’s echo chamber.

The overarching message of the piece was that technology companies are disrupting the world. They will continue to upend every single traditional industry reliant in analog functions. This isn’t Jason’s vision from some crystal ball, this is the reality, and it’s quite easy to see the examples.

Consider how different factories look today than even twenty years ago. Machines perform almost every process, and humans are only there to oversee the work. The job of the travel agent has been all but eliminated, replaced by sites like Hipmunk, Expedia, and Priceline. Real estate agents aren’t competing with each other these days as much as they’re competing with Redfin, Zillow, and so on.

Then, of course, there’s Amazon. The proverbial category killer, that keeps branching like a hydra into new categories.

Calacanis has a clear message — disruption is happening and will disrupt you. But for the savvy investor, this reality creates opportunity. Invest in this disruption and benefit. The thesis is that simple.

This quote from the NYT sums up his position:

Most of you are screwed,” he writes in “Angel,” arguing that a coming revolution in robotics and artificial intelligence will eliminate millions of jobs and destroy the old ways of getting ahead in America. The world is becoming controlled by the few, powerful, and clever people who know how to create those robots, or how to design the software and the tablet on which you’re reading this.

Like any innovator, Calacanis is not presenting a problem without a solution.

“Mr. Calacanis is peddling a kind of populist movement for investing — he wants doctors, lawyers and other wealthy people, and even some in the middle class, to bet on start-ups, which he says is the best way to prepare financially for tech change.”

As most articles in investing go, the NYT presents the opinion of the naysayers to counterbalance Calacanis’ claims. Traditional “wealth managers” will often say they should be the ones trusted to manage your money. They argue that they are the professionals.

But that argument asks you to ignore the fact that their returns are at best 6-8% before fees…and most don’t even break 5%. It’s important to note that wealth managers are also having to fight hard to keep the money under their management from being transferred to self-directed investing. While their current theories of investment will “balance” a portfolio against downside, most wealth managers won’t even discuss angel investment or early-stage deals as a viable alternative investment method.

According to the best data available, early-stage investors need to know the following:

  • You must invest in 8 to 12 companies to get the volatility to level off.
  • In this range, an investor should expect to earn an IRR in the low 20% range or better.
  • This assumes reasonable effort is being applied to sourcing deals, diligence, etc.

The premise of AngelMD is that we systematize development of a portfolio to earn those returns. Further, historical data tells us that these numbers can be even better with 3 additions:

  • A consistent, large flow of deals
  • Systemic analysis leveraging expertise of physicians and other industry insiders
  • Post investment support by the same experts – make winners, don’t predict them

The best investors are ones who take data points from all sides, perform due diligence, and then act accordingly. I like Jason Calacanis. His views are honest, challenging, and come with a solution for those paying attention and willing to wrestle with new ideas. Like anyone, take his views with a grain of salt, but don’t dismiss them.

Continue reading

Healthcare Innovation Is Not for the Faint of Heart

The statistics are clear: fewer than 1 in 10 startups will succeed. Healthcare is even more complex; so that number is likely even lower. While innovation in any industry is challenging, healthcare holds a unique set of traits that demand a particular type of team to overcome. For the winners, the outcomes can be significant.

Facing the Giants

In addition to the normal hurdles to starting and growing a successful business, healthcare adds a lot of regulatory hurdles and comes with immense inertia. For those prepared to take the journey, it plays out as follows:

It starts with finding a unique idea. Is there a disruptive market opportunity? Can the status quo be replaced? Will the solution require overcoming regulatory hurdles? If so, this could lead to years of work and millions of dollars spent before the product ever hits the market. Who is going to finance these efforts, with the understanding that every step could kill the idea, and every day could change the window of opportunity?

It’s no surprise that securing funding for healthcare innovation is very difficult. Funding is difficult in any sector, but it can be managed.

Investing in Opportunity

Friends and family rounds often make up the early funding of a company. These folks know you. At this stage, they are betting more on the people than the idea. But beyond this stage, things get tougher and competition for capital is fierce.

At AngelMD, we know the marketplace for both investors and startups is inefficient. We knew we could build something better. Raising capital should not be an easy task, but it can be managed more systematically and efficiently than we see across the industry.

In order to meet those goals, we built AngelMD around the premise of “invest in what you know.” We have gathered physicians, scientists and other subject matter experts from every field of healthcare to help evaluate the companies in the network. We add seasoned investors to the mix to augment the entire process. The resulting formula mitigates risk for all. Then we organize investors into syndicates. There is power in numbers and syndicates are far more efficient for both startup and investor in the near and long-term.

For startups, we provide tools to help them tell their story and to generate interest. Once connected, potential investors will be kept up to date with every piece of information that the company adds to their profile. But that’s just the start. We believe firmly that savvy investors don’t predict winners, they create winners. To this end, the AngelMD is positioned to advise and support its portfolio companies all the way to exit. In fact, we work to help expedite those exits.

It takes a specific kind of person willing to take on the risk of building a company with no certainty of a positive outcome. Yet we work with thousands of entrepreneurs who are taking their shots. By improving the funding cycle, fostering open communication, and allowing experts to evaluate, invest and advise, AngelMD is improving outcomes and speeding up the process of getting the technology to market. And this ultimately serves the patient.

Continue reading