Physicians Found an Angel

The following blog post was written by Dr. Robert Teague. Dr. Teague is an AngelMD Regional Medical Director in the Austin, Texas area. Make sure to follow Dr. Teague on AngelMD.


Physician investors have often found themselves struggling to navigate the byzantine and risky world of startup investing. AngelMD brings a new dimension in advancing medical and healthcare innovation with physician domain and financial leadership.

In the world of healthcare startups, complexity prevails, innovation flounders, and patients often lose. One of the main reasons for these issues is the difficulty of investing in new healthcare companies. Many Angel investors do not have the necessary understanding of regulatory pathways, time to market, and other factors that are specific to healthcare. Physicians have a built in capability of assessing these issues, but needed a systematic way to participate with reasonable risk mitigation.

The 2012 JOBS act changed the rules around investing, and the SEC’s 2015 adoption of equity crowdfunding opened the door to physicians who wanted to invest in the future of healthcare.

With these rules in place, AngelMD began executing a vision to accelerate funding of early stage companies and empowering the expertise of professionals to apply smart capital to the equation. AngelMD has developed a highly curated and specialized platform that leverages the wisdom of the crowd and it focuses exclusively on health technology, device and biopharma. The platform includes assessment tools that identify success factors for early stage health tech companies in order to reduce the risk of investing.

Leveraging their physician members across the country and across specialties, AngelMD has an unprecedented capability to enlist physicians in the technical assessment and support of early stage companies with important and novel technologies. Physician excitement and engagement in this activity is palpable. Physicians are back in the innovation loop and their voice is being heard! Physicians members of AngelMD are leading future technology introduction that will improve outcomes for patients everywhere.

Not only have physicians found an Angel, so have startups, other investors, and most of all, those whose health improves from these advancements.

Connect. Engage. Create. Join AngelMD Today.

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New Startups On AngelMD – October 2018

Each of the following startups joined AngelMD in the past month. Check out a new company in a specific innovation category.

Billing

Business Operations

Consumer Product

Diagnostics

EMR

HealthIT

Medical Device

Mobile Health

Patient Care

Pharmaceutical

Practice Management

TeleMed

Virtual Reality

 

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AngelMD’s Q3 Private Healthcare Investment Report

Each quarter, AngelMD Premium members receive a full report that details what’s been happening in the world of private healthcare investment. This preview of the AngelMD Private Healthcare Investment Report is being provided to all members.

The State of Healthcare Funding

Our Q3 report comes from AngelMD’s individual evaluation of over 500 SEC Form D filings. We have eliminated filings that were not directly involved with healthcare, filings from large, public companies, and filings related to private equity buyouts.

The overall number of investments dropped from Q2 to Q3. However, the total amount of money raised grew significantly, and individual investment sizes averaged over 50 percent higher than in the previous quarter. Leaders in the segment were bio/pharma, medical device, and healthcare IT.

The top targeted specialties by amount raised gives some interesting insight into Q3’s market shift. While Oncology is always a top performer, it was eclipsed in Q3 by General Medicine, Genetics, Immunotherapy, and others. Both General Medicine and Genetics look to finish the year ahead of Oncology for total amount of money raised, while Cardiology and Vascular Surgery both enjoy solid investment numbers for the year to date.

Amount Raised by Specialty

The Rise of Bio/Pharma

After a down segment in Q2, Bio/Pharma startups had a strong showing in Q3. Focuses ran the gamut from pain management to pathology, with drug discovery and biotechnology leading the charge. Across all Bio/Pharma startups, nearly $2 billion was raised, while the median investment size increased by $900,000.

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AngelMD On Call: Dr. Mario Ramirez – From ER to Entrepreneur

Dr. Mario Ramirez is a practicing ER physician, Chief Medical Officer of AffirmHealth, and the Chief Medical Development Officer of Briovation. This myriad of experiences makes him uniquely qualified to tell the story of going from practitioner, to entrepreneur, and to investor. We caught up with Dr. Ramirez after his time at Health:Further. He talked about his personal journey into entrepreneurship, and how his perspective gives him an advantage when it comes to investing.

Transcript is below for those that prefer reading to listening!

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Brad McCarty: Mario, it’s not really fair to even say Health:Further. You’ve got a lot of titles behind your name and a lot of companies, right? So kind of give us the rundown here.

Dr. Ramirez: Sure. Well thanks for having me, Brad. I’m really excited to be here with you. So, I am first and foremost a practicing ER physician. I still practice about full time out in the community. But then in addition to that, I hold two jobs. So the first, I’m the chief medical officer of a software company named Affirm Health. We help physicians with opioid regulatory compliance. In addition to that, I work as the chief medical development officer here at Briovation, which is the parent company that sits over Jumpstart foundry, Jumpstart Capital as well as Health:Further. Each of those are three sort of distinct verticals. The first two primarily focused in the health investment space, and then the third, Health:Further, being our health ideas festival.

Brad McCarty: And so I actually have a chance to hear you talk a bit at Health:Further, and that’s kind of what spawned this conversation. Tell me a little bit about for those people who are unfamiliar, kind of the Genesis of Health:Further and what it’s become today.

Dr. Ramirez: Yeah. So Health:Further initially started four years ago. This is the fourth year that we just added in late August, and it originally started as a way for us to bring ideas and thinkers together who were interested in talking about health innovation. And in some ways, a little bit differently than other conferences and other festivals have positioned themselves. I think Health:Further is very much a grassroots effort, and we make room for everybody in the tent. I think we’ve traditionally had a digital health heavy focus. Some of that is broadened over the last few years, but the festivals grown from about 600 attendees to nearly 2000 this last year. We pulled participants in from all over the country. I would say about half of those come from the Midwest and the Southeast, and then the remaining half come from the coasts in other parts of the United States. And we were excited this year to have three different international delegations, so a lot of great growth in the festival. I think we’ve expanded the tent now so that it’s not just about I think health and digital health innovation, but now we’ve got a number of tracks that focus on other things including clinician entrepreneurship, which is a scenario that’s certainly near and dear to my heart. But then also, talking about things like blockchain interoperability, healthcare financing. So a lot of growth going on without further-

Brad McCarty: Right. Talk about the geography of side, or the geography of things. We’re in the healthcare city. I think pretty much anybody who has been around healthcare for any amount of time knows Nashville as healthcare. What do we know here that other people haven’t learned yet? What makes it special to be in Nashville to kind of base things out of this area?

Dr. Ramirez: That’s a great question. In some ways I feel like Nashville is healthcare’s worst kept secret. Because when people think about Nashville, the first couple of words that come to mind usually are music city and people don’t realize that it is a healthcare heavy city unless you happen to live here or you work primarily in healthcare. I think people tend to equate cities like Boston or necessarily silicon valley or some of those other locations as being sort of more healthcare focused. But here in Nashville, I think we occupy or have occupied in the past a particular niche. They’re really focused around healthcare services delivery. Certainly HCA is headquartered here, a number of other sort of big hospital corporations have their headquarters here. But, I think that’s changing over the last few years. I think Nashville is undergoing a little bit of a pivot. There’s a lot more growth in this sort of entrepreneur community here. And so, there’s people that are moving to Nashville and I think are using that sort of backbone that existed for the last 40 years and building off of that and turning this into a much more sort of innovation focused city.

Brad McCarty: It’s interesting that you talk about how long it’s been here. I remember when I moved here eight, 10 years ago, something of that nature. I kind of did a deep dive on local startups and wanted to try to find 10 startups that the people who are around the world should know about. Kind of what I found through my interviews during that time was that there weren’t necessarily at that point 10 startups that the world really needed to know about. There were definitely 10 startups, but there just wasn’t a lot of activity around them yet. What has changed in the past few years to make this area more viable than it used to be?

Dr. Ramirez: Yeah, that’s a great question. I mean, I think there’s a number of things, some of which are specific to Nashville, some of which are not. I mean, I think as a whole across the country the barriers to entry into the innovation, into the innovation space have come down. Some of that is in part due to things like increased broadband access, increased education around accessing digital health in software development. But then also, I think there’s been an increased focus since the high tech act on interoperability and some of those other policy changes that have sort of created a more fertile landscape, for people outside of the big sort of hubs or traditional hubs to kind of break into that space. The other thing specific to Nashville, I think there’s so much more capital that’s flowing in here in I would say the last 20 years. Specifically the last 10 years, that has created an opportunity for people to maybe take some more chances. Maybe sort of move a little further to the left in the innovation and entrepreneur space-

Brad McCarty: Sure.

Dr. Ramirez: So that people are willing to invest earlier and kind of help foster and nurture some of that growth that we traditionally didn’t see, because capital was a little more restricted here.

Brad McCarty: So, you had said that you are a still practicing physician. When did you know that you needed to move and do something beyond the emergency department?

Dr. Ramirez: Yeah, that’s it. That’s a good question. I think I’m like a lot of emergency physicians because I think this is a theme that you’ll hear resonate frequently in er physicians. But also I think in physician specialties that are a little more amenable to specific scheduling, which is different than like an internal internist or a surgeon or something like that.

Brad McCarty: Sure.

Dr. Ramirez: I think among specialties like mine, we see a little more of this attitude. But, my story was a little bit different. I came up right after 9/11, and actually my first foray out of the traditional ER world was in the defense space.

Brad McCarty: Oh, wow.

Dr. Ramirez: So I actually joined the military for a while, spent some time overseas and was working in sort of the National Security Structure for a while. And then, at that time had moved to DC and went to go work in government for a while. And at the end of that had, helped start a nonprofit company with a friend of mine that was essentially helping the federal government supply public health infrastructure around the world. I really sort of got interested in creating something from scratch that hadn’t been there before. I mean, essentially there had been no company or no nonprofit that was really trying to do what we were doing, but there were challenges associated with a public health funding and having the federal government as your primary funding.

Brad McCarty: Sure.

Dr. Ramirez: So about two years ago, my wife was getting recruited back to Nashville, and we decided we were going to come back. I decided that I really wanted to try to use that as a career pivot time a little bit, and try to figure out how I was going to move away from the national security structure. But also, hold onto that idea of creating something from scratch, and something where I felt like the private sector really had a little more to give in some ways than working in the public sector did. The great thing about Nashville is that the barriers to entry are low and if you’re willing to come back to the city and you’re willing to just roll your sleeves up and start working people will meet with you, people will talk to you, people will give you a chance and that’s something that’s a little harder and other places.

Brad McCarty: So what does a typical day look like for you now?

Dr. Ramirez: So I spend about 14 days a month in the ER, so those are usually scattered throughout the week and the weekends at nights. So, those days tend to get blocked off first.

Brad McCarty: Sure.

Dr. Ramirez: And then apart from that, I spent about two days a week in the office here at Briovation, and then sort of constantly working at night or kind of in off hours. And then, the rest of the time I’m working for Affirm Health.

Brad McCarty: Okay.

Dr. Ramirez: So, it’s a pretty fluid structure. Every day is different.

Brad McCarty: Okay. It keeps things interesting.

Dr. Ramirez: Yep, that’s right.

Brad McCarty: So, tell me a little bit more about Affirm Health. You talked us through a little bit of the three verticals of the company. How do these all play together, or do they play together? And, how does it play into kind of the bigger picture of healthcare entrepreneurship?

Dr. Ramirez: Sure. Actually, I think you’re talking about Briovation, not Affirm Health.

Brad McCarty: You’re right.

Dr. Ramirez: Briovation is the parent company over three distinct verticals. So the first is Health:Further, which I think is our largest sort of tent, and we welcome everybody under that umbrella. It’s a chance for everybody from entrepreneurs to investors to payers to providers, to come together and talk about where they think healthcare is headed in the next several years. Where they think the space is right for innovation, and maybe try to create networks that wouldn’t otherwise exist. A big part of that is tapping into the entrepreneur community and trying to attract people. They want to come and show off their work and possibly tap into that community. And so of that, a subsegment will apply to Jumpstart Foundry, which is our second vertical. And Jumpstart Foundry initially started as a traditional kind of accelerator, not specific to healthcare, although that focus changed several years ago and now all of our investments are in their healthcare space. But, that operates in some ways similar to an accelerator.

Dr. Ramirez: We raise a fund every year. We invest in between 15 and 18 companies for some equity stake in the company. And then, we help nurture them along. I think it’s a little bit different than some accelerators, in that our help has traditionally focused around getting those entrepreneurs out in front of healthcare buyers and healthcare change makers who can help connect folks to help those companies flourish.

Brad McCarty: Okay.

Dr. Ramirez: So, different than some of the others that offer like a primary teaching curriculum, or some of those other things.

Brad McCarty: Right.

Dr. Ramirez: And then the third is Jumpstart Capital, which is a larger fund that’s in the current process of being raised. And, will traditionally focus on I think late seed to early series A investments, to really start to help nurture those companies that are kind of in that valley between the really early seed stage or the angel stage-

Brad McCarty: Sure.

Dr. Ramirez: … and are not quite as series A, and as a value where we’ve seen a number of our companies and number of other companies struggle to raise funding a little bit. And som we’re going to help bridge that gap.

Brad McCarty: Okay. It’s interesting. I heard a presentation on the last day of Health:Further about what you guys are doing as far as your fundraising and where you invest. It actually lines up pretty similarly. There we go, if I could spit the word out, to what we do with AngelMD. Where it’s either seed or kind of almost series A, an occasional series A round as well. What does the funding landscape look like when you are more focused on a singular area?

Dr. Ramirez: Yeah, that’s a great question, Brad. It was an area of focus that I wanted to make sure that we talked about at like this clinician investor breakfast that we had. Because I think if you’re a clinician and you’re looking at the investment landscape and you’re trying to figure out where you may want to sort of invest some of your money, there’s a couple of different things to consider. I think there’s a difference between Jumpstart Foundry jumped our capital and AngelMD. I think you’re right in that both groups try to leverage clinician expertise. Jumpstart Foundry I think operates a little more like a traditional fund in that you choose to invest in the fund. We have a fund manager who helps make those investment decisions, and then after the investments are made you own some slice of 18 companies as part of this portfolio.

Brad McCarty: Right.

Dr. Ramirez: AngelMD I think is a little bit different in that you pull from the kind of intellectual capital that exists in the physician and clinician community, but then you essentially get to decide what it is exactly that you want to invest in.

Brad McCarty: Right.

Dr. Ramirez: It’s really interesting and I think they’re not exclusive. We certainly know lots of folks who do both, I don’t know. I’m a member of AngelMD, and I happen to really enjoy the platform because I think it gives me a chance to rely a little bit more I think on the clinical expertise that I’ve built. I think the direct answer to your question about what the funding landscape looks like in a way, depends on where it is that you think you want to sort of deploy your capital.

Brad McCarty: Sure. So when we’re talking in the Nashville area, what’s the future look like for us? I mean, we’re pretty exciting times as far as anyone kind of at a glance can tell. Is that a fair assumption?

Dr. Ramirez: It’s a great question. And if you asked 20 different people in the city, you’d get 20 different answers. I think Nashville is in some ways at a really exciting place, right? There’s lots of capital that’s come to the city. There’s lots of new intellectual capital which is different than financial capital, obviously.

Brad McCarty: Right.

Dr. Ramirez: But the other thing I think is that there’s so much change that’s going on in healthcare in particular because of organizations like HCA, and some of the others that are here in the city. Nashville grew, and has grown on the backs of fee for service, healthcare delivery. And depending on who you ask or which way your politics blow or any other number of sort of X factors, managed care is either going to come in and revolutionize healthcare and this fee for service model is going to go away. Or, people are going to double down and say we’ve just got to figure out how to deliver that more efficiently. I don’t really think that anybody knows yet. I think a big part of Nashville’s future is going to depend on how all that plays out. I can see a world where things really don’t change that much either because political inertia discontinues.

Brad McCarty: Sure.

Dr. Ramirez: Or, we figure out how to deliver things more effectively. I think Nashville will kind of continue to innovate on the margins. But, I think you could also say as things like bundled care, accountable care organizations, some of these other things kind of really change the payer delivery model.

Brad McCarty: Right.

Dr. Ramirez: Nashville will need to change with that because if it doesn’t, it will struggle.

Brad McCarty: There was a really interesting talk at Health:Further from a gentleman whose name I don’t remember off the top of my head, but he was from Walmart of all places, which kind of at one moment made my jaw drop. And so, he was talking about kind of the market as it stands today with it being a consumer’s market, a shopper’s market when it comes to healthcare. Do you think that that’s going to play into what we see here? I mean, it’s kind of that larger conversation of ACO’s versus fee for service, and what have you.

Dr. Ramirez: You know, it’s great question and it’s one that I’m kind of like internally conflicted about a little bit. I’m wearing my hat as a clinician on some days of the week and then-

Brad McCarty: Sure.

Dr. Ramirez: Because I think … Let me take a step back and say that that first day of Health:Further, one of the messages that I took home was change is coming to healthcare and you can either get on board with this or you can get out of the way.

Brad McCarty: Yeah.

Dr. Ramirez: I think that sometimes that creates a little bit of a gut check for people who work clinically who have devoted a lot of time to education, a lot of time to actually delivering care at the bedside. When you have some of these folks who aren’t as directly connected to patient care, sort of big taking what they think is gonna happen in the healthcare space.

Brad McCarty: Right.

Dr. Ramirez: And I always think it’s interesting how much of that population says that it’s a consumer driven market. And then when I go into the hospital, how little of it feels like it’s actually a free choice market.

Brad McCarty: Yeah. Right.

Dr. Ramirez: It’s because most patients don’t directly pay out of pocket for their healthcare. We’re talking about a very inefficient market space that is not driven by traditional consumer behavior. I think there is a real interest and a real desire for increased access to care and trying to find a way to make it easier. But, I think there’s also a reason why we’ve seen things like Telehealth and some of these other things struggle a little bit because people don’t consume healthcare the way that they consume other commodities.

Brad McCarty: Interesting.

Dr. Ramirez: And so, I think that there are still some struggle that’s got to play out there before it really becomes a true consumers market. I think it’s more than hints, but it’s not total uptake model yet.

Brad McCarty: Okay. More than hints, that’s a good way of putting that, I think.

Dr. Ramirez: Well, I think you got to look at players like Amazon, Walmart, some of these other folks and recognize that these are huge market shifters who are going to really change the market.

Brad McCarty: Right.

Dr. Ramirez: But, what that looks like is still anyone’s guess.

Brad McCarty: So, I want to kind of finish out with the last couple of questions here as pieces of advice, if you had to give them. As a physician who has made the transition into entrepreneur, who has also made the transition into at some level an investor as well, what advice would you give to those people who are sitting back and thinking about doing it and are still kind of on the fence?

Dr. Ramirez: Oh, that’s a great question. So, the first piece of advice I would say is take any advice that I give you with a grain of salt. That’s probably good advice for anybody’s advice. I think in a way, some of what is going on in healthcare and among the clinician community is I think a struggle for the soul of what medical education needs to be now. I think there’s a recognition that the way that we’ve taught and trained clinicians over the last 60, 75, even 100 years has to change with the new way that we’re delivering care.

Brad McCarty: Okay.

Dr. Ramirez: And as part of that, the curriculum needs to change, right? So that there’s a reason that we see MD MBAs as one of the largest growing segments of postgraduate education.

Brad McCarty: Right.

Dr. Ramirez: Because, people realize that there’s market forces at work that are changing the way that care is delivered, but also what it takes to be successful in this marketplace. And, it’s not always even the definition of what success looks like, right? Because so few people actually own their practices anymore. People are increasingly seeing their practices bought up. So I think if I was going to give people advice, I would say it’s important to diversify your exposure to things early in life and earlier in your career.

Brad McCarty: Okay.

Dr. Ramirez: Because, I think there’s two sort of competing models. So the first are people who are relatively early in their clinical training or clinical practice, and still have that kind of intellectual rigor and bandwidth to kind of explore other stuff. But then, you sort of get into this valley. You get into your forties and your fifties where your primary focus is on revenue generation and putting money away for retirement or college, or all these other things that you start to get handcuffed a little bit.

Brad McCarty: Sure.

Dr. Ramirez: What you sometimes see is people coming out on the back end of that. Sometimes, not always frustrated with their clinical practice or sort of feeling intellectually void, and trying to find that out on the back end. All of those different things lend themselves to different ways of getting involved. So, I think folks who follow that second model tend to be a little more investor heavy, and have the actual capital to deploy. So my advice is that if you feel like your primary interest is going to be in seeding and funding early stage companies, that you go out and work really hard clinically or do something that’s gonna generate a lot of revenue for 20 or 30 years before you try to get into that space. But if you’re interested in being a part of the process and you want to work in startup space, if you want to be in an early stage CMO or you to be a part of an accelerator like I work at here, I think you’ve really sort of got to redouble your efforts and plan to spend more time in your career doing it.

Brad McCarty: Sure. I had an interesting talk with Dr. Jeffrey [inaudible 00:21:06] a couple of days ago, and he brought up a point that I had never really considered, but I want to bounce it off of you because I think that you’re an ideal person to ask this question to. He said that there’s less of a stigma now about going through medical school and spending maybe a year or two in practice and then basically dropping it to become either an entrepreneur or an investor or what have you. Would you agree with that?

Dr. Ramirez: That’s a great point for discussion, and I love Jeff actually. I think Jeff is one of the smartest people I know in this space.

Brad McCarty: He’s incredible.

Dr. Ramirez: I think you’re right on the one hand, and there is less of a stigma towards … I mean, I think traditionally there was a guilt complex associated with leaving your clinical practice to go do some of these other things. Because if you go to medical school, you should ideally apply that training and the care of actual patients.

Brad McCarty: Right.

Dr. Ramirez: Because if not, there’s no point. That’s part of why I still practice, because there’s a part of me that still feels that way. The chance to sort of lay your hands on patients, actually deliver healthcare is something that so few people get to do, that in some ways it’s unfortunate that we give that up early in life. But, I think it’s also undeniably true that you can’t be all things to everyone. You can’t do everything all the time. And so, it’s extremely hard to practice clinically and do some of these other things at the same time. I think in this sort of existential search for happiness and the meaning of professional fulfillment, I think that’s going to mean different things to different people at different points in their life. The other thing that I think sort of phrases from interesting perspective is that we’re also depending on who you ask, coming to the end of a relatively economic boom time.

Brad McCarty: Right.

Dr. Ramirez: So, their risk trade-off calculus there has been different. So for so many physicians who came out of their training in the last 10 to 12 years, your chance of success with a startup was certainly better than it was 20 years ago, or 25 years ago.

Brad McCarty: Right.

Dr. Ramirez: And so coming out of that place, I think that helps shape the discussion a little bit. I think if we see an economic downturn and things aren’t as successful as they’ve been for the last 12 to 15 years, we may see people sit back in the other direction. And I think the other part of this that’s directing a lot of this is just frustration with the sort of payment and delivery things that are-

Brad McCarty: Yeah, the status quo.

Dr. Ramirez: Right, exactly. I think if we could find a way to fix that and people actually enjoy the act of delivering healthcare again, we may see more people who want to stay clinically.

Brad McCarty: So Mario, final question for you. This has kind of become my favorite go-to ending question because my library is ever expanding. What’s the last book that you recommended to someone?

Dr. Ramirez: The last book that I read actually I think is great. Not just in business, but actually great for healthcare folks is Never Split the Difference by Chris Voss. Chris Voss is a … He’s an old FBI negotiator, and he makes this interesting argument. I think that negotiation is not in the act of finding the best middle agreement, and that’s actually a bad outcome when we kind of agreed to meet somewhere in the middle, and then it actually really doesn’t effectively meet anyone’s hands. It’s interesting how many of the sort of techniques and his approach to negotiation we can apply not only in business, but I also frequently lean on some of these when I’m talking with patients.

Brad McCarty: Right.

Dr. Ramirez: Because I think there’s a lot of the patient care delivery model is a negotiation in some ways. That’s changed over the years, right? I mean, we’ve moved from a very paternalistic medicine model to one where we kind of cooperate with our patients. Which I think is a good change, but that means that we are in the sometimes awkward position of trying to do what’s best for our patients without them necessarily feeling in their best interest, trying to negotiate that difference. So I think that book is great. I would highly recommend it for anybody who’s working clinically or interested in some of these outside ventures.

Dr. Ramirez: Let’s see. Are there any others that I really recommend? The other one that I read that I think is great is Venture Deals.

Brad McCarty: Ah, yeah. Brad Feld.

Dr. Ramirez: I think there is a real absence of information and understanding within the physician community about how venture deals are structured, how Angel Investment actually works. So for people who are either interested in starting their own companies are interested in investing in different companies, I think that’s a critical book for just understanding how this whole thing works. It’ll take you from not knowing anything to knowing more than 95 percent than the people in the room.

Brad McCarty: Absolutely. Well, and Brad Feld is a long time incredibly smart investor who has been wildly successful at what he does. So, kind of speaking from a position of authority on that as well. Mario, thank you very much for your time. Really appreciate it. And for opening up the offices today, which is interesting by the way, as kind of a parting note. When I asked for an address, I kind of figured I’d be in the medical part of downtown, but we’re not. We’re over here. What is this officially? Five points east Nashville?

Dr. Ramirez: We’re in East Nashville now. I mean, it’s funny, right? You can be a guy with a laptop and you’re a startup company. Right? So, we’re in east Nashville and I think this is as much a healthcare focus in Nashville as Cool Springs or any of these areas are.

Brad McCarty: Sure, sure.

Dr. Ramirez: But thanks for coming in, and thanks for having me on the show.

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Dr. Jeffrey Hausfeld – Doing Good and Doing Well

While attending Health:Further in Nashville earlier in the month, we had the opportunity to meet and talk with a number of AngelMD members. Dr. Jeffrey Hausfeld is a startup owner, investor, former practicing physician, and long-time healthcare facility owner. This wide variety of activities gives him a unique aspect to the world of healthcare entrepreneurship that we wanted to share with the AngelMD network.

AMD: You bridge this gap really well between physician, and entrepreneur, and investor, and jack of all trades on the innovation side of the house. Can you tell me a little bit about the Society of Physician Entrepreneurs? What’s the history there, and what’s the goal?

DJH: Doctors in general are smart people, have great ideas, wanna help people, but are not very good in terms of understanding the business. The meshing of those two cultures is an enigma to most of us. Because we’re not wired that way.

Even though we’re not wired that way, that doesn’t mean that we can’t be trained, and taught the perspective of the business. We have to understand and respect that, just as there’s a science to medicine, there’s a science to business. So, myself and two other ENT physicians said, “Why don’t we try to teach some of our young residents about how to commercialize an idea?”

We started having these breakfast meetings at American Academy of Otolaryngology about nine years ago, now. All of a sudden, we had 150 people come out for a 7:00 AM breakfast. I said, “Gee. I guess people really do want to learn this stuff.” We took it out to the general public, and, over the last eight years, now we have probably 28,000 LinkedIn members, and 30 chapters that I have the pleasure of managing throughout the world. I get to meet people that have fantastic ideas, and great insight into unmet needs. That’s really where we fill an essential gap in the whole commercialization process.

You can have people that are really smart technicians, you can have people that are terrific marketers, but, if you’re building something without understanding that there is an unmet need in the marketplace, then you better think of something else. Because if it’s not faster, cheaper, safer, and better than what’s out there today, it’s never gonna fly. And that’s where healthcare providers can really make a big difference. Because we know what’s in our tool kit. We know what patients need, and we know what we would use. Without that essential ingredient, it really thwarts a lot of innovation, because you’re building something that’s no one gonna use.

Based on that, we decided to bring the Society of Physician Entrepreneurs to the general public, and it’s been terrific. We have these local chapters that build these small ecosystems, and they have four to six meetings a year, and we invite everyone to come to our meetings. We don’t restrict our membership to physicians. Matter of fact, probably 30 to 40% of our people are physicians, and 60% are others. Others meaning lawyers and software engineers, hardware engineers, regulatory people, and people in marketing, as well as finance, and investors. They all come to our meetings, and that’s great because it takes a community to really push innovation forward.

Society of Physician Entrepreneurs

AMD: Is it fair to say that most physicians have a bit of an entrepreneurial side to them?

DJH: Absolutely. Every physician that is in private practice thinks of themselves as an entrepreneur. Because running a small private practice, or even being part of a large private practice, you really do have to be an entrepreneur. You have to understand that you’re taking some risks. You’re not just an employee of a larger organization, and, at the end of the day, you can either pat yourself on the back or kick yourself in the butt, but the buck ends at you. That’s the mantra of a good entrepreneur.

AMD: You’re also running your own company. Can you tell me a bit about what you’re doing there?

DJH: Beside these memory care facilities, I got introduced to a biotech company in Frederick, Maryland, by the name of BioFactura.
At a pitch event, this CEO, Darryl Sampey, he gets up and starts talking about biosimilars. This is about four years ago. I said, “Biosimilars? What the heck is a biosimilar? Never heard of it.” He explains that it’s a generic version of a biologic drug when the biologic drug comes off patent. And, I said, “Gee. That makes sense.”

I was part of the great number of physicians that had to switch patients from branded drugs to generic drugs in the 1980s. My drug reps were very good and smart, in that they came in, they made sure that I was detailed in the fact that “those generic drugs, they’re made with formaldehyde, Doc, don’t you give them to your patients or you’ll kill ’em.” Back then, we believed them. So, we would write down “DAW”, which means Dispense As Written, so that the pharmacist could not substitute a generic version of the drug for the branded drug.

Now, looking back, I recognize that I really did the patients, and society, a disservice by doing that. Because I didn’t lower healthcare costs, I didn’t increase access. I also missed a very good opportunity to make some money on the switch to generic medication.

I said, I’m not gonna do that again. Because this is the next big wave of the potential to really reduce healthcare costs, and bring products to patients that will be even better than their branded drug. The manufacturing progress that we’ve made in the last 20 years has increased access tremendously. This has been exemplified in the European models where they’ve had a 400% increase in the use of these biologics and all the while the price came down.

AMD: That’s an incredible opportunity, and now you’re in on it.

DJH: I’m in on it, I’m the chairman of their board, I’m their chief medical officer, and I’m the largest investor of BioFactura.

BioFactura

AMD: In that regard, you’re not just an advisor, you’re also practicing entrepreneurship. But this is far from the first foray that you’ve had. You talked about the memory care facilities, and you’ve done some other entrepreneurial activities as well.

DJH: Oh, yeah. I serve on several boards of other companies, and I’m an angel investor in a healthcare startup.

AMD: What do you wish that more physicians knew when it comes to entrepreneurship?

DJH: I guess what they have to understand is that physicians fail in their attempts to create a new venture, or a new device, because of a few different things.

Most of the time, it’s arrogance. I hate to say that about my colleagues, but sometimes they’re just not smart in terms of accepting advice from others. Understanding that, at this moment, they’re not the smartest person in the room.

There is a low emotional intelligence quotient. They have to understand that if you’re going to build a company that is producing a product or a service, other than your own medical office, you have to make the environment right for bees to make honey. That means you have to empower your employees, and you have to nurture them, and exemplify their strengths. That’s the way you get productivity and accountability, in terms of manufacturing and innovation, in your own business.

When you’re bootstrapping a business, and when you’re dealing with other people’s money, especially angel money, you have to have that fiduciary responsibility that it’s other people’s money, I need to make sure that I’m spending it wisely.

Just the understanding that there’s a science to business, and respecting that, and learning that, is probably the biggest hurdle. That’s what SoPE tries to do.

AMD: I think it’s interesting that when I asked you about other entrepreneurial activities, that you discuss being an advisor, and being on these boards. I think that that’s something a lot of physicians miss is that being an entrepreneur is not always necessarily about “let’s go start this new company.”

DJH: That’s exactly right. But, most times, they don’t want to be in the CEO position. They want to be, but they don’t want to be. They have an idea, they’ve even gotten to the point of getting a patent on that idea, and they want to be the sole owner and steward of that idea as it goes through the process of regulatory and finance.

The problem with that is…just that. They have a day job as a physician, and in their free time, they’re going to try to raise money from angels to work on their project. What I tell them is that I never invest in a company where I don’t have a full-time, totally devoted employee to make sure that this project goes forward.

Because, at the end of the day, patients come first; and their loyalty will be their patients. It should be to their patients, and, if it’s not to their patients, they’re not the kind of person I want to invest in anyway.

AMD: What’s surprising you in the world of entrepreneurship today?

DJH: I see more and more young physicians finish medical school, maybe do a year of training, and then leave. That is a trend that is much more popular today than it was when I was in practice. As surprised as I was, I’m not surprised anymore. Because these young people are making a good deal of money in being advisors to companies, and being analysts for research firms, and for investment banks, and they’re making their contribution in their own way.

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It’s not seen as — you’re a pariah, you’re leaving the force — you’re just doing things in a different way, to help society and to further your own career. It’s just a matter of young people looking at potential opportunities. Often times, they look at medicine, and they look at the changes in the patient/provider relationship that over the last 20 years. They said, you know what? This is not what I want to do. I don’t want to be in an employed physician, which is what most physicians that come out of medical school now are. They don’t want to be looking at an EHR on a laptop instead taking care of patients, and be on the timer that they have to look at every 10 minutes to see somebody else. So they say, what’s an alternative?

AMD: Final question for you. Why are we seeing a shift toward entrepreneurship today?

DJH: For those that have been in practice for so many years, and they see that their incomes are steadily declining, and they’re expenses are steadily increasing, they’re looking for alternative revenue stream. They can leverage their years of practice and experience. Innovation and commercialization of products become another aspect of what they could do, we just have to teach them how to do it.

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