Michael Raymer • June 19, 2019

Today’s markets are making it more difficult for investors and fund managers to find alpha. They are now looking outside of their comfort zones to find an advantage over the status quo. Some would argue that alpha is a victim of the vast amounts of data available to everyone through the Internet. This democratization of data means that the opportunity for alpha is largely driven by how humans or machines perceive the same pieces of information.

For those of you not familiar, Wikipedia has a simple definition for Alpha:

Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index.

For example, if an investment yields a 20 percent return while the S&P 500 earned 5 percent, then the alpha is 15.

At AngelMD, we have found that early-stage healthcare investing holds the best opportunity for alpha. But the data problem still exists. We have found better ways to manage the issue by having a network powered by experts that score, advise, and then invest in the best new healthcare innovations.

If we pull back the curtains somewhat, you can see that we have built a network that is unique in its ability to capture insights to early-stage healthcare investment opportunities. Our network of over 10,000 physicians and experts has acted as the referral source for the first 44 investments that AngelMD has facilitated on our platform. With each new member who joins the network, we grow our opportunity to identify alpha investing opportunities. Our goal is to grow to over 100,000 members by the end of 2020, and with that growth we will see even greater access to game-changing investment opportunities.

The next factor to our success is that AngelMD leverages the wisdom of the crowd. This group of physicians and experts helps to triage the deluge of startups coming onto the network. This group scores promising companies based on criteria that they are best suited to understand:

  • Fit to clinical workflow
  • Clinical and financial ROI
  • Projected clinical adoption

This ensures that only the companies with the highest chances of success gain access to capital through AngelMD. While we cannot guarantee investment success on individual deals, this group of experts helps us to further mitigate risk in our portfolio choices.

Finally, the physicians and experts on the platform give active support to the companies after investment. This support can come through advisory roles, access to early testing sites, advocacy, and direct product feedback. As an example, our VICIS syndicates included investment from NFL team physicians. But these physicians further helped VICIS by educating players about the safety benefits of using better helmets such as the ones manufactured by VICIS.

This is just one example of how the AngelMD network plays an active role in identifying, capitalizing, and supporting the successful launch of a company. VICIS is a strong example of an alpha-level investment on our platform.

Put into investment terms, AngelMD provides information arbitrage for early-stage healthcare investing. There is a gap between the information that the public knows, and what AngelMD is able to find because of our network of physicians and experts. The AngelMD advantage comes, in part, by capitalizing upon that wealth of information. The principles of our network allow for massive deal flow, startup scoring at scale, and post-investment support all by using data that is only available to our members.

Each of these pieces combines to create the flywheel for early-stage healthcare investing. As Jim Collins describes in his book Good to Great, that flywheel can be difficult to turn at first. But once it is moving, each turn builds on the momentum of the one before it, compounding the payoff from your work. At a point, the flywheel begins turning with unstoppable momentum.

At AngelMD, we have been working hard to start turning the flywheel for early-stage healthcare investing. Now that it is moving, we continue putting in work to dominate the market segment with continued growth, better and more data, and a continued commitment to better outcomes for patients, investors, and startups.

LinkedInTwitterFacebook

Find the best in healthcare innovation. Join AngelMD today.

Image Credit: Wikipedia