Why Venture Capital
We didn’t start out as a VC, but we noticed that healthcare investing just didn’t work very well for most investors and healthcare-focused funds. As 10x startup founders and advisors to hundreds more, we also had seen everything go wrong from a startup’s perspective but until we started looking at the problem from the investor’s point of view, we didn’t understand why bad things kept happening to startups. The real issue is that healthcare VC just isn’t very successful at finding and funding the best ideas. As a result, returns are not great and then they often do bad things in the name of improving their potential revenue. We think this is because the typical VC model relies upon a small group of mostly male, mostly young, mostly inexperienced people to decide on what to invest. Corporate and Institutional investors generally do better as they utilize in-house expert resources to vet ides, but even this has its limitations as every organization is susceptible to echo chambers, blind spots and biases. Fact is that, on average, VC in healthcare performs worse than a S&P 500 index fund. So, like all innovators that want to tackle the biggest problems for the largest impact, we sought to fix it. First, we considered how selecting and assisting companies could be done with the help of our vast, inclusive crowds. As scientists and math geeks, we next did some math…
Better Investing with Better Data
So we ran an analysis of the 2,746 teams that did or didn’t win our contests or went on our crowdfunding platform in 2015 we were amazed to see how well we winning our contests and/ or being crowd-validated was predicting companies that would have made great investments, especially with the deep data we had on crowd engagement with the startups. The model predicted that we would do 10-20 times better than your average VC fund in healthcare, producing returns of over 187% per year. Our Ecosystem of healthcare stakeholders was picking winners better than the pros. So we took a year and studied the VC industry, adopted best practices, made up a few new ones of our own, and opened our first fund in 2017, at first just with only one investor, Alex Fair. With a track record even better than predicted in the first 18 months, we then opened Fund II in 2019 and added almost a score of other investors. Our track record is getting better all the time with our first major exits in the pipe and one small spin-off done in Q2 2020. Fund III will open this Summer and we keep doing what got us here, just scaling up for bigger investments in more companies.
What about all that other stuff?
We still do everything else we started with (Events, websites, community newsletters, contests, social media campaigns,…) but the Fund now funds more and more of those activities, helping us do more for our community and startups all the time. We don’t usually charge much for attendance at our events, we never charge startups to pitch or use our platforms, and even our corporate and institutional clients and partners pay less all the time. Why? Because the Fund model works quite well. This allows us to be aligned with all the stakeholders and always to do the right thing by our teams, investors, clients, and partners.
The Nitty Gritty (or some of it at least)
So how does it work? The secret sauce is simply that MedStartr brings together all the stakeholders in healthcare online and off to drive the growth of innovative healthcare companies. Our events, pitch contests, partners, open innovation programs, mentors, accelerator, investment funds, strategic planning and pretty much everything we do is all about helping medicine get better through innovation. This is what we started doing out of a passion for innovation and love for helping startup founders get where they need to go faster. We do this all day, every day and wouldn’t have it any other way. Being able to invest allows us to not only help the teams more but also gives us a business model that is aligned with the startups. We are happy to report it works great and we have had the great fortune to have been able to help thousands of people and their ideas be successful already. Bulleted below are a few of the elements of the MedStartr Model that make the magic happen, but the fuel for this is healthcare startup love, not money. On the other hand, as we always say, “No Money, No Mission” so we really work hard to teach commercialization and are glad to have found a model that is so well-aligned with our mission and will help fuel a thousand more startups improve medicine for all.