Full Transcript Introduction and Meeting at the HLTH Conference 0:01 Welcome to the Startup Physicians podcast where we explore how doctors 0:06 lead healthcare innovation. Please like and follow our show to join our 0:10 community of physicians contributing to meaningful change. 0:16 Hi everyone, welcome back to the Startup Physicians podcast. This is your host 0:20 Dr. Allison Kerman and I am joined by Dr. Daniel Dao. Thank you Daniel for 0:25 joining me today. >> Thank you for inviting me. It's a 0:28 pleasure to be here. >> So, um, we met at the health conference, 0:34 which I highly recommend for anyone who's interested in this field. There 0:39 was a actually a very large group of physicians at that conference, which is 0:43 a fall conference. But Daniel, I was so impressed with all the various things 0:47 that you've worked on in your career and in particular your role now with the 0:52 firm Healthc Care Shares. So I would love it if you could share a little bit 0:55 about your background and how you got started on this path. 0:59 >> Absolutely. Thank you, Austin. So I'm radiologist by training. I finished my 1:05 training in 2004 from UT Southwestern here in Dallas. Uh my father and 1:11 grandfather were also physicians, primary care physicians. My dad also 1:14 practiced emergency medicine. uh they owned their own clinical practices and
From Radiologist to Healthcare Innovation 1:19 with that they had complete autonomy and control over the way they ran their 1:23 medical businesses, treated their patients and they had complete control 1:26 over their schedule. It was the health care system that I grew up with and it's 1:31 really what I imagined my career within medicine to be like. When I finished my 1:36 training, the business side of healthcare was already evolving. 1:39 However, I was very intentional and deliberate about the practice I joined, 1:43 believing that I had that same opportunity for ownership. I joined a 1:47 small group that served rural communities east of Dallas. And it was 1:52 um a wonderful experience. I recruited, you know, a few of my uh friends and you 1:57 know, co-residents uh that joined. But unfortunately I never was able to 2:03 achieve that level of of ownership and and control that I had you know imagined 2:08 in my career. And after about 15 years um you know I looked around and realized 2:15 that um between you know 2004 and 2020 we had transitioned from uh you know a 2:23 medicine a health care system where the majority of physicians owned their own 2:27 clinical practices to one where the majority of physicians were employees of 2:32 hospitals, health care systems and corporate entities. Um, you know, around 2:36 that time is uh when CO occurred. My son, oldest son had just graduated high 2:42 school and had gone off to college and then returned spring of 2020. Mildly 2:47 impacted by by COVID with a reduction in volume. For me, it was an opportunity to 2:52 take time off and spend, you know, more time with my family. And, you know, the 2:56 more time that I had off, the more I realized that I was interested in doing 3:01 something different. um and you know really advocating for uh physician and 3:06 clinician entrepreneurship and ownership. I didn't really know how I 3:09 was going to do that, but that I knew that that's kind of what I wanted to 3:13 work on. My wife convinced me to work with a career coach and I worked with 3:19 Heather Fork out of Austin and she helped me, you know, really realize what 3:25 the different opportunities and options there were for physicians. I mean, I had 3:29 no idea what a physician could do. Um, you know, with their MD, 3:35 um, I decided to join a healthcare startup accelerator here in Dallas 3:39 called Health Wildcatterters, and I've been a mentor and investor in that 3:43 program, uh, since the end of 2020. Uh, it's been an amazing experience. Uh, 3:48 through that uh, program alone, I've had the opportunity to work with over 50 uh, 3:52 healthcare startups and their their teams. Um, it's been a great learning 3:57 experience. I also took a role as a director of a diagnostic imaging program 4:02 for a M company and then had the opportunity to connect with the the 4:08 founder of Healthcare Shares. So, that's kind of how I transitioned from clinical 4:12 to nonclinical. >> Yeah. And so many of the things that 4:15 you're saying resonate deeply with me and I'm sure with a lot of people 4:19 listening that being a doctor has really changed over the past few generations.
Discovering Startup Accelerators and New Physician Career Paths 4:24 And you know, it may not be exactly the way we want it today, but I I personally 4:30 feel like it's up to doctors to then take the reigns and and create what it 4:34 is that we think medicine and healthc care should be. A group are sometimes a 4:38 little more passive. I I don't know. I just think that sometimes we've gotten 4:42 into the frame of mind that like, well, this is just the opportunities available 4:47 to doctors, so I guess I have to grin and bear it and suck it up for 30 more 4:51 years until I turn 65. What your story demonstrates is that when you actually 4:57 go out and seek external feedback and ideas in like a 5:02 more expansive mindset in the form of a coach or a community or you know 5:07 attending events sometimes that opens the door to new opportunities like you 5:11 said the startup group that you joined in your local community like being able 5:16 to work with 50 different more than 50 different startups that's that's amazing 5:20 and I'm sure you've been exposed to completely completely different ways of 5:24 thinking and started to realize exactly what your value is, what they need from 5:28 doctors, the more conversations you have. And so I I think that's just such 5:33 a great story and example to the people listening that there are resources we 5:38 don't know about, there are opportunities we don't know about, and 5:41 sometimes it just takes that commitment to go find them. 5:44 >> Absolutely. Um, yeah. One of the things that I quickly realized and I'm sure you 5:49 have, you know, noticed the same is that when you go to like the healthcare tech 5:54 events and when you engage with or you volunteer for the accelerator programs, 6:00 the physicians and clinicians are significantly outnumbered by the 6:04 business executives, the tech specialists, you know, people like that. 6:09 And I noticed that the focus is typically much more around the um the 6:16 technology itself and the business model and whether or not it has an opportunity 6:21 to be significant return whether it's a 10x return 100x or or thousandx return 6:27 much less attention is is given towards whether or not it's uh going to be 6:32 clinically useful clinically viable for you know the physicians and and and 6:37 clinicians that are going to use that to treat their patients. So, I think 6:40 there's a great opportunity for physicians and clinicians, like I said, 6:44 to become much more involved and engaged with health care in general, whether 6:51 it's the startup uh and the venture capital ecosystem or clinical practices 6:58 um or even, you know, like the pharmaceutical industry, medtech, things 7:02 like that. I think there's a lot of opportunities to see significant 7:06 improvement in, you know, the products, the devices, and the services that are 7:10 being created if physicians and clinicians are are more involved and 7:14 engaged with with those companies. >> I think sometimes when we seek coaching 7:19 or like you mentioned with Heather Fork, we start to realize some of the limiting 7:23 beliefs we have about ourselves and our potential and what we can contribute to. 7:28 And then as we gain experience, we we really start to recognize more of our 7:32 own value and opportunities. Did you feel like that was an experience that 7:37 you had like kind of confronting some of the things about like what you could 7:40 actually do as a doctor? >> Yeah, absolutely. For me, before I went 7:44 through the coaching, I didn't really think there were many
Why Physicians Are Underrepresented in Healthcare Startups 7:49 opportunities. I was aware of, you know, some of the opportunities within the 7:53 corporate side of healthcare, especially utilization management. And so for me 7:58 that was an easy kind of transition to kind of test out what it's like to work 8:03 for a corporate healthcare company. But beyond that I really had little to you 8:09 know little very minimal information on what other opportunities were out there. 8:14 And the more that you work with, you know, your career coach or the more you 8:19 start to listen to podcasts or look at different groups, you realize that it's 8:25 more a matter of trying to figure out, you know, where you want to spend your 8:30 time and what you want to do rather than trying to find something, you know, to 8:34 do. So that was very, you know, definitely a very rewarding experience 8:38 for me. And as you've worked with more and more budding companies, have you 8:43 developed more of your unique value as a doctor or do you think you've been able 8:47 to understand more of how you're able to help these these companies and and how 8:54 you can contribute value? >> Yeah, absolutely. As I mentioned, I 8:57 quickly realized that there's significantly less physician and 9:01 clinician involvement. But then I also realized that the focus, especially 9:06 within venture capital, is on finding companies not necessarily that have the 9:11 best products, but have the best returns. And so, you know, I realized 9:16 that there was a lot of startups that weren't really receiving funding, not 9:20 because they didn't have a great, you know, tool that was going to improve 9:25 healthcare, but more because it just didn't have that opportunity for that 9:29 that large return. So as I began to learn more about kind of the venture 9:34 capital ecosystem and different models, I realized that there are actually 9:39 models that do really support smaller, more sustainable companies like venture 9:43 studios. So a big part of what we're building at healthcare shares is really 9:49 looking for opportunities to do venture capital differently. We're very 9:55 different from a traditional VC firm in that a traditional VC firm raises 9:59 capital from a few institutional investors that are silent partners. 10:02 We're raising capital from hundreds of individual investors that are subject 10:07 matter experts. Not only physicians and clinicians, but the healthcare 10:10 executives, the founders, the consultants, advisers, the attorneys. 10:15 The goal is to bring together all of the stakeholders that support healthcare 10:19 startups into a community to really be able to deploy intellectual capital 10:26 alongside the financial capital when we make the investment. And so we really 10:31 look for opportunities to leverage that collective, you know, subject matter 10:35 expertise and networks of the membership to find the best companies to consider 10:40 investing in through warm introductions and then collectively do the best due 10:46 diligence and make the best decisions about what companies we want to invest 10:50 in and then collectively to support them postinvestment once they become a a 10:55 portfolio company. So that's one of the biggest differentiators is that a 10:59 traditional VC firm typically they make that investment and the level of 11:03 engagement significantly decreases. We really want to look for opportunities to 11:08 extend that level of engagement for as long as possible. And when you think 11:13 about like the venture studio concept where you're not only you're not 11:18 investing in an existing healthcare startup, you're designing that company, 11:22 building it and launching it and you're essentially a co-founder and a partner 11:27 with that company from conceptualization through commercialization and exit. It
How Venture Capital Works in Healthcare 11:32 really increases the probability of success. So most people know that the 11:39 majority of startups in general and healthcare startups as well are going to 11:43 fail. However, with venture studio companies, the success rate is around 11:48 65%. And so trying to incorporate that 11:53 venture studio concept and that community support into all of our 11:58 investments, you can think of I like to kind of analogize that to the long-term 12:02 patient physician relationship. So really having that level of of long-term 12:06 commitment, long-term partnership. Um, and I think that, you know, that's where 12:10 a real opportunity is to do things differently and really improve, you 12:14 know, the quality of the products that the healthcare startups are building. 12:19 >> Yeah, thank you so much for describing the organization. I think it really 12:23 demonstrates that there's no one way to do venture capital. And I think that I 12:28 actually I get a lot of questions about healthcare shares. I have a lot of 12:32 people that actually come to me and they say like, "Hey, I was looking on 12:35 LinkedIn. Did you see that this group has advisory roles?" And I do think it 12:39 takes a little bit of a different perspective because what you're 12:42 describing is not just working capital, but what you called knowledge capital. 12:47 So, bringing in investor advisors that can put in a portion of funds to also 12:55 then be included. It's similar to like I uh I've interviewed other people on the 12:59 podcast who are limited partners in venture firms that they it's they're 13:04 looking for an investment and they're looking for exposure to this world. So 13:08 being able to do diligence and have visibility to deals and to to different 13:13 companies and um understand how venture capitalists assess companies and support 13:19 them. Um, and I actually know several founders who have fundraised with your 13:24 organization and um, how this model allows um, a greater chance of success 13:31 because you're when you're trying to raise money as a founder, you don't just 13:34 want money, you need a team. You need a support around you. You need people that 13:39 are going to be available for you to call when you have a weird problem that 13:44 you couldn't have predicted. and and just having um a lot of expertise in 13:49 your corner. So kudos to you for helping develop this uh this firm. What is your 13:55 role at the firm? >> So I mean I'm one of the core team 13:59 members. My title is chief innovation officer and I mean essentially like a 14:04 venture partner in healthcare shares but you know it's it I love healthcare 14:10 shares. Love the mission. I'm not the CEO. I'm not the founder. I'm not the 14:13 ultimate decision maker. So I do definitely do my best and you know when 14:18 you were talking about like the the campaigns the LinkedIn campaigns 14:23 obviously that's a core piece of of healthcare shares and we did not 14:28 initially launch as a venture capital firm we evolved into a venture capital 14:32 firm and the concept for healthcare shares actually came from requests by 14:38 healthcare entrepreneurs from the founder to help them raise capital the 14:42 way he did. So with his first healthcare startup he launched in 2014 he raised 14:48 capital exclusively from individual investors and between 2014 and 2022 he 14:54 raised over 35 million from over 600 individual investors and during that 15:00 time he had several healthcare entrepreneurs reach out to him to get 15:03 help raising capital that same way. So we actually launched, you know, with a 15:07 model that was designed to replicate what he did did for himself for for our 15:11 clients. And we we have had success since June of 2023. We've helped over 25 15:18 uh healthcare entrepreneurs and startup raise over uh 30 million. Our most 15:22 successful client has raised 6 million. And then, you know, basically building 15:27 on that success, we decided in the end of 2024 to launch the the venture fund 15:32 and the venture studio to go along with that. So it's been an evolution. I love 15:37 the concept. I love the, you know, philosophy of bringing together all of 15:41 the stakeholders and all and the intellectual capital. Again, at the end
The Healthcare Shares Model: Investing With Intellectual Capital 15:46 of the day, I'm part of the team. And I've taken that concept. I'm very 15:50 passionate about independent physician and clinician practices. So I've 15:54 essentially taken that concept and applied it to my own venture community 16:00 that I, you know, started building as well. 16:02 >> That's awesome. And I mean it it just shows how like all sorts of things 16:06 evolve over time. You start doing one thing and then you find value another 16:10 place and you're like hey let's do that too and make some strategic pivots. And 16:14 yeah it it actually it makes me think of uh with you know the election year 16:19 coming up like all the politicians that are like I I raised an average of $10 16:24 per donor from you know thousands of people as opposed to you know one person 16:29 giving me 25 million. kind of reminds me of that getting like a very broad 16:33 contribution base and and then being able to call on those people in the 16:36 future. >> Yeah. No, absolutely. I wanted to point 16:39 out when you were talking about uh the companies, so we the the venture fund 16:45 itself is raising capital that way, but then we also have clients. So, you have 16:49 to really look at, you know, the campaign to determine if it's for the 16:53 venture fund or if it's for one of our clients. And then also there, you know, 16:57 there are others out there that have duplicated or attempted to to duplicate 17:01 and replicate the model. So sometimes people ask me, it's like, is this one of 17:05 your campaigns? Like, no, it's not. Having said that, uh, you know, for the 17:11 venture fund, um, you know, we're recruit we're recruiting not only 17:16 investors, but adviserss. And so there's no obligation to invest to become an 17:22 adviser. And so I always want physicians um to know that especially if you're 17:26 just starting to learn, you know, about this space. Um I think there's, you 17:31 know, great opportunity to to join the board of in advisors and investors and 17:36 to join the community. So our board is um like I said, it's over 300 members. 17:41 Um about 15% are investors, 85% are advisers. Some of our adviserss have 17:48 joined um and then become investors. And then some of our investors have decided 17:53 to invest a second time. But I always I always advise caution and know with with 18:00 investing in venture capital, it's you know very risky. People ask me uh you 18:06 know about what what advice was I given when I first started investing in 18:10 healthcare startups. Uh I had invested since 2003. I've invested in private 18:15 equity, a lot of distressed commercial real estate, you know, opportunities, 18:20 oil and gas, things like that. Obviously, the stock market, you know, 18:23 venture capital is is very risky. It's very it's illquid, meaning that once you 18:28 get your you put your money in, you know, they tell you you're going to have 18:32 to wait 10 years to get the back in the return. I always tell people I was 18:37 advised to invest in at least 25 to 30 companies to be appropriately 18:43 diversified and only to invest up to about 5% of my, you know, investable 18:49 dollars. And I think, you know, those are all great points. What I love about, 18:53 you know, the the healthcare shares venture fund is that, you know, for an 18:58 investment, you know, as small as $25,000, 19:02 you will have exposure probably to over 50 companies. We've already invested in 19:08 16, but the goal is to invest in over 50. And some of those companies will be, 19:13 you know, venture studio companies, which statistically should have a higher 19:17 success rate. >> Yes. And I mean, I think that when it 19:22 comes to startups, I've heard the phrase that you're you're betting on the 19:25 jockey. So, like it's, you know, sometimes the concept itself may evolve 19:30 and you're really betting on the the founder that you're trusting in and and 19:34 obviously with a fund like what you've put together, you have more distribution 19:38 across multiple jockeyies. So, that that sounds like such a good opportunity. I 19:43 actually have when people ask me about, you know, having seen your LinkedIn ads, 19:48 a lot of people that I work with are looking for advisory roles and looking 19:51 for paid advisory roles. And I think that then when they come across the 19:55 thing, they're like, "Oh my god, this company wants me to invest to be an 19:59 adviser." And I um I think it's just a very different mindset. I know that one
Advisory Roles vs Investor Roles for Physicians 20:04 of the like benefits that was offered to me at my firm was co-investment rights 20:09 as as part of my offer and in addition to founder equity. It's it's like 20:13 sometimes if if there's a really good deal, it's um it's a privilege to be 20:18 able to invest in certain companies. So, um it's a it's different mindset, but I 20:23 think the fact that you have this community of adviserss that don't all 20:26 have to be investors is also something that everyone should check out. 20:30 >> Yeah, absolutely. And I wanted to when you talked about the founder, the 20:34 importance Absolutely. Uh I also completed a Columbia Business School 20:39 venture capital private equity executive program and that program highlighted the 20:44 importance of you know the founding team. The CEO and founder of health 20:49 wildcatter same thing everyone that you talk to is uh really highlights the 20:53 importance of the founding team as you mentioned that importance there's a at 20:58 least two examples in the health wildcatterers portfolio. So they've 21:03 health wildcatterters has been around for, you know, I think 13 years. They're 21:07 on their their 13th or 14th cohort. They've actually had two founders where 21:12 the companies have gone completely belly up, bankrupt, shut down. And the 21:17 founders through that experience launched a second company and they took 21:23 the equity that the investors had from the original startup and rolled it in to 21:28 the next startup. so that the those original founders instead of just having 21:32 a complete loss of their investment, they were invested in the next startup. 21:37 So I think that you know for me it really is important to really have that 21:42 that level of of trust and confidence in you know the founder and the founding 21:47 team. That's the most important part of analyzing the the healthcare startup. 21:52 The other thing I was going to say is uh for sure most of the healthcare startups 21:56 that we work with are you know too too early stage where they can afford to 22:00 actually hire consultants. That's always a big request. You know the vast 22:04 majority of the the physicians and the clinicians and even the non-clinians 22:08 that are in the group they are looking for those opportunities. Many are 22:13 already serving as advisors, consultants, fractional officers, 22:17 fractional CTO, CMO, CFO, CEO, and they're all looking for, you know, 22:21 healthcare companies to engage with. You know, for me, you know, I have always, 22:26 you know, just volunteered my time. Um, I I have actually not been paid much, if 22:32 any, as an actual consultant. Most of the opportunities that I've had have 22:36 come through volunteering my time, you know, with the company for sweat equity 22:40 and then the the investment piece. Yeah. I mean, some people have different 22:44 feelings about that. From the founding team, you know, perspective, it's 22:50 obviously a huge boost of confidence or vote of confidence when your adviserss 22:56 believe so strongly in what you're doing that they're willing to invest in the 23:00 company. And so I think it helps to really identify if you know this is a 23:06 company that really has the potential for success when the adviserss are you 23:10 know believe strongly enough in the company that they're they're willing to 23:14 invest in it and then you know beyond that the advisers now they have you know 23:20 essentially skin in the game and they really want to see that company succeed. 23:24 So, one of the challenges that founders have is when they onboard advisors,
Why Venture Capital Bets on Founders 23:30 making sure that they're actually going to, you know, add value to the company 23:36 and put in the time. And, you know, so many times with with founders, they um 23:43 they, you know, allocate or designate equity to a team of adviserss and then a 23:49 year or two later, they can't even get the adviserss to show up to meetings. is 23:53 they can't get them to answer emails and so you you end up in a situation where 23:57 you know you have this equity on your table that you've given away that 24:01 doesn't have value is not providing value. So I definitely think it helps 24:04 you know from that perspective. >> Yeah. No, that's all all really good 24:09 points and I think that anyone listening if they are interested in joining your 24:16 community or even considering investing in your fund it is uh I would double 24:21 check it's he healthcareshares.com correct? 24:25 >> Yes. >> Awesome. And also anyone looking to 24:29 connect with Daniel we can put his LinkedIn in the show notes as well. 24:34 Daniel, as we're wrapping up, I was gonna ask you if you have any last 24:37 thoughts or encouragement for people that are exploring a new route or trying 24:42 to uh find new ways of being a doctor. What would be your advice for them? 24:47 >> Yeah, I I think focusing on, you know, just trying to understand what 24:53 you really want to, you know, work on, what provides you, you know, purpose, 24:58 meaning and and fulfillment. I think that's really the the most important, 25:03 you know, thing. I mean, you know, for me as physicians, you know, we're we go 25:08 into this because we really are, you know, tend to be compassionate people 25:12 that want to to help others. And unfortunately, we enter into a health 25:18 care system that's very restricted because of the business leadership and 25:23 the investment objectives that really govern what we can and cannot do. So it 25:30 it really creates a situation where we know what we need to do for our patients 25:37 but we're unable to do that because of the constraints of the system itself and 25:42 it creates a lot of stress and anxiety leading to to things like moral 25:46 distress. So, I think it's really important to understand yourself and 25:52 what's going to align with your beliefs and what's going to provide you purpose, 25:57 meaning, and fulfillment. And then look for an opportunity where you really 26:02 have, you know, autonomy and control over that. 26:05 >> Well, thank you so much, Daniel, for your time. I know how valuable it is, 26:08 and I hope that everyone listening has learned something about uh some more 26:13 opportunities available to you. So, thank you all for listening and we will 26:18 see you next time. Thanks for listening to the Startup Physicians podcast. This 26:22 community was built for doctors who want to contribute to the future of 26:26 healthcare. We offer support for physicians who are ready to make the 26:29 next step towards building the career they've dreamed of. Visit 26:34 startupfysicians.com to learn more. And if this episode 26:38 resonated with you, share it with another friend who needs to hear it. 26:42 Let's change the future of healthcare together.
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