Full Transcript Introduction and Meeting at the HLTH Conference 0:01 Welcome to the Startup Physicians [music] podcast where we explore how 0:05 doctors lead healthcare innovation. Please like and follow our show to join 0:10 our community of physicians [music] contributing to meaningful change. 0:16 Hi everyone, welcome back to the [music] Startup Physicians podcast. This is your 0:20 host 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, 1:57 you know, co-residents uh that joined. But unfortunately I never was able to 2:02 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 co 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 a career coach and I worked with 3:19 Heather Fork out of Austin and she helped me, you know, could really 3:24 realize what the different opportunities and options there were for physicians. I 3:28 mean, I had 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 3:42 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 4:33 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 more expansive mindset 5:04 in the form of a coach or a community or you know attending events sometimes that 5:08 opens the door to new opportunities like you said the startup group that you 5:14 joined in your local community like being able to work with 50 different 5:17 more than 50 different startups that's that's amazing and I'm sure you've been 5:21 exposed to completely completely different ways of thinking and started 5:25 to realize exactly what your value is, what they need from doctors, the more 5:29 conversations you have. And so I I think that's just such a great story and 5:34 example to the people listening that there are resources we don't know about, 5:39 there are opportunities we don't know about, and sometimes it just takes that 5:42 commitment to go find them. >> Absolutely. Um yeah, one of the things 5:46 that I quickly realized and I'm sure you have, you know, noticed the same is that 5:52 when you go to like the healthcare tech events and when you engage with or you 5:57 volunteer for the accelerator programs, the physicians and clinicians are 6:02 significantly outnumbered by the business executives, the tech 6:06 specialists, you know, people like that. And I noticed that the focus is 6:11 typically much more around the um the technology itself and the business model 6:19 and whether or not it has an opportunity to be significant return whether it's a 6:24 10x return, 100x or or thousandx return much less attention is is given towards 6:30 whether or not it's uh going to be clinically useful, clinically viable for 6:34 you know the physicians and and and clinicians that are going to use that to 6:38 treat their patients. So, I think there's a great opportunity for 6:42 physicians and clinicians, like I said, to become much more involved and engaged 6:48 with health care in general, whether it's the startup uh and the venture 6:54 capital ecosystem or clinical practices um or even, you know, like the 7:00 pharmaceutical industry, medtech, things like that. I think there's a lot of 7:03 opportunities to see significant improvement in, you know, the products, 7:09 the devices, and the services that are being created if physicians and 7:12 clinicians are are more involved and engaged with with those companies. 7:16 >> I think sometimes when we seek coaching or like you mentioned with Heather Fork, 7:21 we start to realize some of the limiting beliefs we have about ourselves and our 7:26 potential and what we can contribute to. And then as we gain experience, we we 7:30 really start to recognize more of our own value and opportunities. Did you 7:35 feel like that was an experience that you had like kind of confronting some of 7:38 the things about like what you could actually do as a doctor? 7:41 >> Yeah, absolutely. For me, before I went through the coaching, I didn't really
Why Physicians Are Underrepresented in Healthcare Startups 7:48 think there were many opportunities. I was aware of, you know, some of the 7:51 opportunities within the corporate side of healthcare, especially utilization 7:56 management. And so for me that was an easy kind of transition to kind of test 8:02 out what it's like to work for a corporate healthcare company. But beyond 8:05 that I really had little [laughter] to you know little very minimal information 8:11 on what other opportunities were out there. And the more that you work with, 8:17 you know, your career coach or the more you start to listen to podcasts or look 8:21 at different groups, you realize that it's more a matter of trying to figure 8:28 out, you know, where you want to spend your time and what you want to do rather 8:32 than trying to find something, you know, to do. So that was very, you know, 8:36 definitely a very rewarding experience for me. And as you've worked with more 8:40 and more budding companies, have you developed more of your unique value as a 8:46 doctor or do you think you've been able to understand more of how you're able to 8:50 help these these companies and and how you can contribute value? 8:56 >> Yeah, absolutely. As I mentioned, I quickly realized that there's 8:59 significantly less physician and clinician involvement. But then I also 9:03 realized that the focus, especially within venture capital, is on finding 9:09 companies not necessarily that have the best products, but have the best 9:13 returns. And so, you know, I realized that there was a lot of startups that 9:18 weren't really receiving funding, not because they didn't have a great, you 9:22 know, tool that was going to improve healthcare, but more because it just 9:27 didn't have that opportunity for that that large return. So as I began to 9:31 learn more about kind of the venture capital ecosystem and different models, 9:37 I realized that there are actually models that do really support smaller, 9:42 more sustainable companies like venture studios. So a big part of what we're 9:46 building at healthcare shares is really looking for opportunities to do venture 9:53 capital differently. We're very different from a traditional VC firm in 9:57 that a traditional VC firm raises capital from a few institutional 10:00 investors that are silent partners. We're raising capital from hundreds of 10:05 individual investors that are subject matter experts. Not only physicians and 10:09 clinicians, but the healthcare executives, the founders, the 10:12 consultants, advisers, the attorneys. The goal is to bring together all of the 10:17 stakeholders that support healthcare startups into a community to really be 10:23 able to deploy intellectual capital alongside the financial capital when we 10:28 make the investment. And so we really look for opportunities to leverage that 10:33 collective, you know, subject matter expertise and networks of the membership 10:37 to find the best companies to consider investing in through warm introductions 10:43 and then collectively do the best due diligence and make the best decisions 10:48 about what companies we want to invest in and then collectively to support them 10:52 post investment once they become a a portfolio company. So that's one of the 10:56 biggest differentiators is that a traditional VC firm typically they make 11:01 that investment and the level of engagement significantly decreases. We 11:06 really want to look for opportunities to extend that level of engagement for as 11:10 long as possible. And when you think about like the venture studio concept 11:15 where you're not only you're not investing in an existing healthcare 11:19 startup, you're designing that company, building it, and launching it. and 11:23 you're essentially a co-founder and a partner with that company from 11:28 conceptualization through commercialization and exit. It really
How Venture Capital Works in Healthcare 11:32 increases the probability of success. So most people know that the majority of 11:40 startups in general and healthcare startups as well are going to fail. 11:44 However, with venture studio companies, the success rate is around 65%. 11:50 And so trying to incorporate that venture studio concept and that 11:55 community support into all of our investments. You can think of I like to 12:00 kind of analogize that to the long-term patient physician relationship. So 12:04 really having that level of of long-term commitment, long-term partnership. Um 12:08 and I think that you know that's where a real opportunity is to do things 12:12 differently and really improve you know the quality of the products that the 12:16 healthcare startups are building. Yeah, thank you so much for describing 12:21 the organization. I think it really demonstrates that there's no one way to 12:25 do venture capital and I think that I actually I get a lot of questions about 12:30 healthcare shares. I have a lot of people that actually come to me and they 12:33 say like, "Hey, I was looking on LinkedIn. Did you see that this group 12:36 has advisory roles?" And I do think it takes a little bit of a different 12:40 perspective because what you're describing is not just working capital 12:45 but what you called knowledge capital. So bringing in investor advisors that 12:51 can put in a portion of funds to also then be included. It's similar to like I 12:57 uh I've interviewed other people on the podcast who are limited partners in 13:01 venture firms that they it's they're looking for an investment. They're 13:05 looking for exposure to this world. So being able to do diligence and have 13:10 visibility to deals and to to different companies and um understand how venture 13:16 capitalists assess companies and support them. Um, and I actually know several 13:22 founders who have fundraised with your organization and um, how this model 13:27 allows um, a greater chance of success because you're when you're trying to 13:32 raise money as a founder, you don't just want money. You need a team. You need a 13:37 support around you. You need people that are going to be available for you to 13:41 call when you have a weird problem that you couldn't have predicted. and and 13:46 just having um a lot of expertise in your corner. So kudos to you for helping 13:52 develop this uh this firm. What is your role at the firm? 13:57 >> So I mean I'm one of the core team members. My title is chief innovation 14:02 officer and I mean essentially like a venture partner in healthcare shares but 14:07 you know it's it I love healthcare shares, love the mission. I'm not the 14:11 CEO. I'm not the founder. I'm not the ultimate decision maker. So I do 14:15 definitely do my best and you know when you were talking about like the the 14:21 campaigns the LinkedIn campaigns obviously that's a core piece of of 14:25 healthcare shares and we did not initially launch as a venture capital 14:30 firm we evolved into a venture capital firm and the concept for healthcare 14:35 shares actually came from requests by healthcare entrepreneurs from the 14:40 founder to help them raise capital the way he did. So with his first healthcare 14:44 startup he launched in 2014 he raised capital exclusively from individual 14:51 investors and between 2014 and 2022 he raised over 35 million from over 600 14:58 individual investors and during that time he had several healthcare 15:01 entrepreneurs reach out to him to get help raising capital that same way. So 15:05 we actually launched, you know, with a model that was designed to replicate 15:09 what he did him did for himself for for our clients. And we we have had success 15:14 since June of 2023. We've helped over 25 uh healthcare entrepreneurs and startup 15:20 raised over uh 30 million. Our most successful client has raised 6 million. 15:24 And then, you know, basically building on that success, we decided in the end 15:29 of 2024 to launch the the venture fund and the venture studio to go along with 15:34 that. So it's been an evolution. I love the concept. I love the, you know, 15:39 philosophy of bringing together all of the stakeholders and all and the 15:43 intellectual capital. Again, at the end of the day, I'm part of the team. And
The Healthcare Shares Model: Investing With Intellectual Capital 15:47 I've taken that concept. I'm very passionate about independent physician 15:52 and clinician practices. So I've essentially taken that concept and 15:57 applied it to my own venture community that I, you know, started building as 16:02 well. >> That's awesome. And I mean it it just 16:04 shows how like all sorts of things evolve over time. You start doing one 16:08 thing and then you find value another place and you're like hey let's do that 16:11 too and and make some strategic pivots. And yeah it it actually it makes me 16:16 think of uh with you know the election year coming up like all the politicians 16:21 that are like I I raised an average of $10 per donor from you know thousands of 16:26 people as opposed to you know one person giving me 25 million. kind of reminds me 16:31 of that getting like a very broad contribution base and and then being 16:35 able to call on those people in the future. 16:37 >> Yeah. No, absolutely. I wanted to point out when you were talking about uh the 16:42 companies, so we the the venture fund itself is raising capital that way, but 16:47 then we also have clients. So, you have to really look at, you know, the 16:51 campaign to determine if it's for the venture fund or if it's for one of our 16:55 clients. And then also there, you know, there are others out there that have 16:59 duplicated or attempted to to duplicate and replicate the model. So sometimes 17:03 people will ask me, it's like, is this one of your campaigns? Like, no, it's 17:07 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 [laughter] to get the back and the return. I always tell 18:36 people I was advised to invest in at least 25 to 30 companies to be 18:42 appropriately diversified and only to invest up to about 5% of my, you know, 18:48 investable dollars. And I think, you know, those are all great points. What I 18:52 love about, you know, the the healthcare shares venture fund is that, you know, 18:56 for an 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 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 20:03 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 Wildcatterer 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 wildcatterers 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. So I 21:37 think that you know for me it really is important to really have that that level 21:42 of of trust and confidence in you know the founder and the founding team that's 21:48 the most important part of analyzing the the healthcare startup. The other thing 21:53 I was going to say is uh for sure most of the healthc care startups that we 21:56 work with are you know too too early stage where they can afford to actually 22:01 hire consultants. That's always a big request. You know the vast majority of 22:04 the the physicians and the clinicians and even the non-clinians that are in 22:08 the group they are looking for those opportunities. many are already serving 22:14 as advisors, consultants, fractional officers, fractional CTO, CMO, CFO, CEO, 22:20 and they're all looking for, you know, healthcare companies to engage with. You 22:23 know, for me, you know, I have always, you know, just volunteered my time. Um, 22:29 I I have actually not been paid much, if any, as an actual consultant. Most of 22:34 the opportunities that I've had have come through volunteering my time know 22:38 with the company for sweat equity and then the the investment piece. Yeah. I 22:43 mean some people have different feelings about that. From the founding team, you 22:48 know, perspective, it's obviously a huge boost of confidence or vote of 22:53 confidence when your adviserss believe so strongly in what you're doing that 22:58 they're willing to invest in the company. And so I think it helps to 23:03 really identify if you know this is a company that really has the potential 23:07 for success when the adviserss are you know believe strongly enough in the 23:12 company that they're they're willing to invest in it and then you know beyond 23:16 that the advisors now they have you know essentially skin in the game and they 23:22 really want to see that company succeed. So, one of the challenges that founders 23:27 have is when they onboard advisors, making sure that they're actually going
Why Venture Capital Bets on Founders 23:33 to, you know, add value to the company and put in the time. And, you know, so 23:39 many times with with founders, they um they, you know, allocate or designate 23:46 equity to a team of adviserss and then a year or two later, they can't even get 23:51 the adviserss to show up to meetings. they can't get them to answer emails and 23:55 so you end up in a situation where you know you have this equity on your table 23:59 that you've given away that doesn't have value is not providing value so I 24:03 definitely think it helps you know from that perspective 24:07 >> yeah no that's all all really good points and I think that anyone listening 24:12 if they are interested in joining your community or even considering investing 24:18 in your fund it is uh I would double check it's healthcare shares.com. 24:24 Correct. >> Yes. 24:27 >> Awesome. And also anyone looking to connect with Daniel, we can put his 24:32 LinkedIn in the show notes as well. Daniel, as we're wrapping up, I was 24:36 going to ask you if you have any last thoughts or encouragement for people 24:39 that are exploring a new route or trying to uh find new ways of being a doctor. 24:45 What would be your advice for them? Yeah, I I think focusing on, 24:51 you know, just trying to understand what you really want to, you know, work on, 24:55 what provides you, you know, purpose, meaning, and and fulfillment. I think 25:01 that's really the the most important, you know, thing. I mean, you know, for 25:05 me as physicians, you know, we're we go into this because we really are, you 25:10 know, tend to be compassionate people that want to to help others. And 25:15 unfortunately, we enter into a health care system that's very restricted 25:21 because of the business leadership and the investment objectives that really 25:26 govern what we can and cannot do. So, it it really creates a situation where we 25:34 know what we need to do for our patients, but we're unable to do that 25:38 because of the constraints of the system itself. and it creates a lot of stress 25:44 and anxiety leading to to things like moral distress. So I think it's really 25:48 important to understand yourself and what's going to align with your beliefs 25:55 and what's going to provide you purpose, meaning and fulfillment and then look 26:00 for an opportunity where you really have, you know, autonomy and control 26:04 over that. >> Well, thank you so much, Daniel, for 26:06 your time. I know how valuable it is and I hope that everyone listening has 26:11 learned something about uh some more opportunities available to you. So, 26:16 thank you all for listening and we will [music] see you next time. Thanks for 26:19 listening to the Startup Physicians podcast. This community was built for 26:23 doctors who want to contribute to the future of healthcare. [music] 26:27 We offer support for physicians who are ready to make the next step towards 26:30 building the career they've dreamed of. Visit startupphysicians.com [music] 26:36 to learn more. And if this episode resonated with you, share it with 26:40 [music] another friend who needs to hear it. Let's change the future of 26:43 healthcare together.
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