Christopher Kager, MD, a fellowship-trained neurosurgeon with over 18 years in practice in Lancaster, Pa., has engaged in many medical and non-medical investment opportunities over the past decade. Six months ago, he seized an opportunity and joined angel venture capital firm, Global Health Impact Fund, as CMO and as a principal in the fund.
Anesthesiologist Gary Goldman, MD, DDS, is founding principal and managing director of GHIF with his partner Bob Sweeney — former CEO, board member and investor of medical software company Challenger Corporation — also as principal and managing director. David Goldman is another principal and director of finance for the fund, which is headquartered in the San Francisco Bay Area.
GHIF provides an opportunity for healthcare professionals to participate in a diversified portfolio of early-stage healthcare technology companies. The fund presents a team of principals with experience in both business and medicine and aims to provide capital for companies looking to create, profit and innovate.
The goal of GHIF over the next six months is to complete the capital raise of the first fund, while continuing to evaluate top medical technology startups worldwide. Dr. Kager discusses his role as CMO and principal in the fund, innovative companies on the horizon and future objectives for GHIF.
Question: As CMO and principal of the fund, how do you evaluate companies? What are the primary traits you're looking for?
Dr. Christopher Kager: We search for companies that are poised to make an impact. There are many companies that have an interesting idea, but it might just be a one-off company or — if you look at spine — companies with just a different type of screw or rod. We are looking for companies that can significantly enhance the practice of medicine and surgery and that would have an extended and more global impact. Away from the financial side, we also like companies that can increase access to top-notch healthcare. For example, companies that have a viable idea or product and may just be starting to enter the market or even be pre-revenue and looking for the funding to expand development, production or distribution.
Although GHIF considers investment from any qualified investor, what we are really looking at is both investors and clinical partners. We like the fact that this is going to be a clinician-driven fund and network, and companies are drawn to that as well. They like the fact of having clinicians on their board and also being vetted by a group of clinicians, so if we decide to partner and invest with them, or partner with them within the network, that is viewed as a sign of our approval. If you have a large group of clinical providers who are interested in a company and can provide advice, beta testing, or early implementation, other investors and companies look at that as a positive as well.
Q: Have you come across any products or companies that have a particularly innovative idea within the realm of spine or orthopedics?
CK: For spine and orthopedics there are a few that are in the early stages of due diligence. One is a company called Plethy that is looking at ways to optimize postoperative care from orthopedic and spine procedures. For example, in total knee replacements, they have a device that can be placed on the extremity and connects wirelessly to an application on a smartphone. It can lead the patient through postoperative exercises and record and send that information to the surgeon and the clinical team. It will automatically track and record the exercises patients are doing, their range of motion and improvement over time. It is a very accurate measurement of not only compliance but also clinical outcomes. They are also in the development process for other orthopedic and spine procedures. Another interesting technology is being developed by Sensifre. They have developed a device for continuous non-invasive blood pressure recording through a finger sensor that looks like a pulse oximetry monitor. This obviates the need for arterial lines and blood pressure cuffs in all aspects of patient care, including intraoperative monitoring.
Q: What is the next step for the fund once it has capped investors?
CK: We will continue to actively evaluate promising healthcare technology companies. We anticipate that due to the strength of the companies we have seen in due diligence, that within a short period of time we would form a second fund, GHIF 2. Due to SEC regulations, there are limitations on the number of investors that a fund can have, but we are planning a second fund to allow investors to join GHIF who did not have the knowledge or liquidity to invest in the first fund. Our overarching goal is to continue to assist these startup companies in their early phases. We have a wide range of clinicians involved in our network and fund to assist them in clinical development and we have developed a significant number of connections in the venture capital world that can assist, especially when they will be looking for their next round of funding. Our "sweet spot" for a startup investment is generally within the $250,000 to $1 million-plus range, and in the next round, there are many venture capital firms that could take a growing startup to the next level.
Q: Has there been a significant interest from surgeons getting involved with these early-stage companies?
CK: Yes. We have many surgeons and other clinicians of all types who joined our network and the fund specifically because of certain companies, but also because they like the concept of the fund itself. Data suggests that angel venture capital investing in early-stage startup funds can have excellent rates of return and physicians are generally more comfortable investing in companies in the medical field that they readily understand. Generally, if a surgeon wants to be involved in this type of investment, it is somewhat difficult for that individual investor to diversify a startup portfolio. This is due to the minimum levels of investment that startups are seeking and the number of companies that an investor would need to evaluate and invest in to be truly diversified. By investing in GHIF, they will be diversified across 15 to 20 companies, which mitigates some of the risk with this model.
Q: What is the process like for people who want to get involved in the network but not the fund?
CK: They should reach out to us to discuss either the fund or the network. There are people who may not want to invest into the fund at this point but are still interested in joining the network at no charge and learning about different startups and angel investing. If we have an orthopedic surgeon, chiropractor or physical therapist who thought Plethy was interesting, the company may request to talk to 20 clinicians and pay them a consulting fee (or equity in the company) for being involved in an advisory role. Or if a company required funding beyond the initial GHIF investment, they may form a special purpose vehicle — separate from the fund and network — and those clinicians could make a separate individual investment in just that company. This can be a great model, and between the GHIF, the network, and SPV, there are a lot of options for clinicians to be involved in an exciting time in medicine and in healthcare investing.