Health Tech Matters

Rich doctors are beginning to offer their time —and money— to health-tech start-ups

Key Points
  • Doctors with cash to spare are getting into the start-up game.
  • Are they poised to make good investments? Well, it depends.
Paisan191 | iStock / 360 | Getty Images

Investing in health start-ups is all the rage. Now, doctors are getting into the game.

At least two groups, FundRx in New York and angelMD in Seattle, are connecting physicians with cash to spare with medical startups in need of funding. AngelMD's pitch to companies: Close a round with funding from "those who know healthcare the most."

Do doctors really know best when it comes to funding young companies? That depends on who you ask.

Physicians with a background in investing or company operations are well-poised to evaluate medical start-ups. Perhaps even better than technology investors, who might not have a sense of many complexities and nuances in the health sector.

FundRx, for instance, is backed by two physicians with experience running companies: Eric Golding, who previously worked in hedge funds, and Aron Ron, a former operating partner at venture firm Bessemer Venture Partners. "At the end of the day you want the end user involved because it's their problem you are trying to solve," adds Zeshan Muhammedi, the fund's co-founder.

For doctors who haven't worked in industry but still want to invest, AngelMD offers business and finance training.

It's not clear whether you can train practitioners to be good angel investors -- it could go either way. But it seems unlikely that doctors would invest in new technologies that are promising but might undercut some aspect of their job or hand over power to a nurse or a patient.

Still, many early-stage founders are actively seeking out investment from doctors.

As Halle Tecco, co-founder of the venture firm Rock Health points out, technology start-ups in other fields often get angel investment from senior executives in their space, who already made their money through exits. But with so few successful acquisitions and IPOs in digital health, funding from health providers might fill the gap.

And physicians tend to care a lot about human health and understand the problems, explained Tecco.

For doctors, start-ups are a potential source of income (albeit, a risky one) and they offer an opportunity to change the status quo in medicine.

"Doctors want to build and create but their day jobs don't allow for that," said Choy, who has opted to advise start-ups in exchange for equity, rather than invest personally. But he's not ruling it out.

Med-tech is also an entrepreneurial outlet for them, as a decreasing number of physicians are running their own practices these days.

"Entrepreneurship in medicine is harder to pursue than ever," said Choy.