'Doctorpreneurs' — the latest trend in funding for healthcare startups

Healthcare entrepreneurs often have difficulty identifying investors who are comfortable enough with the sector to offer funding. At the same time, physicians, who generally have capital, often seek to diversify their finances beyond their practices and the stock market. To remedy both sides of the equation, teams of physician investors — or 'doctorpreneurs' — are cropping up to offer a solution, according to Crain's Chicago Business.

"There's a camaraderie," Jay Joshi, MD, a Chicago doctorpreneur, told Crain's. "Physicians want to invest in other physician-led startups. It takes out a lot of risk. They are living and breathing the market innovation they're trying to create."

Over the last decade, medical and healthcare startup activity has lagged significantly compared to digital startups, at least partially due to a lack of seed-stage funding.

While still in his residency, Dr. Joshi decided to launch a startup. His company, called Output Medical, makes a device to automate the monitoring and recording of a patient's urine output. He raised under $1 million from several physicians and a former sales executive at a medical products company. Currently, his product is in the prototyping phase at Insight Accelerator Labs in Ravenswood, Ill., according to the report.

While his own venture is under development, Dr. Joshi has assembled a group of about 30 physicians to fund healthcare-related startups in their beginning stages. His group, called MD Angels, is one of two healthcare-focused angel groups that have cropped up in Chicago. Angels, or groups of individual investors, have played an important role in the development of startup companies across the nation.

MD Angels, formerly called TiE Angels Midwest, has made investments in a couple of projects since it was launched last year. It meets quarterly and makes modest investments of $100,000 to $150,000 per deal, with each physician investing $10,000 to $15,000, according to the report. Another group called Chicago Capital Partners has about 10 physicians who have done 15 deals over the past three years, according to the report.

Physicians are growing increasingly interested in becoming angel investors for several reasons. A main one is the changing nature of their own jobs. As more formerly independent physicians become employed by large groups or hospitals, they have more bandwidth to get involved with outside activities, according to Crain's.

And while less risky ventures exist, physician angels are attracted to the idea of investing in what they know. "We can't invest in real estate because we've grown up in a cocoon and have absolutely no idea how the world works otherwise," said Andrew Albert, MD, a gastroenterologist at Advocate Illinois Masonic Medical Center in Chicago and doctorpreneur who co-founded a software company called Fibroblast, according to the report.

The entrepreneurs also benefit from the deep insight of their physician investors. By turning to medical professionals for funding, founders of medical startups "have networks of doctors they can call on, and you can get valuable advice on demand," Sachin Gupta, a member of Chicago Capital Partners, told Crain's.

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