Raising angel investments for digital health startups

April 20, 2022
01:03:10

In this episode of the Digital Health Community by Persimmon, Tim Cooley, Start-up Chief of Staff, Executive Director of Park City Angels, and author of  “The Pitch Deck Book” talks to Chris Sprague, CEO of Persimmon, about raising angel investments from angel investors. Tim explains what it takes to raise angel investment in the context of a digital health startup. There is a nuanced difference between consumer startups and digital health startups. Tim goes through the nuance differences and shares solid advice for entrepreneurs and Angel Investors. Watch and listen to gain actionable insights about raising investment.

In this episode of the Digital Health Community by Persimmon, Tim Cooley, Start-up Chief of Staff, Executive Director of Park City Angels, and author of  “The Pitch Deck Book” talks to Chris Sprague, CEO of Persimmon, about raising angel investments from angel investors. Tim explains what it takes to raise angel investment in the context of a digital health startup. There is a nuanced difference between consumer startups and digital health startups. Tim goes through the nuance differences and shares solid advice for entrepreneurs and Angel Investors. Watch and listen to gain actionable insights about raising investment.

Introduction

Chris: Okay. So I'm excited about today's podcast, both because it is our first podcast here at Persimmon and more. So because of our guest Tim Cooley, we're going to be talking about the future of healthcare, angel investing, and Tim's advice to entrepreneurs and Angels looking to work with startups and for our audience. Tim has been a serial entrepreneur and founder of health-focused startups, general manager of an accelerator before joining the other side of the table. Currently as executive director of Park City Angels. Tim combined both of those perspectives to literally write the book on pitching startups called the PitchBook, which is a step-by-step guide to raising capital from VC and angels. So, Tim, welcome to our first podcast. And thank you.

Tim: Yeah, thanks for having me.

Chris: Awesome. Yeah. Happy to have you here. So, Tim, another fun fact is that we went to high school together in Eugene, Oregon, and we both left after high school. And I bumped into you over 20 years later at the Innovator MD conference, where you were giving a master class on how to pitch healthcare startups. And I'm still blown away that we both ended up working with digital health startups around the same time. And I'm curious, what was your journey to get there?

Tim: Yes. So it was crazy when you messaged me. That was awesome. Yeah. So I'm not sure why you left Eugene, but I left because I joined the military, and then I did that for five years. So that took me down a crazy path. I got back on my first career path out of the military. So I used to build jet engines, and then I went down the sports medicine route. I ended up working at the University of Arizona, then the San Francisco 49ers, and then ended up at the University of Utah working with the swimming and diving team and did that for a couple of years. Ended up starting my first company, which later I sold. And all through the middle of all that, you got your side hustle and then your day job. So my day jobs were mostly around marketing. Did that like SEO, link, building that whole world. I learned web development. I learned all the things. And then, I went back and got my MBA, and I started doing healthcare consulting during that time. Once I finished my MBA, I ended up doing a second startup, which was in the digital health space, trying to get people to walk more.

Tim: And then I couldn't raise capital. And so I decided if I didn't know what I was doing, I might as well go learn from experts. And then I ran an accelerator and then ended up being involved in the investment side of things. So my career kind of went all over the place and ended up where we're at today.

Chris: Oh, man, that is epic. So, yeah, I have a couple of off-topic questions for you. Not off-topic, but I was going to ask you to compare Utah and Oregon in all kinds of ways, but I'll stick with the one that matters, which is, are you still first and foremost an Oregon Ducks fan?

Tim: Sure. You know, it's weird being in the sports world. I just love games. I don't care what it is. So because of my job, I kept switching. Right? I root for the team where I'm at, so when it's the Ducks in the Utah game, I just want it to be a really good game. That's all I care about.

Engine engineer vs. Software engineer

Chris: Okay. Got it. Okay. I've been biased my whole life, and I think I'll continue to be so at the College level, pros. I'm the same way. Who's the most entertaining team on the given season? Okay. And then next question is, you've been a, I would say hardcore engineer with designing jet engines, and you've been a software engineer. How would you compare those?

Tim: So it's interesting. So building an engine is much easier than writing code. Honestly, somebody else did all the hard part, and so you just gotta put the screws in the right place. There's, like, documentation and stuff like that. When I got there, literally, it's kind of like all startups, all the bolts and things were in a bin, and they were like, Go find the one you need. And obviously you can tell that's completely inefficient. So by the time I finished, we put, like, all the things where they're supposed to go. If you want to work on the front of the engine, all the pieces are here. And I felt like I've taken that through my whole career and didn't know what that was. Right. It's called lean manufacturing, but at the time, I didn't know that word, nor should I have. They were like, get the plane flying. And then throughout my career, I always dabbled, even back in high school with software engineering. So I used to build websites for people even back in the 90s, and then I kind of, like, carried that through. I just thought it was so complicated that building engines is way easier.

Lean Methodologies

Chris: Awesome. No, I'm just smiling because I built websites in the 90s and had gratuitous use of things like the blink tag, et cetera. That was perfectly acceptable to draw attention back in the day. Now, it's interesting that you mentioned Lean, though, because, of course, that's the Bible that we tend to follow with the early-stage startups that we work with, which is build, measure, learn. But the idea is to reduce the waste in finding the right product market fit. So prioritizing things like validated learning, are you on the right path? And that was an eye-opener for me, to be honest, in my first startup 13 years ago. But what I've discovered in focusing on healthcare is that Lean has taken on a similar origin, but a little bit of a different manifestation in terms of process. So still reduce waste. But instead of reducing waste in what you prioritize for a startup, it's reducing waste within a house system and things like, okay, how long do people have to wait in the office or between visits and referral times and things like that? Have you encountered that personally, much at all, like these different versions of lean?

Tim: Oh, yeah, absolutely. First of all, you've got Lean methodology and just the startup world like you mentioned, build a test, get your MVP out there as fast as possible, and then try and break the whole thing as quickly as possible. What's cool in healthcare right now is I think a lot of people are approaching the whole system as a waste. Meaning I'm working with a lady right now and helping her pitch her company better and she's reducing an entire building with an app, theoretically, right? That's crazy, right? She could unfortunately remove 100 jobs with an app. And that's amazing, right?

Chris: No, that is amazing. And so, yeah, that's the dichotomy that as I've been getting into Lean for health care to deal with, which is there's kind of two motivations that it could be, which is reducing waste is in time spent on task in people, or it could be reducing waste to the end of better outcomes to the patient. I can't remember who had the quote, but they said that a successful Lean transformation within a health system was when everyone in that health system asks, how does this benefit the patient? Which would be awesome if in practice it's actually a guiding force?

Tim: Totally. I totally agree. I mean, like in this case, I think that at least in her pitch, it's like 20 steps for the patient to get seen in this whole thing or she's in the transfer space and in her thinking it could talk to maybe two people versus I think at least just 20. And that's incredible.

Tim: Yeah, that is amazing. And I think that's one of those cases where the incentives align. Right. So less work for people within the health system, which of course, they're overburdened in so many ways and then less time spent waiting for the consent of the patient. That's great.

Tim: Yeah.

Angel Investing - What & How?

Chris: Cool. So that is all very exciting. But I'd love to learn more about what you're doing now with Park City Angels. And I guess first, starting at the top, can you tell me about angel investing and what it is? How is it different then, say, friends and family debt? VC?

Tim: Yeah, totally. So at Park City, I'm the executive director. So I do all the deal flow screening. I actually meet with five companies a week, but I screen up to hundreds. It just depends on that month. So I try to meet with anybody who's in Utah. That's kind of the charter that I've taken on. I think it's important for us to stay local if we can. But if we get referrals, then we'll take them as well from anywhere in the country. So that's what the group does. And as you said, they are different. So friends and family is probably the hardest and easiest money to come across because you don't want to ask your friends because it might fail, but usually they're the best ones to go to, especially if your product isn't built yet. So I would say that it's best to go seek angel funding if you've got your first couple of clients. Uh, maybe one. You only really need it. One, maybe two. You know, you just want to say, like someone bought it, someone's using it and we know how to grow it if we had extra cash. And then once you get a handful of customers and you kind of really know what you're doing, you know how to get the next hundred. That's really kind of when I say that early stage VC comes in and then you go into that next round of funding when you're looking at different verticals and expanding the business. That's kind of how I would freeze it all.

Screening and meetings

Chris: Okay, Yeah, I got it. No, that's interesting. This kind of maps to how we think about different stages of companies, which is okay, either as an entrepreneur or an intrapreneur. You're in the show proof stage, which means okay. I have an idea somehow through hook or crook, I need to demonstrate that it has value. It could be through prototypes, things that don't work. Smoke screens, smoke tests, or it could be through one pilot where people are telling you good things, and then there's that little stage which is becoming viable. So you know, turning that initial validation into an actual business where you can repeatedly go out and get some more of these customers and make sure that the same is those initial customers, and then the third would be the scalability, which is more the same, or expand the business with more products. And it sounds like you guys are very much, you know, along that path, and gosh, I would love to learn. Actually, you mentioned that there's a hundred companies you see in a month, and there's five that you talk to per week. What is the difference between screening and meeting or what do people need to show you to get to that meeting?

Tim: Yeah, so I would say, a lot of it's kind of gotta feel. So every group has their like called their thesis. That's the word they use. So say like we only look at health care or only digital health or female founders or whatever the thing is, are going to kind of put a line in the sand. And a lot of that has to do with just the inundation that we get from so many people, so it's kind of like that first filter, so for us and for my role, it's Utah. Like I said, we look at others, but if it's a cold application, no one knows you at all. Utah is our filter? Okay? So every group has that; whether they state it outright or not, is up to them. And so once I get the person on the call then I start to ask you some questions. Like what are you doing? You know? Is it a physical product? You know? Is it a pharmaceutical or whatever? So after that then we have the other filters. So like I said for us, we typically like to see that the product is built? And you're right in that early stage of customers. Obviously, the more customers, the better just to risk the business for us as investors. And so, the things we don't really look at are like real estate. , not this particular group doesn't mean that the investors don't like real estate. But for this particular vertical of investment we don't look at them, So it's kind of like that's kind of right, of how we do it.

Chris: Right, Interesting. And you talk about de-risking investments. And then there's the counter side, which is how much potential for either impact or home run swing does an idea have. How do you balance those two things? Okay. Saying is this thing legit versus it may or may not be legit. But if they hit the ball, it's going to be a home run. How do you think about that?

Tim: So I like to do a balanced approach, So obviously not every company's going to have the potential of a hundred. But that is one of the criteria. Could you, if all the cards fell properly, get to a hundred times valuation of what we're doing today? Then sure, we'll bring it in. And we have a lot of those conversations like in the group after the people pitch, and it's like man, if they hit this, it is huge. Otherwise, there's nothing there, and some of those are the fun ones to invest in. But then obviously you have your diversification portfolio and so you know, I'll try and bring in something that has a clear exit path. You know, if they get to five million, ten million dollars in revenue, there's definitely a buyer there, so I'll have some ideas.

Chris: Okay, Yeah, I got it. Yeah, that that makes sense, and that. Yeah, yeah, that matters for investors where you guys get a windfall only when there's either a subsequent round of investing. You guys. You guys choose to cash out, or there's an exit that could be meaningful, for example, an acquisition or going public in. In that case, okay, no, that's very interesting and I know you guys. You don't do real estate, but you do invest in different spaces. For example, health care is one, and then it could be conser is others. How is raising angel different for a healthcare startup versus a conser or any other space? Like what is specific to healthcare?

Tim: Yeah, so typically health care needs a lot more money. So let's say for example, you're doing some kind of diagnostic. It's going to take multiple rounds of funding. You still are in most people and are aware in this space that there's like SBBR and STTR funding so you can get government grants. But a lot of those don't cover things like a salesperson, right, like they have to be used for development or they have to be used for a very specific way. Yeah, research or something. So you're looking for like

Chris: Right, research.

Tim: this, like two, three, maybe five million bucks to try and get the product past development into the hands of a few people you know, but you still have like all this research that you have to do, but then the funding runs outright, so you just raise three million products. Still not in the market. Then you go and raise another five, ten million, and then twenty million, and you're like seven years down the road and no, an early investor has seen any kind of potential of return. So that makes it really hard to raise capital, so you have to pitch home runs when you're talking about medicine, you know, or, or right. these therapeutics or whatever?

Goto market

Chris: Yeah, I got it. And you've talked about traction before and just it helps to demonstrate that you have one customer, or you have gone from one to five before getting to an Angel round. and certainly a v, c bro. Something with the companies that we work with, maybe underestimate within health care is how hard it is to navigate into that customer nber one, and how hard it is to go from there into customer nber five. Can you comment on the go-to market challenges tips, observations that you've had for healthcare startups?

Tim: Yeah, totally so I'll give you some tricks here, so the best trick that you can do is get to the point where you steal your competitor's salesperson. Like that should be your first hire, Like, and you should be wooing them like crazy from the beginning. Like due, Chris. I know you're doing a thing, but like when you're ready to jump ship, I need you to come to me because they've got all the relationships. They know how to navigate the thing. Like an experienced salesperson in that world is invaluable to a startup. The second thing that I think people don't do enough in the healthcare space is have a direct conser pathway. With where medicine is at right now. I know everybody wants to chase. like, , the reimbursement and all that stuff, but it is super complicated and very difficult. If you go direct a conser, you can test a lot of these assumptions. Um, really really quickly. And while you build the FDA version of the product and they could be the same, but you just change something. And so you have like these two products going to market simultaneously. And I wish people would do it, but as you can imagine, very few researchers have direct conser experience like you see this right, happening right now in the real world. There's women's health issues that are going to direct to consumers. I guess a lot of people just aren't familiar with how to do it. And so, that's another one that I would do. The third way I would say traction can be accomplished in health care is to have the people who would use it invest. So if you're doing a dermatological device of some sort, and you don't have twenty dermatology doctors investing in you like that doesn't even make any sense. Like you should have hit up every single one in your development process and being like, do you like this idea enough to throw in twenty five thousand dollars and that's a really good traction point? I've seen four angels when, or even early-stage VCs. When you're like, we've got ten people who are not only investing but waiting till FDA approval so that they can use it.

Metrics for traction

Chris: Yeah, I got it. Oh man, so I have a couple of questions on that. So one is around metric, and then the other is round direct to consumer in general, So mean first, you mention metric for traction, Um, what is traction in your world? By the time the company is pitching, you like it. What do you need to see? How do you quantify it? As let's say, a healthcare start-up.

Tim: Okay, so let's go back. So one of the big things is and people don't realize is that investors don't want to look stupid. That's their biggest fear. They want to go talk to their buddy on the golf course and be like, ‘look, I just invested this really cool idea.’ It's worth a billion dollars right. That's the dream conversation, so they use traction to kind of alleviate these like stupidity markers. Like I can invest in you Chris. I know I've known you for a long time. And so that's a. That's a traction point, like just the time we've known each other. But for most people, if you are unaware of the entrepreneur, it really comes down to these critical things like, Do you have customers? That's a traction point. Is somebody else investing in you? So do you have a lead investor? You know, let's say you're raising five hundred K. Do you have half of it closed already? You know, So we talked about friends and family, friends and family in a lot of ways Can be the traction that you're looking for on a fundraise when you're super super early, right, like like Look, we're just trying to finish off another half a million and we close two hundred K already. It could be partnerships. Could be another attraction. So you're like look, we've got a beta that's running out of Intermountain Healthcare. Um, it could be strategic partners. So for example, like let's say Cerner was given you a hundred k as a pilot. Clearly, they're interested in the possibility of whatever you make. Um, you know so, and in each one of these bigger organizations has a investment arm. Typically, Um, an order associated with some group you know. Like Epic is Intermountain Health Care’s affiliation in Utah.

Chris: Right right. Got it. Yes, you have to work through those, , more organic ends, or you need to find someone who has those relationships already might be a longer slog.

Tim: Mhm, Yeah, that's why we like it. We call them gray hairs, right, gray hairs on the team are super important as especially in this industry because they've done it before you know. and A and a lot of people. We see this a lot. they'll be working at, you know, epic or whoever, and been launching products. Um. but when they go out on their own, it's a completely different thing you know, like you don't have an unlimited budget. You don't have a team of nine thousand that are trying to make money. you know.

Beyond traction

Chris: Yeah, no, absolutely. So I do want to come back to the direct to consumer later, But since we're talking about what makes a pitch successful in terms of for example, traction, Now, in the pitch deck book, you share that in your ten years of experience raising money yourself and years under your belt of funding companies yourself that it's never the idea that got funded. So, can you tell me if it's not the idea, and what beyond traction does get things funded? What's a minimum viable type of pitch?

Tim: It's usually the execution of the entrepreneur up to that point, right, So like there's lots of cool ideas and you're just like Oh my gosh. That's what I mean. I come up with stupid ideas every day and they're all great. They're all billion-dollar ideas. right. Um, it's not true, but you know what I'm saying, So you get this idea that comes in and then you're like. So what have you done so far and then they're like, oh well, we did launch an MVP. We've got thirty people using it so far and you're like, Oh, these people hustle like there is something cool about watching them in their element trying to get this company off the ground, you know, And so when you hear someone talk about all the things they've accomplished with basically nothing, you're like. Oh, I can see why if I gave you a million bucks, you're the person that's going to make this happen cause when you're a good steward of money. I trust you, you know, like all of these things.

Chris: Yeah, that makes a lot of and, And something I've heard before is. Yeah, you invest in the people, not necessarily the idea. not just the traction. Um, but yeah, people that you believe in in terms of their either experience or their grit and resourcefulness, Um that that they're showing, Um, Yeah, no, so that that's great. Um, so I do want to pull back this metal level you mentioned directed at the conser, because that's something that we've been hearing about so much lately. Uh, is that Um, you know, like the the graveyard of health care startups is really littered with these companies that promise programs to providers or health plans bears, Um, and they never bore fruit, because at the end of the day the people would not use the thing that enabled that type of “patient engagement”, right, or that type of program ought to be effective. And what we've heard is this kind of , you know, flipped model or it? It reminds me of flip classrooms from Salkon and Edck. Um. but this flip model of Hey, no one's going to believe you anymore because they have been through the rodeo with the CCM and now RPM and know RTM, of all of those things are great in practice. Yes, we can build for it, but it doesn't matter at the end of the day if the people don't use the thing. Um, yeah, I, I'm kind of curious is to your thoughts around this. Uh. Okay, let's validate with consumers first, and then , work backwards into who can actually pay for this thing at scale if patients engage.

Tim: Yeah, totally. So, I mean, let's us take Nuom, for example, write the health and wellness app Killing it right, But their go to market strategy is dial right, Their a behavior change platform and I don't know their story, but we could make one up and say, And this is what almost every digital health platforms out there is like Look, we can change behavior and prove it, And then like well, we need five million dollars to run a research study. They like. Why do you need that? Like all you need to show me is how many people downloaded and use the app every day. Like that's all we need and Nuom is like. I mean, I don't know if you've ever downloaded it. but like they walk, it's like it costs us eighteen dollars and thirty-six cents to acquire you as a person. like, Do you want to pay that or do you want to pay the full amount and you're like. Well, that's pretty cool. Like you have this dial to a nber you know, and I think they take special people to be able to do that, But there's so much out there. I think there's just so many other business models people don't use in the healthcare space. Um, that are direct conser. Uh, everybody wants the healthcare system or the employer to buy your thing, But at the end of the day it's there's a. There's a person who has a problem and they're willing to pay for it like they're willing to pay for a solution that works. Um, it's kind of like back pain. There's a company here in Utah called Chirp they'. . it's kind of like a little circle that you roll out your back on And I mean, I think they did something crazy, like ninety million dollars last year or something. Be like. It's like I have back pain. I will try that. Here's a hundred bucks like it's that simple and I think when you're in the healthcare space, you forget that that's an option.

Chris: Yeah, no fascinating and you can see it coming literally. Malls. Was at a mall. Maybe was yesterday where there is a Las surgery center in the mall was really interesting. Yeah, and then there's this movement of okay, your providers and insurance companies are not taking good enough care of you. They treat you when you're sick, not keeping you well. And now there are these waves of let's say, direct primary care or wellness coaches, or your, you know mindfulness guru, that you may have that are really oriented around your long term health and prevention and behavior change. So I think that's very interesting that people are starting to now get to decide between the system where all of the incentives seem, if not misaligned. At least, Um, you know not align towards saving people money for the outcome, and they get to choose, so I think that is a great trend that you brought up.

Tim: Oh, totally well, and you look like. Yeah, like our. I think our generation was the this flip, right cause. I, a lot of people don't realize that health care wasn't like this in forty years ago, right like you went in, you paid your tab. you walked away and you did the billing right. Like you sent your health care the reimbursement, and then once the doctor said Well, why don't we just take care of it for you? Some business model came around and like we'll just take And then it went like kind of crazy like it is now. But now you see a lot of business models where people are like taking that back over. Um, And so they're like, use Like I haven't been to the doctor in years. Like why? That doesn't even make any sense like I know it's an insurance, but like I would much rather just pay when I need it. You know, So you have things like Afck and things like that, but for catastrophic, and I'm like that makes sense like if I break my arm, I need help.But if I have a sniffle, you know. But you can see this too in a different way, so like it's the education side of things, so pharma is killing it right. Even though they're through your physician model. They're a hundred percent direct to consumers now. Um, and you can hear them on the radio like they're just educating you on this problem you might have, and you have to finish the conversation with your doctor, But it's like they kind of pave the way for this new type of care in a lot of ways.

Chris: Yeah, no, definitely no, I'm just smiling because they all have that Um. master of reading the fine print really quickly, so nobody can ever hear it at the end of the commercial when you're watching it. Yeah, I know that I want that button for our business meetings. Actually, just someone to come in and you know, read all the stuff at super speed. Um, cool.

Tim: Yeah, yeah, they out the end of this like all the data I said, may or may not be true, you know.

Chris: Exactly. and it's like Okay, You know, if you go with our service then you could get , yeah, diarrhea loss of weight, nausea and perhaps death, and it's like Oh, okay

Tim: Perhaps death.

Chris: I just want software engineering. Yeah, okay man,

Tim:
That would be so funny though,

Chris: Right

Tim: Yeah

Chris: Yeah, well, we'll try that on some email footers or something. See if anyone actually notices. Yeah,

Tim: See what happens. Oh man, they're like. How do I get diarrhea from coding? You're like. Who knows it

Chris:
Oh, yeah, well, I, yeah. I'm pretty sure I've gotten it from coding back in

Tim: Could happen Though

Chris: The day, but yeah, that's that's more anxiety related. Yeah, yeah,

Tim: That's a whole different issue.

Chris: Right. No, yeah, that's the Domino's Pizza at one a M issue, not the coding issue. Okay,

Tim: right

Chris: Cool. It'd be just okay. Circling back to the startups that you work with, would love to know. Actually, some of the tweaks that companies can make in particular healthcare startups, but I mean, really anyone like If you have any boots on the ground, experiences of companies that Um, didn't hit it out of the park the first time through with you, but or or someone else, and they, they were able to tweak things reorient. Re, remix without pivoting. Necessarily. And then it made sense,

Tim: Yeah, so there's a company I'm invested in. It's called gift gos, not the health space, but it's Um. and in the original pitch it was a coaching app. So you would film yourself golf. You would send it to a professional golfer and they would kind of mark up the video and tell you what you're doing wrong. Nothing wrong with that business model. It's been done a million times and it. It just doesn't really work. Long term. It takes a lot to make that really happen. So we were talking. The guy's name is Willie Ford, great friend of mine and one of his clients is actually Mastercraft. So the boat company and they are the subscribers and they said, Look, anybody who buys a boat from us gets ‘x’ number of credits to our professionals, So I was like. Well, this is a really interesting use case, like the brand is the buyer, and all they're trying to do is facilitate the conversation between these pros that they're already paying. and then the conser like Imagine and I don't know. I'm going to make up something here. But imagine if you bought some really expensive golf clubs and then you got you know, connected with Tiger Woods to fix your golf swing. Like how rad would right, right, that be Or like you know, like Matt Jones, I watched some bicycling things on Youtube. Like these guys, you, I bought this bike and now he's going to coach me on how to do a backflip. That's pretty rad. Like. I think that's the next level of influence. You know, But it took listening to the business model testing out different assumptions and then when the true business model appears, communicating it that way, right, like the first business model. Still the same thing you record yourself. Send it to a coach, but now you actually know who the buyer is and you can communicate with a buyer really really wants.

Chris: Yeah, no, definitely, that makes sense. I would love Bill Gates to do my code reviews. For example, , not no, that. Yeah, exactly. No, no, it's interesting. Yeah, I know, I've seen a lot of these companies that use the ARAI to try to break down different physical movements, But then you look at, let's say, the master class type of model where it is? it's , you know it. it's less about the content. it's more about who you're receiving the content from. Um. Yeah, so I think that's a really interesting tweak

Tim: Oh, that. I mean, And the popul. the popularity of Cameo and some of these other like celebrity type things Yeah, Mhm. is pretty cool like you know.

Chris: Yeah. No, I. I think it's absolutely incredible and you know, Oh man I, we've been taking master classes from Uh. Whomever it is, from cooking to music production from Timberland and Um, all kinds of things. And I don't know. it's just . Yeah, it's a different experience than reading yet another tutorial or some other method of learning. Um, it is feeling like you're getting it from a master. whether they're more qualified or not. You feel like there's an inside scoop,

Tim: Well, not only that, but it's the Interim right. Like you, you interacted with a brand and now the brand's facilitating that conversation like that's rare. Like you know, imagine if Pepsi ran a commercial like a contest and you could have a conversation with one of their athletes. That's cool. That's a cool brand experience.

Gaps with healthcare startup pitches

Chris: Yeah, absolutely right on. Um. Okay, so let's see and can you maybe identify any common gaps or mistakes that you usually see with, let's say health care Startup pitches or other pictures that are easily correctable If you kind of have the right mental model of how to position yourself.

Tim: Yeah, totally. So let's start. Let's use health care because that's what we're talking about. One of the biggest issues is that they start with the solution. So they come in there and they're saying my widget does this. Really? I like to use this phrase as Polymer. Ligy's Nine eighty three. You know Beda blocker and you're like. What? In the? I don't know what that is Like? Ninety nine. You're the only one who knows what it is because you literally made it up like you're the scientist. You made up the term. No one knows what that means. And , that actually floors a lot of angels from investing Because it already sounds too complicated. We had a guy come in last month pitching a pharmaceutical which we rarely ever look at and he goes okay. Imagine this thing you've got. Pacman comes in and he bites this thing and his head on the thing. And when he does that, we can kill Pacman and it'll kill anything he's eating, And I'm like cool. I get it. Like so simple, so beautiful. I know what Pacman is like. It's just the simplicity of the model and I think a lot of health care people. Y, you spend so much time educating Um, And you want people to come up to you and a lot of health care people need to realize they need to come down to. If a sixth grader cannot sell your product, you don't know what you're talking about.

Chris: God, it got it. what? Well, I thought of the ace in the hole for the next pitch. That doesn't make sense to say Okay, that's all going good. I didn't understand what you said, but can you tell me about the side effects? Uh, anyway,

Tim: Totally

Chris: Yeah, and and

Tim: Yupp, and they play the thing.

Chris: And then and then you could sell them that button that brings on the master of speaking quickly. Yeah,

Tim: Yeah, yeah, that's the. That's the new venture. Let's go. Patented

Chris: Right, awesome. Awesome.

Tim: Effects may include, and it comes exactly at the end of every pitch

Chris: Exactly. Um, so

Tim: That's awesome.

Pitching your startup

Chris: Yeah, I mean you, you've literally written this. The book on pitching your startup. I would love to know. What haven't I asked? Or what is your top advice that you usually give startup founders when they're looking to build a new start up or wondering what that next milestone and raising money is?

Tim: Yeah, I think the keys here are. So one of them is to get help from someone who knows what they who, who's either done it before, been in the industry for a while. There is lots of competing feedback on pitched Dexs. I. I'll be the first to admit that I think mine's the best, but the reality is it's like you got to find what fits in your narrative and then what communicates what you're trying to communicate. The second one specifically in health care is you have to know your numbers. so I work with a group called forecaster, Um. It's a really simple tool, Um. for gettin our like kind of numbers put together, and it acts basically like a kind of a fractional CFO in a lot of ways, Um. but tools like that are super helpful in getting you started, because a lot, especially in health care because you are raising so much money and the revenue is delayed by years. You've got to have a really solid idea of how much money you actually need. What are your major major milestones in, you know, and all of that stuff. So I would think two things really is. You know. Make sure you're telling the right kind of story that other people can hear, and they understand, and then make sure your numbers really make sense.

Chris: God. Got it. Is there any encyclopedia of numbers that you should hit for different areas within health care that is out there, like for example, back in the day, put out when you w combinator companies to be hitting thirty percent month over month growth, which means they double between two and three months every two and three months. Is there like a guide on whether you're on track or off track in terms of traction?

Tim: Hm, that's great. I, not from that I'm aware of. I mean, most people's traction is like, and especially in healthcare, is like a clinic, like a hospital. You know. It depends on the product, but it could be just like We've got five directors using our thing. cool. you know.

Chris: Got it. Got it? Okay? No, this is a good one to unpack together. Maybe, , if it doesn't exist

Tim:
Yeah yeah

Chris: Cool

Tim: I'm sure there's something out there we just see ' so early that usually it's not a thing.

Beyond/After partner angel meeting

Chris: Right, right. Okay. So we've gone up through how they get screened by you and then that meeting. Let's just say they check all the initial boxes. What happens after that kind of partner Angel meeting where you determine if you're going to actually invest

Tim: Yeah, so usually there's a part called due diligence. So it happens after the meeting, so this is one thing. I'll take back a little bit. You're pitching to get to do diligence. not to get no one's right. I've never seen anybody write a check that day, so you're getting to the next meeting. The next meeting is due diligence. Um. you'll end up building what's called a data room. So a dated room is really all the documentation. Like we talked about your forecasts, your financials. Like, it could be your cap table. Meaning who all owns the company. It could be a whole host of other things, intellectual property. You know whatever, so you're going to send this whole bulk docent to people, Uh, they may or may not read it, Um, any, will, , and then you're going to go through a series of meetings. Um, you know, and my advice is reply as fast as possible. Um, if you can do it within the hour, do it. Um. but Y, you know a good time frame is no more than twenty four hours. Um, but anyway, so you go through that and then at some point down the future, and you, you get your term sheet, Uh, and then it gets signed and then the funds get wired over.

Chris: got when you when you're talking about responsiveness? It is that because it's just professional because it's yet another signal that you look for.

Tim: It's another signal. So I've seen a couple of deals not go through because it took the founder a week to reply Like, Clearly, this isn't important to you and in, especially in angels. This is what people don't realize is it's kind of a hobby investing. Uh, whereas inventure capital, they're required to to fund. They have to put money to work. That's their job. Whereas angels don't have that same mechanism of force.

Chris: right right. Okay? Got it and the last question about Angel investing is from the time you first hear from an entrepreneur to the time that a check may actually get written. What time is that time? In terms of okay, long?

Tim: Yeah, yeah, so let's take our process, So let's say you applied today. I was able to get you into our screening meeting. So the screening meeting is the first Wednesday of the month. Then you did a great job. You killed it. You go to our general meeting and so that's at the end of the month, So we're now. We're talking almost two months from today. Um. and then our goal is to get a check written within thirty days of that final meeting. Um. so we're talking about. that's you know, a ninety day process given where we're at today, Um, Othergroups can be longer than that. I would say very few are shorter than that, So, Um, you know that's kind of the process.

Chris: Okay, Got it okay? Well, thank you for that, Tim, and don’t you have your own startup experience? I guess that on the other side of the table as a digital health entrepreneur you found two companies Random Breakfast and I was wondering just to take one of those as kind of your personal war stories of what you've gone through. Can you give us your random breakfast journey in a nutshell? Yeah, please,

Tim: So yeah, Random breakfast was a digital health product. Our goal is to get people to walk more. Um. At the time, behavior analytics and things like Gamification wasn't really a word when I started my first company, which was around, getting people to come back and participate in exercise. So the first company Coole Fitness was designed like Pelatton today. Back in twenty ten, so we kind of took what we learned from that. I turned it into a health and wellness blog that I ultimately sold and then the. So the second company, we took all the learnings from the first one. My partner was some people who were in the game development department at the University of Utah. Um. and we tried to do something really unique. Really cool. Um. and we were pitching it around the world and people were like, No one will pay. No one will play video games and walk. That was the feedback we were getting. and we're like. Well, we'll prove you wrong. So we built our first product, which was awful, but it got us some funding. Then our second product took. It was a Hu. Like games are really complicated. Like coding is easy compared to building a video game. And so like Imagine coding fun like where's the docent on that? Um. It doesn't exist by the way. Okay. So anyway, so well what we did and this is where I learned about pitching was. We kept trying to tweak our pitch to make it sound like our product was bigger than it was. like You know, a hospital will pay for us because we can insert these ads. and like we were just trying every avenue of communication. Then what it was like, we were building a game company focused on a really unique niche in the marketplace, And I think if we would have done it differently and we would have been in like California, New York, things might look differently, but Um, Utah, we just could not communicate. So that's what happened.

Behavioural change in healthcare

Chris: Yeah I know it's super interesting and I had a personal experience in a and what was interesting is that what worked from the gamification perspective motivation for learning or or peer validation they were the ones that the gamification system like reinforced so they they shot through the roof in terms of engagement for example 98 of the other students questions were answered just by two percent of the people because they're that engaged and they wanted the validation and the scoreboard but what I'm getting at is really do you think gamification works depending on the person right whether they're intrinsically motivated to do a thing or they're not or what have you observed

Tim: Yeah so the answer to your question is yes and no depending on like the motivation for example let's look at just everyone does leaderboards right I'm you know 500 pounds super overweight you're really really fit you know you track background you do all the things right and we're on the same leaderboard of walking you go and walk 9,000 steps you know I barely can walk five the effort for me was way higher than yours right yet you're killing me and there's no way I can catch up right it's just not possible

Chris: Right

Tim: So I think that when people who don't understand gamification put gamification into apps it's usually done very poorly so I think the majority of people do it very wrong right like you mentioned like how much those guys who don't study like I wasn't to study here in high school and so like what would it have taken what would have been the incentive structure like James bond was big deal right at the video game like if I they didn't do skins back then but let's asse they did you know it was like oh if I did my homework like which I never did then I got a new skin and bond that was like only to those people who never do homework like that would be kind of cool you know like we'll take fortnite today right there's got to be something else that's really which I'm motivated by which is why we went down this path of games like most games even if it's a small game like you still want a treasure chest of some sort

Chris: Right

Tim: So that we were like what if you could just get a treasure chest by walking 500 steps and for you I know you walk nine thousand so that's not hard for you so why do I make it ten thousand it's the same incentive reward and almost the same

Chris: Right

Tim: You know no Chris that's interesting so first of all you took me down memory lane when you mentioned bond all about odd job with the golden gun that's all I'm going to say

Tim: Yeah totally paintball mode.

Chris: And oh wow man wasted. Not wasted. Spent so much time on that.

Tim: Learning it was educational

Chris: Yeah yeah exactly learning have you seen those ads lately that are you know I don't game for me I came for you and it's a doctor it's a flier of a you know commercial airline but a little ridiculous intel but anyway yeah so but yeah my parents were a part of a health plan and they were incentivized to wear their fitbit to track all of their stats and they if they reach some nber per month then they got a five-dollar discount and that was enough for them right

Tim: Really

Chris: Yeah what was enough for them because they're already very fitness-centric and they wanted to do those things and they wanted like some carrot at the end of it but recently their health plan has stopped that program because not enough people were using it so I just think it's really fascinating to try to figure out what these reward mechanisms are and they're usually you know there can be one that works but I feel like there's a whole spectrum of personalization and motivation that not everyone is quite figured out yet right and it's probably very startup specific

Tim: Oh I totally agree and the reality too is there's another issue it's just do you want to do it like do you really want to walk five miles a day like for some people I have a dog so walking five miles a day isn't that hard for me right but for someone who is sedentary like like walking to the refrigerator when your feet hurt is a task that is a thing like my dad has some issues and like to get him just to do his laundry on his own a thousand dollars wouldn't be enough of a reward you know like so it's like the money and they've proven this time and time again money is not a motivator for 99 of people and so like you got to find something else that fits where they're at and I think that that's the hard part

Chris: I got it. I think that's great great insight definitely yeah I don't think the money is enough either it's just and I mean that is the question you talked about different ideas at different times and probably timing matters right so before our current you know several year generation wellness was not a thing right watches were not a thing wearables and then you go back 10 or more years and there's a google health vault trying to get into the game of personal health records and centralizing everything in one place and people didn't care at all right and now I feel like we're getting back into that era of oh well now there's final rules so there's a supposed you know reason for for health systems to support sharing data but and now people are questioning do people really care right do they care enough to centralize it on ios or whatever the next vault is gonna be but yeah do do they care is the big question when it comes to motivation and behavior change yeah I don't.

Tim: We'll see

Healthcare or Sickcare

Chris: Yeah we'll see we'll see so on that note Tim I would love to ask you just a couple big pic picture questions so  we've talked about  a lot thatrather than keeping keeping people well it's completely oriented and aligned around treating people when they're sick I would love to know how do you feel about the current state of healthcare and what do you think we need to do to make it more patient-centric in terms of cost or accessibility or wellness

Tim: I think we need something new you know working with a lot of these big providers you know they're not looking for something that's going to move a small needle they want to move a big needle and there's lots of cool ideas I'm sure many of the people that you guys are working with who have not billion dollar ideas they're not going to save an organization billions of dollars but they could help ten thousand a hundred thousand people do something very good for themselves but again like I mentioned before they have that requires new business models I mean imagine if you had 200 bucks a month from your health insurance that you could do whatever you wanted with like that would be a really unique way and it was free to you like you're already paying for this service I mean I know this these are happening in some employer health care systems but that would be neat but I do I don't think that I don't think that people sell these things enough right like they just don't know how to communicate to consumers in a way that's very important so like you look at noon like we talked about earlier like tony robbins can sell something because he you believe he's gonna change your life right you know like noom you believe it's going to change your life this digital wearable thing that actually can change your life you don't believe it'll change your life and that's that's a big problem right right

Chris: Yeah I know that that's super interesting and I think that's where these direct to consumer models are interesting to follow because it really is flipping who determines what is valuable in terms of care and I think the the the examples that you've mentioned and then all these emerging direct to consumer models whether it's primary care or Lasix and of course ed was like the big you know home run early on guys it's going to be super fascinating because that is the market determines what is valuable for me in terms of my care

Tim: Yeah and the awareness of it too as a conser right like there's a billboard on ed on my like going to my house every single day you know so if you have that problem the odds of you making that phone call go up exponentially

Chris: Absolutely yeah. No I get 10 emails and three spam calls it seems like every week I'm not totally yeah so not even just billboards yeah it's a random person it's like

Tim: You know you might get diarrhea or death you know

Chris: Oh gosh! Well yeah yeah yeah. Those people don't include the disclaimers they don't have that button man this is a big idea Tim Not Yet

Opportunities after Covid

Chris: Recently at a meeting they said that within healthcare since the pandemic a transformation that would have taken decades is unfolding right now so in taking out your crystal ball what area of healthcare innovation do you think has the most opportunity for entrepreneurs not necessarily the impact for patients but I mean what is like being enabled and transformed right now that you think people should look at

Tim: So I really think that the digital device telemedicine space is going to blow up at some point I think that I'm not sure what's holding it back but if you could walk into a little cubicle put your arm in a thing like we used to do at walgreens and it tells you everything that's wrong with you like that's going to happen I know theranose is a thing but like at some point that's going to exist in the next maybe 30 years and it's going to be like print out your receipt go put it in the vending machine and here's your medication like that's going to happen I think that diagnostic tools are going to be much more consumer-centric in the future like you may not have an x-ray machine at your house but like why do you need to go to a hospital to get an x-ray or an MRI like that again I don't need to wait in line to stick my arm in a thing and follow a tutorial like there's just lots of things that don't need people and I feel like in the future that's going to happen we're seeing lots of cool AI things come that can like diagnose cancers and like there's literally you're just gonna like I feel like maybe this is what's gonna happen the airplane industry is gonna dominate and you just walk through the machine and it's gonna be like you've got cancer oh and by the way you're good to clear this thing right like there's gonna be something as simple as that that is going to do our diagnostics in the future and so someone's going to crack that I don't know who it's going to be but

Chris: Yeah no that's amazing. Yeah I'm just like thinking back to even the original total recall where where they have that walkway you could pass through that shows you everything about the person and of course everything that they're packing in their clothes But

Tim: Yeah  

Chris: Yeah. No I think you're absolutely right as far as those types of things being more accessible more autonomous which hopefully actually creates the space for the health professionals to consult right more than interpret what what what a result could be which I think would be great for for a lot of people I think that's why there has been this big evolution for some towards like the coaches the the wellness professionals the masseuse the naturopath because they really do consult with you and individualize versus just being a you know a workflow step depending on what your readout is and yeah and I'm I'm hopeful to to to follow those trends

Tim: Well I think it's a I call it triage okay right yeah like I hurt my foot how bad is it can I go and see a natural path can I go see someone I'm gonna say lower on the totem pole whichever however to find that or do I need to go see a professional and that's kind of where general healthcare is at right that person is a triage machine and I don't feel like we need those people right like in the future we definitely won't need something like I need a foot doctor like I don't need five people to tell me I need a doctor I already know this like you know and if you need the check system you just go you know go to the airport right?

Chris: Right right and go to the airport that's funny oh man okay well TimI just kind of have three rapid fire questions for you to close maybe let's just focus around pitches okay okay so pitches you've heard or heard others give is your time an accelerator or given yourself although hopefully not for some of these

Funniest pitch

what's the kind of the funniest pitch you've ever heard without necessarily naming the company

Tim: Oh man, that's a hard one  I heard somebody I'm not gonna go into details kids ever hear this but like it was a class they wanted to raise five million dollars for to do this class and like it's like one of those thingsthat you can literally do on your phone today like it wasn't funny but it was like one of those like what like it was kind of sad but i'll go with that right there's like

Chris: They're like and with our app you can view your call history yeah yeah totally yeah you're like you're like and you can text people

Tim: You're like can't we do that already like not with your left hand.

Most memorable pitch

Chris: Okay got it and then so how about your most memorable pitch as executive director of Park City you know again you don't have to name the company that's up to you but but just like figuring out what is memorable in a good way about it

Tim: Yeah that's a tough question I see so many I really like when people walkaway and you're like that's cool I can't give you an example but it's just when you there's a feeling that you get when it's i'll say that actually that healthcare company most recently that explained something super complicated in a way a five-year-old could understand was a really cool moment right

Chris: Right yeah you know and that makes sense because you know healthcare I think isn't apparently something that people don't necessarily understand but even if they do the webmd thing so grateful appreciative for you being on our podcast I think you know it it's it's apparently something that people don't necessarily understand but even if they do the webmd thing so so they can talk to their physician they don't know how to say it right so I think that type of hanizing what is going on with you know your your body your condition and what to do is a big deal because most people don't have the the ability to learn or the thought process or if they do have those two things the ability to articulate and have a productive conversation with their physician

Tim: Totally agree yeah and then they come up with some new word and then you're like back to square one you're lost right

Chris: Right. Yeah. People get hung up on words and technicalities when it's just I'm trying to report my symptoms man

Tim: Right. Yeah. There are two bones that do this mine feels like this right okay

Chris: Yep cool well Tim. I am immensely grateful appreciative for you being on our podcast I think you know it it's amazing to have known you in high school and now learning even more about your journey as every side of the table so entrepreneur and then angel investor and running an accelerator to glue those two things together and writing a book about it really blows me away and I'm just very grateful for you sharing your your learnings with us

Tim: Yeah well thanks for having me and that's cool to reconnect after so many years and then end up in a totally random spot so.

Chris: Yeah yeah yeah well let's make it less random going forward right absolutely okay alright thank you for your time tim

Tim: Yeah thank you guys

Chris: Have a great day

In this episode of the Digital Health Community by Persimmon, Tim Cooley, Start-up Chief of Staff, Executive Director of Park City Angels, and author of  “The Pitch Deck Book” talks to Chris Sprague, CEO of Persimmon, about raising angel investments from angel investors. Tim explains what it takes to raise angel investment in the context of a digital health startup. There is a nuanced difference between consumer startups and digital health startups. Tim goes through the nuance differences and shares solid advice for entrepreneurs and Angel Investors. Watch and listen to gain actionable insights about raising investment.