In this episode of the SeedFunders podcast, a new partner, Bob Kropp, pinch hits for Dave. Bob gives an overview of his experience in medicine and what it has helped him understand about investing in medical startups. He also shares why he joined SeedFunders and how valuable the group is to both founders and investors.
Thanks to Bob Kropp for guest hosting!
We are back on the SeedFunders’ podcast, but you don’t look like Dave.
What was your first clue?
I don’t know. I just uh – Bob Kropp, welcome sir.
Thank you very much. Yes, I’m a poor substitute for Dave today.
Well, don’t let him hear that. We appreciate you pinchhitting, and thought it’d be a great chance to get to know you. You’re one of the newer partners in SeedFunders and understand what you saw on SeedFunders. And what you see in the community at large, with regard to startups. Let’s get to know you a little bit. First, can you give us a quick overview of your background?
Sure, I’m a physician. I’m trained as a child neurologist. The majority of my clinical practice was here at All Children’s. I was head of child neurology there for 15 years. Then I got interested in the business of medicine, went back to school. Got an MBA and that provided an entrée into the business world. Really opened up a lot of horizons for me. Then, part of those opportunities was to participate in the first wave of healthcare reform. At the time, it appeared that managed care organizations were going to be the answer to that. Because they had more data than anybody else. So, I went in that direction and had a 20-year career in managed care. First, as a chief medical officer of Signet Healthcare of Florida. Then as a regional medical director and then a national medical director for ETNA. In my last position, I was their national medical director for accountable care organizations. So, it was my responsibility to manage over 70 ACO relationships across the country. I got a good, healthy look at what healthcare reform looked like on the front end.
With that overview of the machine – we’ll call it – and the knock-on healthcare when it comes to startups is, the machine moves really slowly. Everything is so siloed. Even if you have a good idea, it’s as much about getting the integration as it is about the technology. Is that in line with what you saw?
Yes, exactly. It’s still a very manual process. It still suffers from many of the handicaps of a manual process. Unlike many things that I’ve come to witness in business, where there are best practices and established methods for let’s say or operations, medicine is still practiced very locally. If you will, almost as a microcosm. The industrialization of medicine has been slow to come. I think just in the past year to the manifestation of that has been that more physicians are now employed by groups than are in solo practice. Of course, solo practice or independent practice anyway has been the model for medicine since World War II.
Partly, it almost seems that one of the big barriers to innovation is that there is somewhat of an adversarial relationship, because when it comes to integration, that usually has to happen through the payer. The payer is incentivized for things that are different than what the physicians are incentivized for. You don’t have that alignment like you do in some other industries.
That’s exactly right. It’s even more complicated than that. I think that the reason why reform in healthcare has taken so long is that is fundamentally dysfunctional. The incentives are misaligned in such a way that it’s very difficult to break individual behavior that’s in their own self-interest. What you have is a number of different entities that are acting rationally for themselves, which they should, but in terms of the marketplace, it’s dysfunctional. For example, in healthcare, the person who consumes the service is not the person who purchases the service or orders the service. That’s not the person who pays for it. Immediately, because of those disjoints, it’s not like going into Walmart and deciding what kind of toaster you’re going to buy. Those kinds of relationships are not transparent. It’s very difficult for the marketplace to act in a rational manner when you’ve got that much complexity.
As you went down the road, seeing all that, did you see any bright spots, any places for hope?
Oh sure, I think that the healthcare reform was actually a step in the right direction. Not perfect to be sure, but in terms of solving an access problem and taking some fundamental steps to realign the financing of healthcare, I thought it was directionally correct. As a result of that, in managing these ACOs, which were a specific product of healthcare reform in that business entity, I saw the cost of healthcare come down and the quality improves in these organizations, albeit slowly. Albeit, in focal areas, but unlike anything that I had seen, most of the efforts previously were patch efforts. There was transparency. Then there was patient responsibility. Then there was, “Let’s shift the cost to our consumers.” All of those things really amounted to no change in the fundamental access or financing problems. But even though the results have been modest, I think that accountable care organizations represent the best model I’ve seen in my career.
That’s great. It’s that kind of insight that makes SeedFunders special, because we’ve got a collection of people who have very deep and very rare overviews into a lot of industries, as you just demonstrated with your understanding of healthcare. What got you excited about SeedFunders and joining in looking at these startups in the space?
At heart, I think I’m still an old-fashioned physician and that I like to be an entrepreneur. I brand my own practice. I created a couple of foundations. Along the way, I started a care coordination business with Beth Houghton who you featured last week. At heart, I really like to create something out of nothing. That energizes me. SeedFunders exposes me to a host of surprising opportunities in our community that are really nascent and in which – as an investor – you can get your hands dirty, and really make a difference.
As these young companies have come and we’ve dug into them, have them present to us, moved into due diligence with some of them. What’s that experience been like as far as understanding the roots of it all?
There is not a meeting that goes by that I don’t learn something. Then that’s another reason why I’m energized about SeedFunders is that, we do have a collection of 30 odd people now who are very successful, each in their own right and in different fields. I love listening to them call out a problem, analyze a problem, propose solutions. Not a week goes by that I don’t learn something. That for me is one of the big benefits of joining.
It is kind of interesting. For as many high-function as we have as partners every Monday, for two hours, everybody shows up and hangs out together. That’s a pretty cool thing.
It is a pretty cool thing. And now, even face to face a little bit. That’s even better.
Of the companies that have come through, do you think of a couple that have really peaked your interest and talk about why?
The first one of course was RX Live. That’s a company that I was invested in even before I joined SeedFunders and brought that opportunity to the group. RX Live capitalizes on what I think is the untapped potential of clinical pharmacists to improve both the health cost and quality of patients’ healthcare. Most people see pharmacists as that busy person behind the counter that’s 10 feet away from wherever you’re standing, counting pills and filling bottles. Yet, these are very highly trained individuals that with the opportunity to do one-on-one coaching can make a really big difference of a patient’s healthcare experience. Needless to say, I’m very [8:53] on RX Live. We’ve done some great things. We’re going to be doing some more great things. It just gets better and better.
As you’ve gone through the experience, you can juxtapose already having been invested in that company, seen them come through the SeedFunders process and due diligence. Has it opened up any news for understandings of how to examine startups and things to think about?
Absolutely, I’ve had to brush off some of my training from MBA school to look at financials and understand projections and assumptions. And think about markets in a different way. Again, that’s not in my will house. When I listen to our colleagues at SeedFunders expound on their understanding of the marketplace and how things work, it’s always a learning experience for me. Also, on the finance side, how these instruments are put together, what their advantages and disadvantages are, how they work. How they benefit the company, how they benefit the investors. I think that it’s just fascinating to me. It’s a wide-open opportunity for learning.
With all the opportunity that comes with investing in those startups, that aside, it’s got to feel good. It does for me at least, to know that we’re seeding in the next generation of companies, and our kids and jobs and really helping the city grow.
Absolutely. This is not just an investment club, where you buy a few shares of stock. Then you sit around and watch the index go up and down. This is an opportunity to get your hands dirty with these companies to the extent that you would like. And to the extent that you have something to contribute. Our members are really making a big difference in these companies’ chances of success. That’s very unique. That’s again, a source of energy for me that I wouldn’t have otherwise known about. As a matter of fact, when I just mentioned that company that Beth Houghton and I started back in the late 90s, if we had known of SeedFunders at that time. That company which was successful for 10 years, could have used the expertise of a group like ours. Could have used the funds. And might today be an ongoing concern. It was simply that Beth and I didn’t have the time to invest in making this thing grow an ongoing concern. I appreciate SeedFunders from the perspective of an entrepreneur and an investor. To me, it really resonates.
That’s great, final question. Based on your performance today, do you think that Dave should be worried about his job, because I think he needs to step up?
I’m going to officially reserve judgment on that. How about that?
I think that’s very diplomatic.
Bob Kropp, we’re really happy that you joined SeedFunders, and the knowledge that you bring. We needed it and we’re glad to have it.
It’s my pleasure. Thank you for inviting me to stand in for Dave. Even though, he can certainly stand for himself.