Opportunities for Physicians in Venture Capital
By: Dev K. Mishra, M.D.
The allure of venture capital is fueled by the vision of the heyday of the late 1990s: private companies moving rapidly from inception to IPO, with millionaires being created on a weekly basis. The industry at least as it pertains to healthcare has cooled, but venture capital today is still one of the best means for promising young medtech/pharma/biotech/ or medical services companies to finance their product creation and pathway to market. Opportunities for physicians to work directly or indirectly in venture capital exist.
Before we consider opportunities for physicians it is useful to consider the anatomy of the venture capital markets. What is “Venture Capital” and what do venture capitalists do? In its simplest form, venture capital refers to a type of private equity investment. A private equity transaction in an existing company or start-up involves an entrepreneur, their staff and financial investors. The financiers invest equity, becoming shareholders in the company. The main opportunities for physicians desiring exposure to venture capital come indirectly (through the company being funded) or directly (through the venture capital investor).
Working on the company side is by far the easiest way for the experienced physician to become involved in venture capital, albeit indirectly. Typically the physician would form a consulting relationship with a private company. Consulting relationships are heavily scrutinized by federal regulators but the physician is able to receive fair market value for services provided to the company. This can result in a nice supplemental income stream. With respect to venture capital the consulting involves advisory service for privately held companies. These companies are all around you- chances are high that you use or prescribe products created by privately held companies. If you are a physician with a high level of trust and credibility it is possible to establish a consulting relationship with a privately held company. Over time (and often after working with several companies) you will be introduced to the venture capital firms that fund those companies, possibly resulting in opportunities to work directly with the venture capital firms.
Direct involvement in venture capital is more difficult than working indirectly from the company side. Physicians working directly in venture capital typically follow two pathways. First, they can enter venture capital from the operational side of the company as described above. Working as a scientific officer or consultant to several private companies can result in direct relationships with venture investors but this pathway often takes several years. I followed this pathway to my current position as a Venture Partner with SV Life Sciences. If you are driven and fortunate enough to have your own company started and taken to a successful “exit” you will have multiple venture firms knocking on your door. Many physicians have taken this route but there are obvious limitations and risks involved, and it takes a very long time. The second pathway can be appropriate for younger physicians, involving full time enrollment in an MBA program. Upon completion it will be likely that the experienced physician with an MBA can find rewarding work on the investor side in venture capital. The risks are substantial with this pathway, most notably the need to abandon clinical practice to dive full time into graduate study.
Working indirectly with venture capital through the company side can be very rewarding, with the chance to shape the development of products or services that improve the lives of our patients, and to provide a modest supplemental income stream. Working directly in venture capital is extremely stimulating intellectually and contributes great value in medical innovation but can require quite a bit of commitment and time. For the physician with an entrepreneurial spirit and conviction either route is possible.
Dev K. Mishra, M.D. is a Venture Partner with SV Life Sciences. The SVLS team manages five private venture capital funds with approximately $2.0 billion of capital under management. He is currently the Chief Medical Officer of AlterG, Inc., Medical Director of Cayenne Medical, Inc., and President of Sideline Sports Doc, LLC. Dr. Mishra is double board certified in orthopedic surgery and orthopedic sports medicine. He maintains a part-time clinical practice and is a team physician with the United States Soccer Federation National Teams as well as several San Francisco area high schools. Dr. Mishra has been an advisor to several venture capital firms, as well as Intersect Partners, LLC, providing clinical and strategic advisory to more than 100 companies over the past 16 years. Dr. Mishra also served as a medical officer at Oratec Interventions, Inc., MedModus, Inc., and as a Clinical Advisor to Stryker Endoscopy. Dr. Mishra has a B.A. in architecture from Yale University, and M.D. from the University of California, San Diego. He is fellowship trained in Orthopedic Research from the University of California, San Diego, and in Sports Medicine from the University of California, San Francisco.