Rheumatologists earned an average annual salary of $234,000 in 2015, according to the Medscape Physician Compensation Report 2016.1 And although rheumatologists might not make the same salaries as surgical specialists (i.e., orthopedics), many have the means to entertain investments in riskier ventures.
You Might Also Like
Also By This Author
Well, before you plunk down a sizable sum on a shiny new medical product venture or agree to bankroll your intern’s can’t-miss Web app opportunity (she plans to sell it as “the Uber for patient care”), know that investing in startup companies can be risky—and isn’t for everyone. In fact, only two-thirds of businesses survive two years in business, according to the U.S. Department of Labor. Only a third survive 10 years, and the figures don’t vary much by sector, whether it be healthcare, manufacturing, retail or technology.2
Scary facts aside, investment opportunities are plentiful in both the U.S. and abroad and can be rewarding on a number of fronts—financial, personal, humanitarian, etc. A new business might be the perfect vehicle for rheumatologists looking to make a little more than the traditional target fund offers or seeking an escape from the rigors of daily practice. And healthcare just might be one of the last startup frontiers.
“In general, two major opportunities out there, from a technology standpoint, are health and education. Those two sectors, historically, have not been exciting sectors. With the development of social [media], mobile [technology] and data in general, we have all the infrastructure in place now,” says Adam Cegielski, a biochemist and founder/CEO of Eyecarrot, a startup tech firm that provides customized vision therapy via a mobile application. “I think for quality projects and for companies in disruptive markets that are still growing … there is always money for great opportunities that have, sort of, de-risked their projects.”
Before you jump on the proverbial startup bandwagon, keep in mind these five tips culled from various entrepreneurial and investment strategy resources:
1. Do Your Research
It probably goes without saying, but doing your homework is vital. Investing in a startup is not the same as buying a car or shares of Coca-Cola. Investigate the track record of the founder(s) of the company. Have they been successful previously? Are they familiar with the market, or is it new to them? What value do they bring to the table?
At minimum, rheumatologists should understand the size of the market and competitors.
“And not just competitors in the sector, but also those in adjacencies,” says Dain Currie, senior vice president of Corporate Strategy at Eyecarrot. “It’s really easy these days to get information on what people are doing in various spaces. It doesn’t have to be reams and reams of information, but they should have a distilled understanding of what it is going to compete [against] in the market space. What is going to differentiate your value and your offering against what is available today?”
2. Understand the Risks
Most startups fail; it’s just a fact. Whether you are contemplating a small investment or a multi-million-dollar deal, investors need to be realistic; success is not guaranteed. Most experts say that if you are stressing as you open your checkbook, the time might not be right for the transaction.
One helpful hint is to hire a financial advisor to walk you through the process (most rheumatology practices work with an accountant or brokers, so you might start by asking them questions). Financial advisors can provide guidance and assess the level of risk you are comfortable with.
3. Be Ready to Write Another Check
If you find a great idea, a great bunch of people to work with and are willing to join the venture, don’t be surprised if the first investment is not your last. Small businesses and early-stage startups typically take a few years to turn a real profit. Most need to raise capital on a regular basis, via loans or additional investors.
“Be prepared to do follow-on investment to support the mission,” Mr. Cegielski says.
Market shifts will affect your investment, Mr. Cegielski says. Hot markets make it easy to raise capital, but those “windows can close” fast. “Hopefully, entrepreneurs have some good underlying partners to back them as they go forward,” he says, noting the best scenario is when investor and startup share the same goals.
4. Exit Strategy
Whether things go great or go sour, a clear exit strategy is smart business. At a minimum, your business partners should provide a list of competitors who might be interested in an acquisition. A strategy to go public is advisable, and other opportunities should be laid out up front. Discuss this with your financial advisor and potential partners before signing on the dotted line.
5. Be Patient
Investing is a lot like making a fine wine. You aren’t going to see returns on your investment the minute you mash the grapes.
“Ultimately, investors who are aligned with your mission will need patience. When you are attempting to do something substantial in scope, it takes time,” Mr. Cegielski says. “[Rheumatologists] need to be financially and mentally invested.”
Mr. Cegielski says the healthcare market is developing rapidly, with small solutions showing promise, more manageable technology costs and larger players (i.e., insurers, health systems) taking notice.
“As an entrepreneur, it is a really exciting time to be trying to address large problems that affects hundreds of millions and billions of people,” he says. “It’s not going to be long until everyone on the planet has access to some sort of connected, mobile device.”
Richard Quinn is a freelance writer in New Jersey.
- Peckham C. Medscape physician compensation report 2016. Medscape. 2016 Apr 1.
- Business Employment Dynamics: Entrepreneurship and U.S. Economy. U.S. Department of Labor, Bureau of Labor Statistics website. 2016 Apr 28.