For Experts

Executive Summary

FundRx is a virtual venture capital firm that invests in early stage healthcare and life sciences companies. Our online platform is an end-to-end sourcing, screening, and investment tool for our Venture Partners (leading physicians, scientists, industry executives, and entrepreneurs) and Limited Partners (high net-worth individuals, family offices, and other investors) looking to fund and support high-potential early stage startups.

FundRx has made over 20 investments to date across the biopharma, healthcare services, healthcare IT, and med-tech sectors, and our platform publicly launched in August 2015.

This overview contains background on our firm and our value proposition for prospective Venture Partners.

NOTE: If you are not already familiar with the venture capital industry and/or angel investing, we recommend you first read the Venture Capital Primer in section 5 of this document before continuing on to the following sections.

Approach to VC

Process Overview

FundRx’s approach to VC is unique as compared to the traditional venture capital model. Instead of investing out of a dedicated pool of funds, our team sources, screens, and helps our Venture Partners and Limited Partners make investments into companies on a deal-by-deal basis through individual funds we create to invest in one company at a time.

To conceptualize how the FundRx Venture Partner community makes investments, it’s helpful to think of our process as a funnel.

At the top of our funnel, our internal deal team reviews new deals that (1) we have identified and sourced ourselves, (2) have been referred to us by a FundRx member and/or co-investor, or (3) have requested investment from FundRx by applying directly. The goal of this review process is to curate deals we post on FundRx and maintain certain quality standards for the opportunities on our platform.

If a deal looks promising, we will take initial meetings with the company’s management team and review the opportunity with our full investment committee, which consists of experienced healthcare investors and executives. If our investment committee concludes that we should move the deal forward in our process, we begin to prepare a deal memo which contains a detailed overview of the investment opportunity and request additional data and materials from the company for review. These materials, additional research, and our deal memo all are then posted on the company’s deal page on the FundRx platform for our members to review themselves. Often, when curating opportunities, we will peer review deals by working with Venture Partners with relevant expertise to evaluate certain components of the deal. At the conclusion of our review process, we form funds around specific deals and begin to accept investments into those opportunities.

How We Source

Sourcing and curating quality deals in the healthcare space is incredibly time intensive, and requires expertise not only in the science relevant to the startup at hand, but also in regulatory, financial, and strategic matters, as well as human capital as it relates to management teams of the startup being reviewed.

To ensure a robust funnel of deal flow, we spend significant time building relationships within the industry, including with other VC firms, universities, and key opinion leaders within certain areas of interest. We regularly attend major industry conferences and events to source deals as well.

We also track industry publications, review potential opportunities from technology transfer offices and corporate partners, and search databases from industry tools like Pitchbook to identify deals.

How We Screen Deals

Our initial screening process involves a pitch deck review, a screening call with the company’s management, and a conference call discussion amongst our full internal investment committee members. In any given week, our deal team may review up to 50+ startups as potential fits for FundRx, and hold initial calls with a significant portion of them. After discussing with our investment committee, we prepare deal profiles on the FundRx platform for companies that make that initial cut. These profiles contain relevant investment-related material (or “research memos”) in a digestible, easy-to-follow format, compiled from various documents, spreadsheets, and presentations that startups send us.

Once a company profile is prepared, we invite qualified Venture Partners (VPs) to take a critical look at those companies and provide feedback, similar to an academic peer review. We’ll share more background on the Venture Partner community in a later section, but in general, VPs are clinicians, scientists, industry executives, entrepreneurs, and investors with experience in the healthcare space.

For example, a few of our cardiologist VPs might review a new cardiology device and provide feedback on its clinical utility, whether it might interfere with their workflow, how it compares to competitor devices, etc.

This is a crux of what makes the FundRx platform unique. Because we have hundreds of VPs representing specialties across the healthcare spectrum, it allows us to make investments in deals across a wide variety of sub-sectors (e.g. pharma, devices, Health IT, etc.), rather than be limited to a small niche of opportunities.

Once peer review from our VPs is complete, we set-up a webinar and Q&A session with the company’s management for interested Venture Partners to learn more about the investment opportunity.

If the webinar session goes well, and the company passes another round of screening based on insights from the webinar shared by both our internal investment committee and VPs with relevant expertise, FundRx ultimately decides whether or not to open up the company for investment on the platform.

As a note, we may sometimes deviate from this process depending on the unique circumstances and timelines of each deal.

How Investing Works

Once a deal is open for investment, community members can indicate an interest in investing. In general, the minimum investment size is $20,000.

In many cases, FundRx provides individual investors the unique opportunity to invest alongside established venture capital firms in certain deals. In the past, FundRx members have co-invested with firms including F-Prime Capital Partners, New Enterprise Associates, Optum (UnitedHealth), and Founders Fund.

Once an investment is made, the FundRx team manages the investment on behalf of the participating Venture Partners for the life cycle of the company into which they have invested.

Making investments is not a requirement to join the FundRx community, and there is no cost to being a non-investing FundRx member. However, to support the cost of operating the FundRx platform, there is an annual Platform Management Fee of $1,000 that Venture Partners pay once they begin investing on FundRx. As is industry standard, FundRx also typically takes a 20% carried interest (e.g., 20% of profits) on all deals that successfully exit. Investments on FundRx generally have administrative costs taken out of the capital invested to cover tax and legal expenses associated with making the investment.

Beyond the Investment

FundRx portfolio and platform companies are often interested in expanding their teams, advisory boards, and Boards of Directors by leveraging the FundRx Venture Partner community. In cases where a Venture Partner is a fit for an opportunity, the FundRx team facilitates warm introductions to the relevant company.

Through our industry partners, we also provide job and consulting opportunities to our Venture Partner community, beyond our portfolio and platform companies. Some examples of recently available roles include the Director of Clinical Research position at Meissa Vaccines (a FundRx portfolio company), Fund Associate at Ample Plus Fund, and a high-level consulting opportunity in the primary care space with GE Healthcare.

Additionally, several of our Venture Partners are also entrepreneurs who leverage the FundRx platform to test and launch their own products.

If the FundRx model is of interest to you, the following sections share more detail on how you can join our Venture Partner community.

Venture Partner Program Overview

Who are FundRx Venture Partners?

Membership in FundRx’s Venture Partner program is exclusive to healthcare leaders with deep expertise in their respective field(s). FundRx Venture Partners have a collective knowledge base spanning the entire healthcare and life sciences industry. At their core, our Venture Partners join FundRx because they are excited to help entrepreneurs build innovative technologies that improve patient care.

We have Venture Partners that specialize in healthcare information technology, patent law, immunology, senior care, cardiology, neurosurgery, drug development, and more. We strive to have a diversity of thought and skills amongst our Venture Partners, as we believe this gives FundRx portfolio companies the best chance to bring the next generation of groundbreaking healthcare technologies to life.

While there is never any obligation to invest in companies on the FundRx platform, Venture Partners are accredited investors and many regularly invest in deals on the FundRx platform.

While capital is key to the success of every startup, exceptional long-term value is also created through the mentorship, connections, and guidance that our Venture Partners provide to FundRx entrepreneurs.

Why Should You Become a FundRx Venture Partner?

  • You want to invest your energy and/or capital into early stage healthcare and life sciences companies, and have the infrastructure to do so effectively.
  • You see startups as a way to improve healthcare, with the potential to deliver financial returns.
  • You are excited for FundRx to provide you with high quality deal sourcing, screening, and research related to startups within your areas of interest.
  • You would like FundRx to match you with promising companies in need of guidance, capital, expert feedback, and/or advisory board or team members.
  • You are interested in hearing about job or consulting opportunities within the FundRx network.
  • You would like the opportunity to invest in companies on the FundRx platform alongside top venture capitalists, family offices, and angel investors.
  • You want to expand your professional network, share and vet ideas, and stay up to speed on the rapid changes happening in healthcare.
  • You want to expand your CV to show that you are active in the venture community so that start-ups and other venture firms are more likely to engage with you.

What Value do FundRx Venture Partners Receive?

Current community members include

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Howard Fillit, MD

Executive Director

Alzheimer's Drug

Discovery Foundation

New York, NY

Irina haivas md 233317dd48fa3944b4cff4b2ee6a053150282efb0df61d498d4822cd7f49c13b

Irina Haivas, MD

Principal of

GHO Capital

London, UK

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Joaquim Trias, PhD

President and

CEO of JTPS

Millbrae, CA

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Alok Mishra

Former VP of

Johnson & Johnson

Singapore

  • Live events bringing together our Venture Partner community and company founders on the FundRx platform.
  • Transparency into the FundRx investment process, and the ability to view deals in all stages of review, including deals we passed on.
  • The opportunity to stay plugged into the cutting edge of healthcare and life science technologies.
  • A great entry-point into the healthcare venture capital world, with plenty of support and a knowledgeable community, regardless of previous experience.
  • The ability to invite your colleagues to the FundRx platform.
  • The ability to submit any company to the FundRx investment team for review. Deals referred by VPs have priority review status. If FundRx makes an investment in a company first referred by you, you will be eligible to receive a portion of profits on that deal.
  • Venture Partners that lead a deal syndicate or offer exceptional support in the deal process are also eligible to receive a portion of the profits on the deal they work on.

FAQ

  • How risky are venture capital investments? When can I expect to see a return on my investment?

    Extremely risky. Venture capital investing focuses on making many investments in high-risk start-up businesses with the belief that some of those startups will grow exponentially and succeed.

    You should never invest more money than you can afford to lose into startups, and there is never any guarantee that a startup will succeed. Even the most successful venture capital firms have many of their investments go to “zero”, and rarely have even 1/3 of their portfolio investments become successful – i.e. even with careful vetting 2 out of 3 investments will not be “wins”.

    While there is no guarantee as to when you can expect to see a return on your investment, in general, VC firms, including FundRx, aim to invest in companies with clear exit opportunities (in the form of an acquisition or IPO), generally within a 3 to 7 year time horizon.

  • Does FundRx advise me on making investments?

    No. What you invest in is up to you, and you should consult with your own advisors with respect to any investment opportunity on FundRx. However, once you’ve made an investment into a FundRx deal, FundRx will advise and manage that deal on your behalf.

  • Does FundRx specialize in any particular sector of the healthcare and life sciences industries?

    FundRx invests across healthcare and life sciences (e.g. pharmaceuticals, medical devices, health information technology, healthcare services).

  • What are the legal requirements to join FundRx? Do I need to sign any documents?

    Due to U.S. securities regulations, one must be an accredited investor in order to become a FundRx Venture Partner and invest in deals on our platform.

    If you are not accredited, you can still join FundRx as a Venture Fellow, with the ability to participate in deal reviews and view job, consulting, and advisory opportunities on the platform. Venture Fellows can also refer deals to FundRx, with the potential to earn a portion of profits on the deal if an investment is made.

  • What are the confidentiality requirements on FundRx? Can I share materials with my colleagues?

    Due to the sensitive nature of data and intellectual property in the healthcare industry, all content on FundRx is confidential unless explicitly noted otherwise. You may not share information on FundRx with anyone outside of the FundRx community.

  • Is there a fee to join FundRx? How does FundRx make money?

    There is no fee to join FundRx. Venture Partners have free access to our proprietary deal sourcing and evaluation platform, with reports and analysis prepared by the FundRx investment team.

    However, if you would like to make investments on FundRx, there is a $1,000 annual platform management fee paid each year you are an active investor on our platform. Investments on the FundRx platform are also generally subject to an industry-standard 20% carried interest (e.g., FundRx takes 20% of profits) and there are generally administrative and legal expenses associated with each deal, all of which is laid out in each deal’s offering documents.

  • What is expected of me on FundRx? Are there time requirements for Venture Partners?

    There are no time requirements to be a FundRx Venture Partner. We understand that our Venture Partners all have other work obligations to address as busy professionals. If at any time you wish to limit your engagement with FundRx, please just let us know and we will accommodate you in regards to notification frequency.

    However, we do ask that Venture Partners contribute to the growing FundRx community by sharing ideas, vetting technologies, investing, and of course, keeping information on FundRx confidential and private.

  • How often will I hear from FundRx?

    That depends on your preferences. In general, we send out four emails per month, two which contain information about upcoming webinars, new deals on the platform, and updates on FundRx platform companies, and another two which contains available job and consulting opportunities offered by FundRx portfolio and partner companies. You may unsubscribe from these newsletters at any time.

    We may also send you individual emails inviting you to webinars for companies related to your expertise or interests, and/or emails inviting you to participate in the screening of companies moving along the FundRx pipeline.

    Feel free to opt out of or pause communications at any time by sending us a quick note. We do our best to ensure your experience with all that FundRx has to offer is based around your unique preferences.

  • How do I let companies know I’m interested in joining their advisory board or becoming a team member?

    FundRx is currently building an online directory that will allow Venture Partners to search for and contact companies that would benefit from their expertise, and vice versa.

    For the time being, please let a FundRx team member know you are interested in joining a company as an advisor or team member, and we will facilitate an introduction if appropriate (not all companies on our platform have available positions).

    You can also click on the ‘Request More Information’ button on a FundRx deal profile page and we will follow-up with you shortly afterwards.

  • How does the FundRx peer review process work?

    Peer review on FundRx is variable in nature, depending on the preferences of the Venture Partner(s) involved. Peer review encompasses any feedback a Venture Partner might provide with regards to a deal that FundRx is evaluating. Much of our peer review process is conducted over email, phone calls, or on our online platform with relevant experts.

    If you have a certain expertise in an area and have expressed a willingness to participate in our peer review process, you may occasionally receive an email from us with information on a company FundRx is screening, and some key questions that would help us make a more informed decision as to whether or not we should allow the company in question to proceed further down our investment pipeline.

    We might also invite you to join a conference call with members of the FundRx investment committee and the founders of the company we are reviewing, in order for you to get a better feel for the team and to ask more probing questions of the company.

  • Is there compensation for providing feedback on deals or participating in the peer review process?

    FundRx does not provide cash compensation for feedback provided by Venture Partners. The goal of the FundRx platform is to enable individuals across a host of speciality areas to provide mutually beneficial feedback on deals, so everyone can benefit from one another’s expertise.

  • How many Venture Partners are on FundRx? Is my specialty represented?

    There are several hundred Venture Partners on the FundRx platform, representing a global community of healthcare and life science experts. Approximately half of FundRx Venture Partners are physicians, with the rest of our community including scientists, various industry experts, healthcare administrators, and/or entrepreneurs or investors with experience in the healthcare space. In general, there are at least a few Venture Partners representing each specialty in medicine, with the average being between 10-25 Venture Partners per specialty.

  • Who leads the investment committee at FundRx? How large is the FundRx team?

    For the most up to date listing of our team, please visit our team page. Our internal investment committee is made up of experienced healthcare investors and operators and is headed by two MD/MBAs with over a decade of healthcare investing experience each.

  • What is the minimum investment amount on FundRx?

    In general, the minimum investment is $20,000 for any deal on FundRx.

  • Is investing a requirement to be a FundRx Venture Partner?

    Investing is not a requirement to be a FundRx Venture Partner, however, you must still be an accredited investor in order to be a Venture Partner due to U.S. securities regulations.

  • I’d like to refer a company to FundRx. How do I go about it, and do I get anything in return?

    For any start-up that you'd like to refer, you can direct them to apply here, and then send an email to [email protected] to flag to us that you referred that company. We'll keep track of your referral in our internal records. If FundRx makes an investment in a company that you refer, you will be eligible to receive a portion of the carried interest (e.g., the profits) on the deal.

  • Does FundRx invest any of its own capital into deals? Is there a general venture capital fund?

    No. FundRx does not currently manage any committed funds over which it has direct control and invests.

  • I’d like to refer a colleague, is there a referral program?

    There is not a formal referral program at FundRx, but we greatly appreciate any referrals or introductions, as it only benefits the Venture Partner community at large. Please direct any referrals to our Director of Community, Dr. Chris Duff, who can be reached at [email protected]
  • I’d like to meet a FundRx team member in person. Where are your offices?

    We’d love to meet you as well! The FundRx HQ is located in Manhattan (43 W 23rd St. Fl 6, New York, NY, 10010). Please drop us a line if you are ever in the area and would like to arrange a meeting. We also have team members in Chicago, IL and San Francisco, CA.

  • What are the tax implications of investing in deals on FundRx?

    You should consult your tax advisor for any questions about the tax implications about investing in deals on FundRx.

  • Can I make an investment using my IRA or 401(k) account(s)?

    This is generally possible if you have a self-directed account with a custodian like PENSCO that is set up for making investments in alternative assets. It’s possible to convert your accounts to a self-directed account, if you do not have one set up already.

Venture Capital Primer

This section is intended to provide a broad overview of venture capital investing for those who are not yet familiar with the industry. As per the sections above, FundRx’s process and structure differs from the traditional structures described herein.

  • Where does venture capital money come from?

    Typically, professional VC firms raise money from insurance companies, educational endowments, pension funds and wealthy individuals.

    These organizations or individuals have an investment portfolio which they allocate to various asset classes such as stocks (equities), bonds, real estate, etc.

    One of the assets classes is called Alternative Investments - venture capital is such an investment. Perhaps 5% to 10% of the portfolio might be allocated to Alternative Investments.

    The portfolio owners seek to obtain high returns from these more risky alternative investments.

  • How are traditional VC funds organized?

    VC funds are often structured as Limited Partnerships. The Limited Partners (LPs), are the organizations/individuals (e.g. pension funds, wealthy individuals, etc.) mentioned in the previous section. In this scenario, the managers of the fund (e.g. the venture capitalists), are referred to as General Partners (GPs). Many GPs have been entrepreneurs previously, have a financial background, and/or have deep knowledge of the industry into which they make investments.

    The GPs use an Offering Memorandum to raise a fund of a given size from the LPs by convincing them that the GPs have a unique strategy or expertise in a particular sector(s) of the market. If enough LPs are convinced to invest enough money to achieve the fund size offered, then that marks a “close” of the fund.

  • What do Venture Capitalists do?

    Source deals: The GPs have to find investment opportunities. This is done in a variety of ways - referrals from trusted sources (other funds, entrepreneurs they have invested in before, etc.), sourcing deals directly (networking at conferences, utilizing online directories, etc.), and having an application process for companies that reach out to the VC firm directly.

    Make investment decisions: From the opportunities identified, the GPs pick the ones they think will be the “winners”. They might look at 50-100 opportunities for each one they invest in.

    Manage the investment: The GPs have a fiduciary duty to the LPs to “manage” the investment. This means they sometimes sit on the Board of Directors (BOD) of companies they invest in. Given this time commitment an individual GP might only be able to handle 6-10 portfolio investment companies at a time.

    Harvest the investment: The GPs win only if they can get their money out of the investment. This usually takes the form of an acquisition of the portfolio company or taking the portfolio company public in an Initial Public Offering (IPO).

    Even the most successful funds rarely have even 1/3 of their portfolio investments become successful – i.e. even with careful vetting 2 out of 3 investments are not “wins”.

  • Economics of a VC Fund

    Capital commitments: The LPs do not actually invest money in the fund at the closing. They legally commit to provide a certain amount of capital when they are called upon. This is called a Limited Partner’s Capital Commitment.

    Capital calls: When the GPs find what they think is a good investment opportunity they make a “capital call” on the LPs. (e.g. a fund has $500M of capital and the GPs want to make an investment of $10M. A LP with a capital commitment of $50M will be required to send $1M to the General Partners: 50M/500M = 10% * 10M = $1M)

    Management fees: The GPs receive an annual management fee, which is usually a percentage of the capital commitments to the fund. A typical fee is 2.5%. On a $400M fund this would be $10M per year. The management fee is used by the GPs to run the fund business (e.g. it pays the salaries of the GPs, the Associates, the support staff, office rent, etc.)

    Splitting the returns: The GPs make investments and they hopefully harvest some of those. The returns from the investment are split between the LPs and the GPs. A typical arrangement is as follows:

    The LPs receive 100% of all the returns and the GPs receive 0% of all returns until the LPs receive back 100% of their capital (plus in some cases “interest” on that capital). Thereafter the splits go 80% to the LPs and 20% to the GPs. This 20% part is called the GP’s “Carried Interest”.

    The above arrangement provides a heavy incentive for the GPs to invest in situations that can be “Big Hits”, since the GPs don’t make money unless they deliver big returns to the LPs.

    Fund life cycle: Most funds have a 10 year life. At the end of 10 years they are liquidated. Most funds plan to harvest winners in 5-7 years or less. A fund usually makes its initial investments in the first 3 years of the fund life cycle.

    During the remaining life of the fund, follow-on investments (investments into companies that have reached a later stage of financing, and were previously invested in by the fund) are made, and the portfolio companies are positioned for “harvest”.

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