Investment Thesis

0:00 Hi everyone, thank you for joining us for our third newsletter. In this newsletter, we'll talk about investment thesis and why FOMO is very dangerous in angel investing. So, let's start with some definitions. What is an investment thesis? It's essentially an outline of your investment strategy. It should identify the sectors you're interested in, why you believe this sector will grow, and the risks involved. Based on your thesis, you will then evaluate startups and reach a level of conviction. And usually I would divide this into low conviction, medium conviction, and high conviction. So you may be asking, well, why do I need one? Can't I just invest alongside the best investors in my industry?

0:44 You need a screening mechanism to filter out all your deal flow. There are hundreds of startups raising capital at any point, and it's impossible to do a deep dive in all of them. There are also several distractions. FOMO, I think, is the biggest distraction. While investing alongside great investors is a good signal, it should validate your investment thesis, not define or guide it. The bigger firms invest in hundreds of startups and they will throw capital at risky bets for which they will not reveal which bets are risky and which aren't. So following them blindly is, I think, a sure path to losing money.

1:24 Okay, so how do I make an investment thesis? This is a much bigger topic and we'll do a webinar down the line. For now, I will talk about one aspect of the investment thesis. And this aspect can be called your catalyst or the tailwind behind your investment strategy. Tailwinds are responsible for most of our successes. In his book, Outliers, Malcolm Gladwell discusses how tailwinds have been in the past driving successes of major companies such as Apple, Google, et cetera. What are tailwinds? Well, there are external events such as COVID, invention of smartphones, fast internet connection, wars and regulatory changes.

2:11 In your thesis, you should try and identify which tailwind you're banking on. Here are the two tailwinds that I'm banking on. Home-based care, I think, will be a substantial future of healthcare in the next five to 10 years. Too much of healthcare is delivered in facilities and hospitals, acute care settings. These facilities are expensive to run and require a considerable workforce. With more people leaving healthcare, I think there will be a shortage of these facilities and most of the care will be delivered at home. Most people would like to be treated in the comfort of their homes anyways. Home-based care, acute care and chronic care solutions will continue to saturate the market and certain subsegments such as care of the elderly largely remains untapped.

2:58 I think here there is a substantial potential for startups to come and take some market cap. The second place I think will grow quite a bit in the next five to 10 years is artificial intelligence machine learning to replace administrative clinical tasks. I know this has been touted for decades now, but I really do think we're about five years out from regulatory changes which will allow software to treat and diagnose. This may start with fairly algorithmic clinical decision trees for birth control refills and it will expand to more complex decision trees. The reason I think this will happen is because of the aforementioned worsening healthcare clinicians shortage.

3:43 As more clinicians leave, it adds to the workload of those remaining and worsens burnout. The one thing I will say is any solution in this space which involves clinicians doing more work will not survive. We have two exciting updates this week. Please welcome Neil Patel. He's an experienced investor and has invested in about 45 startups. He's the current CEO of ZeoHealth and he will be joining us as an advisor. One of our portfolio companies, Vena Medical, has successfully treated 13 patients with their medical device. Congratulations to them. Their device is used in stroke treatment. Currently to treat strokes, we use fluoroscopy or x-ray vision to look at where the clot is and then we try and extract the clot through an extraction device.

4:29 What Vena Medical has done is they have made a micro camera so we can directly visualize the clot and remove it. Their device has now successfully been used in 13 patients. Usually the industry standard for chances of removing the clot on first try is about 34% and theirs is over 60%. They are currently looking for a project manager based in Kitchener, Ontario and some guidance on FDA regulatory strategy. Please reach out if you're interested. Well that's it for this week. Thanks everyone for joining us. I would love your feedback on how you're liking the newsletter so far, things you'd like me to change and any topics you'd like me to cover.

5:14 I'll talk to everyone again next week. Bye.