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This article by Barbara Fox was prepared for the January 17,
2001 edition of U.S. 1 Newspaper. All rights reserved.
Help for Health Start-Ups
Last year’s wave of capital is enabling startup
companies, says venture capital consultant Ted Stack. "The economy
has allowed later stage investors to take a closer look at companies
in an earlier stage. Everyone is looking for portfolio diversification
and has become more competitive." Individuals with sufficient cash
to be considered venture capitalists are now doing angel investing, he
says, "and this has fueled a whole new type of investor."
Stack and his partner, David Wilson, have founded InHealth Venture
Management to capitalize on these new funding opportunities. They
call the firm a "business accelerator" or, alternatively,
"a venture capital firm without the capital." In other words,
a new kind of consulting company. It operates in Forrestal Village
under the aegis of Niix/Apex Group Holdings.
But though investors may have plenty of cash, they are more careful
than before, says Stack. "Though some VCs continue to amaze you
on what they fund and for how much, most want a good business plan,
a good management team, and connections to the first clients."
Stack’s firm aims to provide those items for their portfolio
The first of its three clients, CareHub, is a Boston-based healthcare
tools designer for the geriatric market. Intelhealth, in Malvern,
Pennsylvania, has a wireless platform for clinical results and does
order entry for providers on PDA. The third client, Chicago-based
RXaminer, is an Internet-based consumer friendly formulary that shows
the best cost alternative for a prescription.
Wilson and Stack were introduced to each other in 1996 by attorney
Sharon Klein of Pepper Hamilton in Philadelphia. "She thought
we were both very entrepreneurial, that our views of the business
were compatible, and that we could do some interesting things."
says Stack. The partners raised their own money (individually and
with Apex Group Holdings) for their own start-up, and they hope to
turn a profit next year.
Wilson was born in Winnipeg, where his father was a firefighter, and
majored in mathematics and statistics at the University of Manitoba
(Class of 1973), before earning a master’s degree. He was an insurance
consultant at Great West Life Assurance and with William Mercer in
New York and Foster Higgins in Princeton. He left that firm in 1993
for Apex Management Group, a healthcare actuarial consulting firm.
Wilson focuses on strategic planning and high level technical support
but also meets with potential investors to talk about the technical
aspects of what a new enterprise might do. "I explain the
to investors and talk about how it fits into the marketplace,"
Ted Stack grew up in McLean, Virginia, where his father worked for
AT&T. He majored in accounting and finance at James Madison
Class of 1986, and worked with what is now Ernst & Young for six years
in the healthcare and insurance consulting practice. Then he spent
eight years with three startups, including one that he founded and
Stack works as the interim CEO who provides the entrepreneurial
"The young companies need someone to step back and think through,
not from an emotional perspective, how to deal with issues that come
up," says Stack. "The whole process of raising money involves
the ebb and flow of emotions, from one day of having investors you
think will invest, and the next day having no one, and then next week
another group comes that you think will invest. If they don’t know
what to expect they get overwhelmed, and they give up in a lot of
"You have to hang in there until everything has been tried,"
says Wilson. "There will be victories and defeats along the way.
The emotional rollercoaster is not unlike the emotional rollercoaster
that a cancer patient rides."
They often look at deals forwarded by former colleagues who have
business plans from companies in early stages; they are not yet ready
for venture capital or the services of an investment banker. "We
deal only with the subject matter we are expert in," says Wilson.
"The referrals we get from the VC world are often driven by the
fact that they respect our knowledge in this area."
"Venture capitalists don’t get involved with the level of personal
issues that come with the starting a company," says Stack.
may not know what it is like to mortgage your house and lay everything
on the line. We have started our own companies and we know the issues
in growing a company. We can bring key things in perspective and not
get wrapped up in any one aspect."
"We look for an initial 5 to 10 percent equity of each of the
companies we deal with," says Stack. "We will look at
startup company. We will spend time working with folks to see if there
is any match with what we do. We think we provide a lot of good advice
as we do our due diligence. VCs don’t give you our perspective; We
give you the entrepreneur’s perspective. But we can do a great service
to the investment community by solving the issues that professional
investors will have before they invest the money. We might need to
tell someone straight out: You have to hire a CEO to make this company
Stack says that his and Wilson’s entrepreneurial adventures help to
attract clients. "Also, we are not an expense item; we are not
taking a pay check. The only reason we get involved is when we think
we can accelerate some key component of your company and turn it into
an equity interest in 12 to 36 months. Our incentives are directly
aligned with the organizations that we work with."
That Inhealth Ventures gets paid in common stock, just like the
also helps to align Inhealth Ventures with the founders, says Stack.
"No one can claim we had had a different incentive."
"We thought about evolving into a VC fund early on," says
Wilson, "but that would put us in competition with our
Instead of money, his firm will invest intellectual capital in the
young firms. "We have a network of relationships with VC folks,
and we hope to provide honest feedback to help them not waste their
"Our short term goal is to build a real brand identity," says
Wilson. "To do that we will have to expand our staff and will
be looking to hire some talented MBA types toward the end of next
Stack tells of a portfolio company that hadn’t been paid after two
months and didn’t know what to do. "The two individuals involved
had never been in a position of dealing with customers before."
Stack called the company himself, reminding the firm that it had
a legal contract and asking if they were going to honor it. "There
are a million little decisions to make," says Stack. "The
entrepreneurs don’t know what they don’t know.
Boulevard, Princeton 08540. David Wilson and Ted Stack, co-managing
directors. 609-452-7100; fax, 609-452-7134.
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