Welcome back! In this week’s episode of Stocks4Docs, we sit down with Dr. Neil Ray. Neil is both a physician and the CEO of Raydiant Oximetry, a medical tech start-up he funded and built himself. From personal funding to private sector investors, Neil reveals how he got his idea up and running.
How Does a Clinician Build a Startup?
Like any company, it all started with an idea.
Neil’s studies took him to a residency at Brigham and Women’s Hospital in Boston, Massachusetts. He followed this up with a fellowship in pediatric anesthesiology. From there, his clinical studies focused on pediatrics and obstetrical anesthesiology.
Through all this experience, Neil noticed a lack of development in fetal heart-rate monitoring technology. With that, his idea began to form.
Unfortunately, Neil quickly learned that not everyone thought his company was a great idea. He founded the first prototype and patent himself with $150,000.
Networking was one of his biggest challenges- going from a clinical setting to the world of business is not an easy jump. Incredibly, Neil made it work.
His project received grant funding from the National Institutes of Health and the Small Business Innovation Research fund. From there, Raydiant Oximetry took off.
Balancing Clinical Studies and a Tech Startup
Despite his company’s success, Neil isn’t ready to put all his eggs in one basket. He still does clinical work a few days a month. He feels that it’s a good fall-back in case his company flops in the next five years- one never knows what the future holds for young startups.
Despite working harder and making less money, Neil says he is happier than ever. Pursuing his passion has made a world of difference in his life. He’s learned to live within his means and prioritize what he really needs and what makes him happy.
What it Takes to be a CEO
Not everyone has what it takes to be a CEO, but Neil firmly believes that being a clinician sets him up for success in the business world. Here’s how:
- Selling an opportunity
Neil had a breakthrough when he started to think of himself as a salesman. He’d sold himself to get into med school, to get a job, to marry his wife- now he just had to sell his business vision instead.
- Make the best of the information you have
As a doctor, decisions often need to be made without the full story. If test results aren’t back or scans can’t be ordered, decisions still need to be made to best help the patient. Neil suggests that this is similar to the decisions he makes as a CEO. He needs to make the decision he thinks is best at the moment and live with whatever consequences that may carry.
- Articulating a vision
One of the biggest challenges to a startup is proving that your product is worth investing in. Why is it important? How will it improve people’s lives? Being able to articulate just how groundbreaking your idea is will get others on board too.
Getting Your Project Funded
The first hurdle to making your idea a reality is funding. Many small companies start off self-funding, which isn’t always an option for hopeful start-ups.
Another option is to apply for grant funding. The federal government has billions of dollars set aside to fund innovation in small businesses. This money can be yours for the taking!
Grants can come in two distinct phases:
– Phase one grants prove that your idea is practical, realistic, and moving in the right direction. These are typically around $200 to $250 thousand.
– Phase two grants follow up a successful phase one. These can run over a million dollars to get your idea really up and running. Ideally, you’ll come out with a prototype of your idea- something tangible to show for all your work.
Phase two money is also very attractive to investors, who can now see that your idea is a more secure investment. Early investors will negotiate for a percent of the company and then take it from there!
Private vs. Public Market
While the public stock market gives an 11-12% Internal Rate of Return, the private market gives an incredible 30%. While it seems like an easy choice between the two, the private market is not typically available for those under a certain income threshold.
In order to be eligible to participate in the private sector, one has to make over $200,000 per year as an individual and have a net worth of over one million dollars. The private market is also significantly riskier than the public market, which we’ll touch on in a bit.
So how does a start-up compete against giant companies like Johnson and Johnson?
We have the private sector to thank for that.
Companies like Johnson and Johnson are public, which means they need to continue supporting the products they already have. This means they focus more on marketing than innovation. Startups funded by the private market have a lot less red tape to navigate, which means they can form ideas and sell to larger corporations for a significant return.
The Clinician’s Secret Advantage
Unfortunately, the private market is also a lot riskier to invest in. A whopping 90% of all startups fail. So what makes Neil’s company different? The clinician’s intuition.
Neil says that most startups fail because they create a technology that no one wants. Clinicians have a significant advantage when it comes to medical technology for one simple reason- they already have a great idea of what would work in a hospital setting.
This is an incredible advantage to have when considering investing in the private market. With some base knowledge on what would be useful in a clinical setting, you have a better chance of finding the startups that have true potential.
Not only is this a great financial advantage, but it’s a moral one, too. Neil loves the idea of investing in technology that is helping to improve medical care around the world. Rather than investing in companies like Amazon that could be easy money, Neil encourages listeners to invest in things that will make a positive difference.
Looking for more information about the stock market, value investing, and more? Please check out the Stocks4Docs Podcast.
Neil is both a physician and the CEO of Raydiant Oximetry, a medical tech start-up he funded and built himself. From personal funding to private sector investors, Neil reveals how he got his idea up and running.