The Future of Medicine Podcast: Episode 3 - Michele Colucci Founder of DigitalDx Ventures
In this episode, Alex Rochegude, Cofounder of Predictiv, invited Michele Colucci, Managing Partner and Founder of DigitalDX, to discuss about how technology is
In this episode, Alex Rochegude, Cofounder of Predictiv, invited Michele Colucci, Managing Partner and Founder of DigitalDX, to discuss about how technology is improving and changing our approach to diagnostics.
DigitalDx Ventures is an early stage venture fund investing in A.I. and data enabled healthcare. DigitalDx has 7 portfolio companies focused on areas such as breast cancer, kidney health, mental health, Alzheimer's and brain health, lungs fluid, and women's health. The fund is located in Silicon Valley on the renowned Sand Hill road.
Alex: Hi, everyone. And welcome to The Future of Medicine. In this podcast, we explore how technology and science are shaping the medicine of the future, from genomics to wearable devices, artificial intelligence to at home diagnoses and treatment. Our guests will share how they fulfill the future and how they contribute to it.
Today, I have a chance to have with me, Michelle Colucci. Michelle is a lawyer, serial entrepreneur, and the founder of DigitalDX Ventures, an early stage venture found investing in AI, data enabled healthcare. DigitalDX has seven portfolio companies focused on areas such as breast cancer, kidney health, mental health, Alzheimer’s and brain health, lungs fluid, and women’s health. And the family is located in Silicon Valley.
I invited Michelle today to talk about what she's looking at when sourcing tech companies and how she envisions the future of medicine. So, Michelle, welcome to The Future of Medicine. Can you tell us more about your background? And how do you turn from a lawyer to an entrepreneur and an investor?
Michelle: Absolutely. Well, I think I've always been a serial entrepreneur since the day I came out. There are a lot of entrepreneurial things that I like to do. My children have always been the same. But the legal education, I think, is really helpful because no matter what you do in life, especially as a woman, it enables you to be able to negotiate, to understand what you're doing, why, and so forth.
I actually have been a serial entrepreneur. I've been in many different verticals. I've been in media, entertainment, retail, legal, and technology. And now I'm med-technology, which is actually very similar to legal technology. I would consider myself more like a cross vertical expert, more focused on the business, how to grow businesses, how to identify partnerships, and how to really drive the bottom line.
An interesting story, one of my investors in a previous company of mine who was the most successful investor in this area, I had sent him some companies and one of which was one of his most successful companies. And he said, “You really understand this. I think you should be investing in this area. I will help. I will back you to start you out. I will be retiring at some point.” That’s really what he did. He was the first investor in Natera, Geneweave, and Assurex. I looked around, I had two friends that passed away from late diagnostics, and I said, “This is just a really big need. There is no reason why we can’t identify what we have a propensity to contract, given our history, family history, our electronic health record, all the social detriments of health, we should have predictive, we should have accurate early diagnostics, and we should be able to monitor.” Really we are trying to attack that entire continuum of what could be wrong with me? What is wrong with me? And is it still wrong with me? It is something that I think is incredibly important. It gets 5 to 7% of the funding. But it guides about 60 to 70% of the entire patient journey. If you get it wrong or if you miss it, the chances of your survival can be reversed, from like 80% to 20. I mean, it’s very scary if we don’t have the diagnostic early and accurate. That is our focus, earlier, less invasive, less expensive, more accurate, enabled by AI and data.
Alex: That’s great. You founded DigitalDX to focus on those technology enabled diagnostics. At what stage do you invest? What is the average amount of investment? The range of valuation fo the companies? Just in case some entrepreneurs would listen and would like to send you their pitch deck?
Michelle: Absolutely. We invest in the seed in early stage. We don't invest in what we call a science experiment. We have non-diluted grants for, non-diluted funding. But we do invest in, if you have something and it works on a certain sample size and you've got great results, your sensitivity specificity in the 90-percentile and you really are solving a very big problem. If you have some IP around it, we want to talk to you. That is how we look at the initial investment.
We do like to follow on with our companies. We like to own about 10 to 15% of our companies that exit. Initial checks started at $100,000 and go up to a million depending on the company. Ideally, we follow on with that particular exit.
Alex: Okay. As an investor, you were mentioning, IP. What is the firs thing you look at when you meet an entrepreneur on Zoom or in person? Is it about the long-term potential? Is it the traction, the team, the balance?
Michelle: It's such a big combination of those. There are some high-level critical items that one has to have to make a good investment and have a good exit with that investment. At the end of the day, especially entrepreneurs have to remember that this is not our money, and we have a responsibility to make a profit and be good stewards of their money. We have a fiduciary responsibility to manage that capital in an intelligent way. We do a lot of diligence. We're very careful with our investments. We're very strategic.
But what we really want to see in companies is what's going to make a company successful. It is the approach of the team, is it diversified, is there a diversity of thought and experience on the team? We focus on gender diversity a lot in our fund because we have different skill sets and it's really important that you have all of them to ensure that you consider everything along the way and make sure you plan for everything, all the possible things that could go wrong, all the possible ways of looking at something. It is very important that the team is diverse for that purpose. We look at how defensible the intellectual property is because being 1st, 2nd, or 3rd to market is not great if you don’t have any defensible position. There is always somebody with more money that can clobber you. A lot of companies, by the way, are sold because of the value of their IP and they are in defensible position for a certain period of time. I mean, you wouldn't have drugs out there if that wasn't the case. We really focus on the defensibility of how solid the IP is, who filed it, have they clustered it, have they put a moat around it, what is the strategy on the IP?
We also look at the likelihood a necessity of regulatory. Is this a lab developed test? Is this an FDA? What are they using? What is the way they are going to have this approved and what is the way they have it reimbursed? Are there existing reimbursement codes? Do we have to figure this all out from scratch? Could this be a break through designation that could carry along with some reimbursement opportunities? There is some really interesting legislation to enable that right now. We are all about risk. We have to reduce risk as much as we can because we are using other people’s money for this.
How can we reduce risk? We reduce risk by identifying how strong the patens are, how great the team, experience, who their advisors are, do they know what they doing? Because at the end of the day, I might not know a specific approach through Tele-meres or something is exactly right. But I do rely on my Noble Laureate who knows that, and I send calls to see what they think. If I see someone on the advisor of the team who is really well versed in the field and a leader, if they are backing it, it gives me more comfort. We look at the quality of the advisors and the quality of the team. And I have to look at what is the risk that this won’t be reimbursed? What's the risk of this won't past regulatory? We focus on the non-invasive methodologies because then you're really just validating the sensitivity specificity. You're not identifying whether it hurts a person when it goes in their body because it's non-invasive. It's like in your urine, your saliva, your spit, breath, all those kinds of things are outside scans. Focusing on those areas that we do, which is earlier, less invasive, more accurate diagnostics enabled by a data, those are the ways that we take. That is how we came with our investment philosophy. We reduce our risk based on those details.
Alex: Among all the entrepreneurs, healthcare professionals, experts, advisors, how do you see technology changing machine today? Yesterday and today, along the years, all of that is changing. How do you see it changing? What is the reaction of clinicians, hospitals? Do they go fast enough? Are they open to it? Are they taking the risk? What are your feelings on that?
Michelle: I think there's a couple things that you have taken into count. One of our tenants is more accurate diagnostics. If a physician is faced with a diagnostic that has a 60% sensitivity specificity in the 60th versus in the 90th, then the chances that they will change their behavior are pretty good, especially if it’s a non-invasive versus an invasive technology. The idea is to really try and figure out what is going to change the behavior of the physician in order to figure out if it is going to have adoption or not. That’s why we add that level of accuracy we want to see because it gives physician’s confidence that they can use this test and feel comfortable that they are doing the best for their patient. Obviously, if it's in the guidelines, even better.
But if you talk about the other question, which is how we see medicine changing. My partner uses this, and it’s funny because I remember this from growing up. You should take a stick and put in your mouth with a light. You could look at your throat and diagnose you. There was not enough data. Now, they have too much data. The reality is, with data comes liability.
We focus on helping a doctor make a better decision with that data, because at the end of the day, they need to know how to use it. They're not technologists or in this area. We really have to find the companies that are groundbreaking that will help a doctor with confidence to say what is exactly wrong or this is where you are in the stage of this illness, or this is exactly the type of drug that will work for you as opposed to someone else. This is personalized medicine. And technology is changing medicine in so many ways. Basically, we look at it as the intersection of biology, chemistry, and technology. This is how we see the changes that are being implemented. When you look at technology, it can be in gathering data, in the sensor-based world, wearables, data monitoring, or in the algorithms that you are using, random 4SA, calculations to amplify signals. Let’s say, using chemistry to replace the biological process or something. There are many different ways technology can be applied. You can add different data sets, whether you are talking about the zip code where you live, the electronic health record, your body mass index, all these kinds of things that the confluence of which can help really personalize the diagnosis and the targeted treatment or other ways that the technology through these different sets and overlays of different data sets can really clarify the right answer, the decision and a path forward.
Alex: You were talking about all that massive amount of data that clinicians have access to today. You were also talking about the variables. You could imagine you could get diagnosed at some point just from the comfort of your home. Last year, because of COVID-19 pandemic, a lot of people had to use for the very first-time telemedicine. And when I say people, it's patient, but also physicians.
Within your companies, that there was really an impact of COVID-19 on the way people turn to technology?
Michelle: Yes. Our focus is on non-invasive. Of course, it helped all of our companies because that’s part of our philosophy. People don't want to be poked with needles time and time again. They hate needles. I hate needles. Everyone does. We want to find a less invasive methodology. And those also happen to scale during COVID. Now, in general, when people are sick, you don't want to be dragged into the doctor again and again or go to the ER. They don’t know what’s wrong. If there was a way to monitor that, the at home monitoring market is really picked up. It obviously has kind of exploded in the way that it sort of accelerated the explosion through telehealth and at home monitoring. It was always going to come. It was just a question of how long it was going to take. And that kind of accelerated the realization of how important this is. And frankly, the humanity. The problem with it before was it wasn't getting reimbursed. People weren't developing or innovating for that opportunity because it wouldn't get paid for it. Now that there are CPT codes that reimburse you about 70 to 80% of diagnostics are reimbursed through Medicare. Now that there are codes to reimburse you to have a telemedicine visit or do an at home test, that has changed the landscape considerably. And it's created a lot more innovation. And we're seeing just some really incredibly interesting companies in this space that are making use of the fact that they can use technology to really deliver novel ways of diagnosing illness and monitoring progress.
Alex: That's very exciting. There are so many entrepreneurs. On the other side, the hospitals and clinician side in general, what do you think their biggest challenges are today?
Michelle: I think their biggest challenges are getting comfortable, first of all, with AI and machine learning. That can be done in a number of ways. Sometimes people don’t necessarily trust an algorithm. But I think if you have adequate data, you can get past that.
The other biggest challenge is just the barest entry. They've been doing it one way for a long time. To change their behavior is a big thing. So, if you can find ways to incrementally move them in that direction, it's better. Or if you can understand what their current flow is right now and try to fit into that flow, that’s a smarter way to do it. I think their challenge is bringing in another system that half the people don't learn and they spend so much money for and that never gets used.
I talked to one of the big healthcare systems and she said, “Michelle, I would rather buy an inferior system that everybody uses, then a superior one that I can't get all my doctors to use.” There is a realistic component that goes with it. And I think when companies do scale, they can't underestimate the importance of the key opinion leaders as a marketing tool. They really have to understand that they need someone who speaks the same language to explain why they should adopt this new technology, what it means for their patients. Because at the end of the day, doctors are trying to serve their patients and also make sure they get paid for what they're doing. And if you can help them with those two things, and you can have actually some people who are leading in that area say, “Yeah, this really works.” Then you're in a better position to influence and impact the behavior and the acceptance of what you're asking them to do. That's probably what I would say their biggest challenge is. It’s really fitting whatever the new technologies are in the patient flow and user interface and recognizing the value it brings to their patients.
Alex: So, this is for today. Let's move into the future, how do you envision the future of medicine, the future of healt care in 5, 10, 20 years? Because we talked about at home diagnosis solutions that are coming up now. How will it be in 10 to 20 years? Will we still go to hospitals? Will there still be hospitals?
Michelle: I think you're never going to replace the patient doctor relationship because it's so critically important. Having information written down or read to you isn't half as impactful as having a conversation with someone who you trust, telling you what it is, and why it is, and being able to kick the tires and ask questions. It's same thing with lawyers. Lawyers work can be replicated with technology. But the real thinking, real innovating, and the real conversation cannot yet.
In the future, I do see that we have so much information data that we will probably get a call from our doctor’s office saying, “You need to come in right now.” Or an ambulance, come to your door and knock on it and say, “You need to come with me right now.” Because I think that all the data that we are giving off our iPhones, other wearables, other kind of signaling, Amazon, whatever it is. We will be able to predict what is going on with us before we have symptoms, which is very exciting to be able to know that. Because oftentimes when you have the symptoms, it is too late or has a bigger impact than if you can get it early enough. I think we will have earlier diagnostics and proactive.
I think we will still have the hospitals and have the in-doctor’s visits. But I think hospitals will be much less prevalent because we’ll be able to do so much in the home. And to be honest, there are all sorts of things that are not always great that come out of staying in the hospital, whether it's catching something or not being around your family. And with COVID, it’s been really hard. You have these people go into the hospital and some cases they can’t bring their husband, mother, or child with them. That’s a really horrible situation. And it also impacts their ability to understand what's going on and to recover. If we can do more on the home, on the diagnostic front, and really prevent a lot of the ER visits, so the ERs are not clogged. Because they shouldn’t be. There are so many people in the ER that don’t need to be in the ER. But sometimes the people that should be in the ER are not. So, really the triage, I think technology will be a phenomenal opportunity for us to triage the severity of illness and the onset of illness. This will allow us to proactively direct people to the right place to the right location at the right time and improve the outcomes in a very significant and profound way. That is where I see us going.
Alex: That sounds super exciting. Well, Michelle, thank you so much for joining us today and sharing your thoughts and expertise with us. Best of luck for DigitalDX and your portfolio of companies.
And thanks everyone for joining this podcast on The Future of Medicine. And see you next week.
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