Meet Ben Joseph, President of Mend Medical

Mend Medical, an investing arm of Ambassador Enterprises, launched last week

Venture capital used to be a cottage industry, with very few investing in tomorrow's products and services. Oh, how times have changed! While there are more startups than ever, there's also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.

But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?

We're highlighting key members of the community to find out.

Ben Joseph is President of Mend Medical, a healthcare investment firm that launched last week.

A lifelong Hoosier from Fort Wayne, Joseph was part of the founding team for Mend Medical. His previous professional experience includes executive commercial leadership and management roles in the medical device and insurance industries, as well as private-equity portfolio management for Ambassador Enterprises. Ben was also the General Manager for the foot and ankle business at Zimmer Biomet, after a long career at Biomet.

He holds an M.B.A. from the Kelley School of Business at Indiana University.

VatorNews: What is your investment philosophy or methodology?

Ben Joseph: Mend began earlier in 2018 with the premise that, despite some market consolidation and some reimbursement pressures, that there remain a lot of opportunities with regards to unmet needs in our healthcare system. At the end of the day, our mission really is to heal healthcare. I’d be the first to say that that’s a bold mission and that we can’t do it alone. In the U.S., we’re fortunate to be part of a healthcare system that’s resource rich and has a lot of great providers and technology and care. At the same time, we also see that the healthcare system is broken and I think we’ve all have experienced personal frustrations with inefficiency and waste, a lack of transparency, and we see some incentives that often put profits ahead of patients. So, we’re looking to invest in leaders and companies and technologies that really attempt to address some of these systemic issues in healthcare.

As our parent company, Ambassador, gave us the go ahead to active Mend, and to create this new affiliate, there were three things that Ambassador told us to do: one of them is to build something sustainable profitable, something that’s growth oriented and to do it really with a focus on solving some unmet real problems in healthcare. Then, third, to make an impact on people and humanity in general. So, those are the directives I was given earlier their year, and we’re excited to launch Mend and to tell more of our story.

VN: What is the opportunity you see in the healthtech space?

BJ: When I say brokenness in healthcare, we’re looking at things like inefficiency and waste. For example, delivery model innovation. We know that healthcare and the economics of healthcare are changing and just another product iteration, or an incremental improvement, isn’t really what it’s about, in our opinion. We want to really address some of the systemic issues in healthcare. So, as I mentioned, delivery model, inefficiency, logistics are certainly some of the areas that we’re looking at investing in.

If you look at my background, I came from musculoskeletal health. Warsaw, Indiana is about 45 minutes due west of Fort Wayne and I spent 10 years in that industry. So, if you look at musculoskeletal health, which is very likely where we’re going to start, that's about a $50 billion worldwide market and an area we certainly see opportunity in. While that’s going to be a starting point, we think it’s much broader than that and we’ll look, as Mend matures, to go into adjacencies and broader areas of healthcare.

VN: I know Mend only recently launched, so have you made any investments yet? What stood out about those investments in particular?

BJ: We have not made our first investment under Mend yet. Now, our parent company has made some investments dating back five or six years ago that are in healthcare and right now Mend is actively managing those investments and we’ll determine if there’s a fit or not into our strategy. Those investments are in directly in musculoskeletal care as well as some adjacencies so you’ll see some of those on our partner section at Mendmedical.com. We’re looking to make our first investments starting in 2019.

One of the investments Ambassador made is a company called Theratome Bio. They’re based in Indianapolis and they focus on stem cells and therapeutic factors that are harnessed in our bodies, and they’re looking to create some therapeutic solutions focusing on stroke as a result of transcatheter valve replacement, or TAVR. It’s a common complication in that procedure. That was an investment that was very early stage, and that’s one that was made many years ago, in around 2014.

There’s another one that’s a class 1 device for Parkinson’s. It basically looks like a hearing aid, and goes over the ear like hearing aid would, and, for people who are suffering from Parkinson’s, one of the complications is speech is hard to discern. The audible nature of Parkinson’s patients becomes reduced over time. This device plays, essentially, white noise and it triggers the lumbar effect, which allows a patient with Parkinson’s to speak clearly and louder when that device is used. So, it’s really almost a subconscious or unconscious result of that device. It’s really interesting. That came out of the Purdue, West Lafayette Innovation Foundry.

Those are a couple of examples, there are others as well, but, again, those were made by our parent company in the 2012 to 2014 time frame.

VN: What do you look for in companies that you put money in? What are the most important qualities?

BJ: We look for team and people. Within that, one of the things we’re very focused on are the leadership team in the right roles? For example, one of the things we often see from startups, you may have a great technology or a scientist founder, and that person or may not be in the right role for the long term growth of the company. So, we look are the leaders in the right lanes, the right roles for long term success in the market and long term value creation.

We look at if they gave a history of success. We think there are certainly advantages for founders who have been in previous ventures together. There’s certainly upside to a common history with teams who have been together before and who have had success before together. That’s a key indicator of success as well.

More fundamentally than that, we look for leaders who are really open to collaboration and partnership. One of the things that Mend is not going to be is just a passive investor; we want to be involved and active at a governance level, but also we see us hopefully being an extension of the leadership team at these companies in which we invest. We look for openness, we look for collaboration, we look for strategic alignment on vision of the company. So, those are the things we’e looking for in people.

VN: What kind of traction do you look for in your startups? And can you be specific? Are you looking for a number of customers or order volume?

BJ: Right now, in order to derisk, we are looking for post-revenue companies who have whatever requisite regulatory boxes checked. If it’s in the U.S. then it's obviously the FDA. We want some commercial experience, and I think that will transition to pre-revenue over time and true venture investing, but for now we’re limiting our focus and our investments to post-revenue opportunities.

I wouldn’t define what we look for as an ARR revenue number. We look for I’m going to call unaffiliated revenue. I think that’s a really good indicator of product market fit. We’re open to a wide range of opportunities and deal structures and deal size, but for us it’s that unaffiliated revenue, that commercial traction, the regulatory boxes that are checked. And then, as long as it fits an area that we have defined in this theme of healing brokenness, we’re going to take a look at it. So, we’re pretty open.

VN: How do those regulatory boxes that have to be checked for the medtech and healthtech space affect the due diligence process?

BJ: The regulatory environment is ever changing and certainly fluid, so we’re primarily looking at the FDA, most likely 510(k) process, so a class 2 device or technology would be the most logical area that we would do due diligence in. We have internal expertise and outside resources we would engage for some of that deeper due diligence, but looking for things like claims indications, IFU, indications for use. All of those things would be normal due diligence.

Our philosophy really is to expedite due diligence as quickly as possible. I think we’re certainly going to be on the order of most other firms that are in this space; we like to do diligence quickly and efficiently and make it as seamless and unobtrusive for the target companies as possible. I think the regulatory piece is pretty straightforward; there are other areas that I feel are more challenging from a due diligence perspective, such as quality remediation and documentation, I think are areas that are sometimes harder to do diligence on so we have expertise and partners in those areas to allow us to do diligence in those areas pretty efficiently.

VN: These days a seed round is yesterday's Series A, meaning today a company raises a $3M seed and no one blinks. But 10 years ago, $3M was a Series A. How has that changed where a company need to be to get their Series A round?

BJ: There’s no question that round amounts are increasing, everything from seed to A and further. Part of it, specifically on Series A, is if you think about the intersection of traditional economy of healthcare, and as that merges with high tech spaces and IT, I think there’s additional costs and infrastructure that need to be dealt with. Our world is becoming more complex and with that the cost and what’s needed to scale commercially is increasing as well.

Certainly round sizes are increasing and with that is that tension that every VC is going to have to deal with: getting in early but also we’re all aware there’s a trend toward derisking as much as possible, and those trends that I mentioned, on commercial traction and regulatory boxes being checked, are not unique. A lot of firms cite both of those. The space is getting more crowded, but I believe Mend has a different long term outlook. We recognize that we’re not going to be for every company. We’re not going to be a firm that buys a company and tries to strip it down and flip it within 18 months, 24 months; we’re looking really to create long term value together with our partners and affiliates and we identify companies and leaders that have that same philosophy and we want to approach this business together. I think we’re going to see a lot of alignment in that and those are the areas we’re going to look at.

VN: Are round sizes for healthcare growing differently than other spaces?

BJ: I’m probably not the best one to comment on areas outside of healthcare, I would only be speculating. But, in this space, seed rounds, Series A are escalating relative to five years ago. Capital is abundant and I think that also fuels round sizes as well. It will certainly change as the economy ebbs and flows, and we’ll see that fluctuate as well, but, when the money is easily available and capital it easy to come by, round valuations and round sizes increase.

VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?

BJ: I spent 10 years in a number of different segments of orthopedics or musculoskeletal in a number of positions ranging from product management marketing to executive leadership roles in sales. Then, after a merger of two of the world’s largest companies, I was the general manager of a division and that constituted the 10 years. So, I have experience globally and in a number of different capacities, but all in orthopedics. I came from the business side of orthopedics and the other two individuals that are part of Mend also have 10 to 15 years of experience in orthopedics, not as a providers but in R&D, commercial leadership, M&A and several disciplines as well, so, collectively, the three of us have a large portion of musculoskeletal health covered with direct experience. I think we’re in a strong position to make really informed strategic decisions on how we invest and where we invest.

When I resigned from my previous employer I came right to Ambassador Enterprises, and Ambassador is a family office where the founder had a liquidity event just before the crash of 2008 in an entirely different space. I came to Ambassador working on the investing team, working with the other affiliates; under Ambassador there are seven affiliates, Mend is one of them, but the others span everything from recreation and boating to logistics to tech to construction and all across different sectors. As we started having discussions about my background, specifically in orthopedics, and given that Warsaw is really the orthopedic capital of the world, where two of the largest three companies in the world have primary operations, we started to look at opportunities and look at how we see opportunities in unmet need in the space. That led to a discussion on how we might frame out a new affiliate and investing arm of Ambassador and, ultimately, was given the opportunity to create Mend and start hiring a leadership tea and putting a board in place.

So, really it was a series of strategic conversations and initiatives related to market needs and the geography in which we live and work here in Northeast Indiana. That was really the genesis of it; it was where we see opportunity and unmet needs and consolidation that drives a lot of opportunity. The larger the big companies get, the more room there is for new ways of looking at innovation and we think there’s certainly opportunity as an investor to build something really unique and sustainable and do it in a way that draws people and prospective team members to Mend.

VN: What do you like best about being a VC? What makes you excited?

BJ: Very rarely in a career or in your professional life do you get the opportunity to build something, so from the standpoint of Mend it’s been really invigorating, its been inspiring, to build Mend, and the vision for Mend, from the ground up. We can make this into whatever want to make it and we’re being very intentional on where we make our first investments. So, from that standpoint, it is entirely different and invigorating and just exciting to be part of that.

When I say different, it really is different than my previous experience. Working in operations in a number of different capacities, whether it’s sales or general management, you don’t get as much opportunity to step back and think sometimes. You’re caught up in the whirlwind of running a business and running operations and running a sales organization and it’s just a different environment altogether. There are clearly differences between operations in a large company and then going and switching gears completely and going into the investing space. For me, being able to be part of new organization, a new firm that’s really looking to make a difference in where we invest and how we invest and to create something together is exciting.

VN: What is the size of your current fund?

BJ: We don’t think of it in terms of a fund or a size. We have substantial resources that we’ll deploy. We’ll do meaningful deals and substantial deals, but we really don’t think about it in terms of deal size or maximums. We have the ability to do large deals, and we don’t have minimums for what we’re looking to do either, as long as it checks the boxes I mentioned before.

VN: What is the investment range?

BJ: Ambassador is our sole source of capital and our ability to do meaningful and substantial deals is there and it really is at our discretion as to how we deploy the capital that’s been allocated. I’ll probably leave it at that, but we have substantial assets, substantial opportunities to do deals and, for us, it’s really about strategic fit. Does it fit the criteria and does it address an area of brokenness that we’ve identified in healthcare?

VN: What series do you typically invest in? Are they typically Seed or Post Seed or Series A?

BJ: It’s going to be that point between late seed to Series A, most likely.

VN: In a typical year how many startups do you invest in?

BJ: We don’t have a number of investments or a target. We’re looking to make everything from minority investing to complete acquisitions and you can’t force good opportunities or good deals. Our deal flow is quite strong right now. We entered the MNVC Conference and then the feedback from that was really encouraging and strong, so a number of other conversations have started from that conference and, if nothing else, the vision for Mend has been validated.

We’re looking to make the right deal and if the first deal is a complete acquisition, given the capital and implications therein, the others that come would be bolt-ons and tuck-ins perhaps, but they all fit together. If the first investment we make with Mend is a minority investment then I would look for a series of other investments that are complimentary with one another. At the end of the day, we need to make sure that everything we do from a complete acquisition to minority investing all fits seamlessly and strategically together and that’s of primary importance. It’s not the deal size necessarily; while capital considerations are part of it, it’s more about fit for us, and, again, we have access to capital and can do substantial deals, so that first deal is going to be a driver of what the rest of 2019 looks like for us.

VN: Is there anything else you think I should know about you or the firm?

BJ: Obviously we’re very fortunate to be part of a U.S. healthcare system, we all see opportunities where it can be improved and areas that we can focus in on. You combine an area like healthcare with people in this region, the talent in this region is really second to none. I mentioned the orthopedic musculoskeletal pool or people and leaders in areas very close nearby, plus with the university system that’s present in Indiana, from Notre Dame to Purdue to IU and many others as well, it’s a unique combination of people and geography and market dynamics. With those three aligned you have the opportunity for great things so we’re really excited to be building a new kind of investment firm in Northeast Indiana. The resources here are abundant and the feedback has been really encouraging, so we’re very fortune to have this opportunity and we don’t take responsibility lightly and we intend to build something great here in Northeast Indiana.