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S1:E2 | #2 – Know Who You Are With David Cash From Medvest Capital

UMN David Cash | Know Who You Are


David Cash is the Founder and Managing Director of Medvest Capital. In this episode, Dave encourages entrepreneurs to have a clear mission & strategy to stay focused. Medvest’s product is growth capital but views VC as a service business and seeks to partner with Founders navigating the process of company building. Dave shares his early career experience as an entrepreneur and how it led to Medtech investing and eventually raising his first venture fund.

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Know Who You Are With David Cash From Medvest Capital

We are joined by David Cash, Founder and Managing Director of Medvest Capital, an early-stage venture capital firm investing in medical technology. Dave, first of all, welcome. Tell us, what is Medvest Capital?

Medvest Capital runs a couple of funds and invests in early-stage medical devices and technology companies. We’ve been at it for close to a decade now. We’re an early-stage investor. We tend to be very closely aligned with founders and entrepreneurs, and try to support them through the process of building a business.

What problem are you trying to solve?

At a high level, our focus has been pretty consistent since day one, and that is improved patient outcomes. Closely on that goal’s heel is decreasing costs of delivery of health care. Lastly, as we look at products and services, we always try to put ourselves in the provider’s shoes and make their lives and occupations easier, and reduce the risk that they’re exposed to.

Those are some pretty big problems, patient care and improving clinical outcomes. Those of us in the healthcare space all share that goal. Reducing the cost, whether we like it or not, has to happen because there are finite resources. If you think about the product or service that you’re ultimately selling, who is your customer?

It’s a loaded question and sometimes a tough one for VCs to answer. Fundamentally, our product is growth capital. The way we sell aligns with what we are and what we do. We’re a service business. Our service is supporting the founders and entrepreneurs, communicating and partnering with them to give them a framework to develop a strategy. We believe that it’s a strategy that guides the journey that those folks are on. They change over time as our experience together over the last years.

It’s a service because we’ve done this more than once. Most founders, especially early-stage med device founders that aren’t professional managers, may have done it once before or have been part of it, but more often than not, they tend to be first-timers. We feel like they can benefit from our experience. That runs from the nuts and bolts of compliance to recruiting and what we’ve learned about their org structure, financial strategies, and raising capital.

Raising capital is probably the single biggest problem we face in the medical technology space. Evaluating teammates on a personal level is often the most challenging for founders and entrepreneurs. Some of these are very tactical in nature. Others are much softer. It’s hard to figure out where these technologies truly fit in. The strategy needs to be clearly defined, written down, and managed. What we try to provide is that service.

The amazing part is it’s usually done between 9:00 PM and 1:00 in the morning. That’s when my phone starts to ring and when the problems often arise. I read a great quote from Jamie Diamond, who’s one of the better bankers of our generation. He said, “In this environment, it’s not the time to figure out who you are.” A lot of early-stage companies don’t write down who they are and what they want to be. At an early stage, there are more tough times than great times. When times get tough, it’s not the time you want to be figuring out who you are. It’s best to work toward a strategy that has been created and pivot as constraints require it or as opportunities arise.


Frameworks and strategies are what really guide the journey of an entrepreneur. Click To Tweet


There’s a lot in there. That’s great info. One of the things you said that certainly resonated is as a med tech founder, we often have three customers. There’s the patient, the ones receiving the most value. A lot of times, we have this dynamic where we’re selling our product to the hospital or the surgery center, but the decision-maker for the product is the physician.

If you think about your customers and how there can be this dichotomy, it sounds like one of your customers is folks like me. They are founders that are trying to figure out how to do this job and know who they are in good times and bad times. They’re trying to make a solution that’s early stage and find where it fits. What do you think about your other customer base, which is the limited partners that trust you to manage and allocate their capital?

When we think about our LPs, we think a lot about risk and return like every other investor. In medical devices and medical technology, probably the word that comes to mind the most is patients. When we invest with folks, our five-year deal is a fast year for us. Generally, our investments require 2, 3 or 4 rounds of additional capital. It can take between 3 and 5 years to manage toward an exit.

Another thing we think about is we try to communicate what we do to our LPs. The power curve in med-tech investing is flatter than in other VC arenas. By definition, how much of the world has a given disease state? Our experience together has been in cervical spine disease and how do we treat that and improve outcomes? As we’ve started, our patients at Providence have gotten smaller and smaller. It’s still a very large market of nearly $1 billion. Nevertheless, how many people on the planet have cervical radiculopathy. That is our addressable market.

As we look at each of our companies, we have a peripheral investment. We have to define how many people on the planet, but specifically in the US where we’re focused, have a peripheral arterial disease. The answer is it’s a lot and it is a staggering amount of dollars, but it’s not 1 out of 7. We are not social media investors where we can have a nearly unlimited financial return. How we offset that is patiently making sure that we have more wins than losses. That’s how we need to invest.

Our investments take a lot of time. They need to be designed well. My biggest learning experience is a general trend in the healthcare industry. There has been a movement for the last fifteen years, but you could argue that it’s longer than that. There has been a lot of consolidation in the largest part of the industry or the large strategics that play in every space. In every space we invest in, there may be 5, 8 or 12 companies, but there’s a finite number of companies that provide the care to about 80% of the patients, give or take. That industry trend continues. There’s more consolidation among the bigs.

If our companies try to replicate the business models that are entrenched, usually, they will go broke. We don’t capitalize well enough, and nor do we have ever achieved the mass to commercialize the same way that others do it. What we try to preach is differentiation, and that can take a lot of forms. Clinically, a well-defined trial that provides provocative differentiated data to a clearly defined patient set is great.

We’ve made an investment in a telemedicine firm that has a breathing device that helps patients with panic and PTSD. When we invested in it, telemedicine was candidly a liability. The coaching that is provided to help patients through the treatment period of about 28 days was a telemedicine delivery. It had to be. It was the only thing economically that made sense.


UMN David Cash | Know Who You Are
Know Who You Are: Early-stage med device founders tend to be first-timers. So, they need some guidance with all the nuts and bolts in the medical technology space, especially when raising capital.


In this environment we’re in, the focus on telemedicine has swung from a liability to an asset. That was the fundamental bet, and it’s doing great. It was a clear differentiation between the standard of care and cognitive-behavioral psychology. That’s what our businesses and our investments need to focus on. If these companies are trying to do it the same way as the major strategics, it’s generally not a recipe that makes a lot of sense.

There’s a lot that I want to come back to and unpack in that. Primarily, our audience is founder types like me, investors, executive leaders, and aspiring builders. This is why I appreciate you taking the time to be on the show. A lot of people don’t understand how VC works. I want to speak a little bit later about the unmet needs I have as a founder. The spoiler is it’s a lot more than capital.

One of the ways you’ve differentiated Medvest and you, specifically, as an investor and director is knowing the needs of the founder. You touched on some of the things like a company has to know its purpose. They need to know who they are and what’s their identity. There is inevitably going to be some shift to the plan, whether it’s an exogenous event like COVID-19 or the assumptions that you went into the business, either in a clinical trial or commercial effort, that didn’t pan out.

You have to have a clear identity, but also what you need are partners that recognize you’re a human being and how hard you’re working. They give credit to your teams and these people that you’ve worked hard to recruit and bring on to the mission. For the audience, Dave Cash is one of those guys that knows how to do that. I’ve said that over and over.

The calls on the way into the office or after a big meeting, we’re feeling excited or down. That’s one of the unmet needs founders have because we tend to get excited and have a lot of emotion. It’s probably one of the things that fuel the audacity to pursue some of these challenges. Having a level-headed partner that can stay in the middle when it’s up and down, I appreciate that. I do want to acknowledge it because we’ve been lucky enough to work with a lot of investors, and people do that in different ways.

Some investors and VCs don’t view their role quite the same way, which is an opportunity for Medvest. The product that you’re giving often to the founder is capital. Capital is ultimately a commodity. The service that comes along with it is a real point of differentiation. When you started off, you’re a young guy. You’re like, “I’m going to be a venture capitalist.” For the audience that doesn’t know how VCs work, how does one go about raising a VC fund? Where do you get the money? What’s your pitch to the people that have the capital to allocate to your fund?

My experience was I was an entrepreneur in several different areas. I focused a lot on surgery centers and medical office buildings when they were going through their growth period in the early 2000s. I understand a little bit about reimbursement and the importance of reimbursement in driving decision-making. We exited those business lines. I knew I wanted to stay in healthcare. By happenstance, my now-partner was a mid-level executive at a startup in the spine space. We were connected.

I started underwriting that business. Interestingly, that business had a me-too product that was going to compete with some of the bigs out there. It was based on a reusable instrument set that I found difficult to scale. They also had a very novel technology. I immediately identified that I wanted nothing to do with the me-too product, but I was interested in this new tech they had. We took a long time. I got to work with this individual.


Businesses need to focus on differentiation. If every startup is doing it like the major players, it's not a great recipe. Click To Tweet


We could never get the financing done, but I realized I wanted to work with them. I approached him and said, “Sorry, this didn’t work out. What if we did this at a slightly larger scale?” He was very interested in doing that. We formed a partnership. One of the interesting parts about Medvest is I represent the largest individual investor in our two funds. Our risk profile was very high because of that.

The first fund was about $7 million. The second fund was about $12 million. We have about $20 million under management. Our investor base includes about 65 different limited partners, primarily high net worth individuals. Healthcare is a huge industry. It generally represents about 20% of our spending as a country. It is also an industry that needs technology to reduce the costs and inefficiencies in the space, and that presents an opportunity.

With the constraint of patients, because our investments take a long time, they provide very handsome returns and a relatively lower risk environment than some of the other VCs. That’s what we pitched to folks. It has allowed us to raise $20 million. We will probably start raising Medvest 3 when we get a little more certainty in the world at large. We’ll continue to put that money to work in companies that do it.

We have to improve patient outcomes. That’s easier than said than done because, in the US, a lot of our outcomes are pretty good. It can be challenging to find applications for products where there’s not a marginal improvement from 96% or 97% efficacy to 96.5%. That doesn’t interest us. Our true paradigm-changing texts address a very specific need in a large patient population, and we can clinically prove that. They also need to reduce the costs and the risk. That has worked for us, and it resonates across our investor base.

Thank you for that. It’s helpful for people to understand how that works. When I think about something you said, you have these investors, whether they’re institutions or high net worth individuals. They’ve been able to accumulate an amount of capital. Like everyone, they have to allocate it in some way. Venture capital as an asset class is riskier because you’re investing in these game-changing technologies that have all sorts of risks.

The expectation is that they want above-market returns. For the limited partner that trusts you with his or her capital, they have a high expectation for return. I can imagine it’s difficult managing their expectations and also the patients that you’re talking about because med-tech does take time, and so that’s not easy to do. Congratulations on having that much capital under management because it’s not easy to get started.

You mentioned another need that you have, which is important for the audience to know. Even though Dave and Medvest have been able to raise this capital and are looking to make investments, it’s not easy to find them. Having founders that you have backed, not just with capital but support, an empathetic ear, and encouragement, one of the best sourcing partners you could have in venture capital are the founders that you’ve already backed. We don’t have to spend too much time on this but I’m interested, and I suspect the audience also. Give us a quick snapshot. Where did you grow up? What were some of your early interests? How did they form who you are now?

I called DC home. I was raised on both sides of the Potomac River, Virginia and Maryland. I lived there through the eighth grade and moved to Philadelphia for high school, and bounced around quite a bit after that. In some ways, it was great. I got to see a lot of different geographies and make a lot of friends, primarily on the East Coast from Ohio East. I played a lot of sports and was very competitive growing up. I ended up playing in Division 1 sport in college until an injury forced early retirement there. I was very privileged growing up and had a lot of opportunities to travel and experience different things. I had a very hard-working set of parents committed to their kids, with very high expectations but a lot of support along the way.


UMN David Cash | Know Who You Are
Know Who You Are: There’s a very finite number of companies that provide care to about 80% of the patients. That industry trend will continue, so there’s more consolidation among the big companies.


What do you think it is about playing sports that you find useful when you apply it to your early career, ultimately start a venture fund, and invest in med tech companies?

We may have had a conversation along these lines at some point. Reflecting on it, there was a good bucket and a bad bucket. The good bucket for me was largely around the work ethic required to excel and both the intensity and long-term nature of it. I wasn’t like you could go out and go hard for fifteen minutes once a week and you would be good. It took a very committed and extended level of discipline and practice, and doing the intangibles to exceed.

I happened to be on a team sport, but I played a very individual position inside of that team sport. That experience has landed itself well, especially on the investing side. I’m part of a team here at Medvest but once our investments are made, there tends to be an individual champion for them. The responsibility for the performance of those investments is largely on an individual level. At the same time, one of the more challenging parts of sports is they tend not to be in a co-ed environment.

As I think about some of the behavior that was tolerated from beginning to end, it wasn’t acceptable candidly. It’s not something that I promote. The concept of boys will be boys is not an appropriate mantra. We deal with this in med-tech and med devices a lot. When we look at gender participation, where is it? What’s happening inside of healthcare in some of the specialties? It’s a real issue and one that we’re trying to be very focused on to improve. I hope that helps.

I’m glad you mentioned some of those important topics. As you and I have discussed before, I agree that there is no place for that. If I reflect on my own experience, some of that camaraderie is teaching the wrong values and a lack of emotional intelligence and certainly not empathy, which not only is the right way for me to be a kind human being but also the data suggests that it’s a way to deliver business results.

What I love about sports is you have to be committed for the long term. Even if you’re playing a largely individual role as part of a team sport, you need to learn how to work with others. They have their own egos and goals of what the outcome of the game means for them or what achieving in the sport means to them and their story.

All those things are amazing. One of the benefits I’ve seen is if you’re lucky and you play long enough, you get exposed to some great mentors and coaches. Some of the people that have been critical in developing my views on life and competition, aside from having great parents, were some of my coaches. They were those people that have been great mentors for me.

The role of gender equality and inclusion is such an important topic. Data shows that organizations that have diversity and value, and promote diversity have better performance. I think about how competitive I was as a kid and continue to be. I’ve given a lot of thought like, “Where does that drive come from?” The last episode was starting with why. What does it mean to achieve? As an investor, what does it mean to find the right company, back it, and then have a great outcome?


Have the ability to identify characteristics and trends, and identify them early. Click To Tweet


How is it important? We all want to be successful. In order for Medvest Capital to sustain its existence, we have to provide above-market returns to our investors. The importance is the ability to identify characteristics and trends and identify them early. There is a Goldilocks path that generally makes the most sense. A question I would ask you if I was hosting this is, once you defined where your organization is going, how do you avoid distraction?

I love the question. A lot of it has to do with this balance you’re talking about, whether it’s youth sports and trying to win at all costs, or trying to figure out your identity on the fly, whether in a time of crisis or breakaway success. It’s the Jamie Diamond quotes, “That’s not the time to know who you are.” For us at Providence, the first thing that we’ve tried to understand is what is our purpose? What are we trying to do? Why does this company exist at all?

Forget financial metrics, growth, sales and products. For us, we want to improve patient lives and avoid surgical failures of the cervical spine. It’s a big one. We could be at this for 100 years. Our mission is to establish circumferential cervical fusion as the standard of care for the high-risk market. It’s a multi-year mission. The way we try to block out some of the distractions is by adopting the objective and key results process that becomes the foundation of our annual operating plan.

At Providence, it’s in the form of four objectives. Each of those has 3 or 4 key results, and they’re measurable. Throughout the year, when things like COVID-19 happen, we’re in crisis but we’re not confused about what we were trying to do for the year. One of our objectives is to continue to bring on new surgeons and help as many patients as possible. That’s always going to be a focus of a growth-stage company because we need growth. It’s also core to our mission to be the standard of care. When something like COVID-19 takes place that is completely out of our control, we have to react.

We also know that we have an important product launch, and how that serves our greater mission of becoming the standard of care. We have to launch that product. We’re adapting and on schedule. We are also doing an important study where we’re going to demonstrate circumferential cervical fusion for three-level patients is superior at achieving fusion than ACDF alone. We’re reacting to this exogenous Corona virus that’s out of our control. We have to do things to adjust, but we know the core importance of the study.

The fourth objective has to do with how we manage our human and capital resources such that we can continue this journey. It comes down to being focused. I appreciate the question. To wrap up, we’ll end the interview with the vault. The idea of going to the vault is I’m going to ask you a few questions. The format is relatively rapid-fire. It’s the first thing that comes to mind. Who is someone, it could be a teacher, mentor, coach, partner or a friend, that saw your potential maybe before you did, took an interest in your development, and provided consistent encouragement throughout your life and career.

I would have to say, my father. He’s not only my dad but a long-time business partner. He came from nothing and was an incredibly tough corporate executive, rising up the ranks, and unflinching in his commitment to the strategies that he and his team put out. At the same time, he has been an unwavering supporter of mine through thick and thin.

Since starting Medvest, what’s the biggest new healthcare problem that you’ve seen and can’t stop thinking about it, and think it’s something that has to be solved?


UMN David Cash | Know Who You Are
Know Who You Are: Healthcare is a huge industry. It represents about 20% of the money spent in a country. It’s also an industry that needs technology to reduce costs and inefficiencies. And that presents an opportunity.


The concept of relationship sales is incredibly inefficient. We need to move towards a more economical and more equitable sales model as an industry. There are a lot of parallels to the financial industry that have evolved over the last twenty years. As we move away from relationship sales from industry to surgeons, I think we will see a faster evolution of quality of care and a faster decline in the costs.

What is your biggest unmet need at Medvest?

The biggest obstacle we face right now is going from high net worth individuals as our limited partners to large family offers and institutional investors who are willing to commit to an 8 to 10-year hold on their investment. It is a difficult chasm to cross. A lot of my focus is on the strategy to cross it.

Thanks for going to the vault with us, Dave. In summary, throughout your life, your father has been unwaveringly supportive. The biggest unmet need that you see as an investor in Medvest is transitioning from relationship selling to a more efficient commercial model. The largest unmet need at Medvest is finding ways to cross the chasm from high net worth individuals to institutional capital. Thanks so much for the time. I enjoyed it. I look forward to future discussions.

Thanks, Jeff.


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About David Cash

UMN David Cash | Know Who You AreManaging Director at Medvest Capital

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