Good morning, everyone. Thanks for joining us for another episode of Signal and Symptoms podcast. We have an amazing guest appearance today. Let me first introduce our great resource. Dr. Manax is essentially an oncologist and then is now an equity capital partner. I would let her introduce herself, and the idea is again, how to bring value. And then we have great Ed Marx, who's going to tell you about the CIO experience. Harvey is a Swiss army knife. and I'm gonna tell you my founder experience and how do we solve real world problems that bring value. Go ahead, Victoria, please.

Well, thank you for inviting me to join this morning. This is the excellent opportunity. Happy to be here. So again, my name is Victoria Manax. I'm actually a partner at Eckuity Capital. We are a growth healthcare fund and it invests in health, tech, med tech and biotech services. But you just jumped off a little bit on my… On my background, you're correct. I'm a medical oncologist. I've been in the healthcare space, gosh, for too many decades that I actually want to acknowledge about 30 years, but around 20 of those have been spent in biotech and in pharma. But I joined a healthcare fund with three other amazing partners and we've been investing in healthcare for the better part of 10 years together. But we're seeing a lot of changes. So I'm looking forward to talking a little bit about how AI is impacting some of those strategic investments in healthcare today.

So I just want to paint a little bit of big picture so that the context is saved. By the way, I loved a lot about, learned about context engineering with Harvey and my discussion. I will bring that into one of these discussions. then I love anyone who loves Star Trek. You should look at the episode called Context is for Kings. You're gonna love it. Anyways, first the big AI picture. mean, we are in Dallas, Stargate is in coming to Texas, billions of dollars of investment. And then as you can see, more and more companies are raising significant amount of money in general, artificial intelligence, Mistral, Rafael AI, Ram, et cetera. As a matter of fact, Anthropic, 170 billion valuation. It's insane the amount of money is pouring into essentially an AI. The second big shift that we have noticed from a data is concerned is that healthcare AI rakes nearly 4 billion in VC funding. So basically, if you look at the digital healthcare space in terms of funding is concerned, AI takes the majority of share. And then if you look at the overall funding over the past quarters is concerned, you're going to see that every day, of course, every time you see a dip in the last quarter, that's not unusual, but it's just slightly uptick now. And then lastly, I want to put it in all of the system over here to set up the stage for today's discussion is that that we have a new bill, the big bill. that big bill is going to overall cut funding for Medicare over the next 10 years, about a trillion dollars. And then what does it all mean? And then go from there. The floor is open. I'm going to start with Harvey and then he's going to cue in Victoria.

Harvey Castro, MD:

Well, you know, as a serial entrepreneur, if I don't have money, I can't make my reality happen. As a physician that we are here and healthcare professionals, we know that our, I know our heart is for that patient. And so it crushes me to have an idea and say, my gosh, I can't fund this. Obviously there are many steps. It takes a lot of courage sometimes to take that idea to a product and then actually to execute. So with that, Victoria, what are some kind of things or tips that you think, “my gosh, Harvey, I want people out there to know XYZ because this is important to make sure that that core framework is there,” so that when they get to that level for you, that they can execute better.

Yeah. So, you know, in terms of AI right now in healthcare, it's very interesting. I'm not sure if you're familiar kind of with a little bit of the of the numbers that have actually gone in about last year, around 11 billion was actually invested in healthcare AI. And it's approximately it's about one in four dollars. I mean, that tells you that tells you a lot. And now by 2028, we're looking at what we expect to be over $75 billion being invested when it comes into the healthcare AI space. And a lot of that is because we've got a healthcare system that is extremely overburdened, I mean, the US healthcare spending rate right now, the US GDP is expected to top about $6 trillion by, gosh, when 2028. And what does that tell you? That tells you a lot. And I think this is why we're seeing the big bill coming about, but individuals are living longer. We've got many more 65 plus year old people and we have an aging and costly patient population, but patients are living longer. And we've got to figure out ways where we can bring these patients out of a hospital type system, bring them to home. So we're not taxing, the shortage that we have on physicians and nurses and whatnot. And I think this is where AI really comes into play because you're able to look at accelerating all types of services that could be diagnostic services. It could be billing services. And I think this is a really important aspect because if we are able to what I call untax a lot of what we see on a daily basis, going to your GP or trying to figure out how we even get an appointment as patients, then I think we're going to accelerate and start to see more advances in what I would consider healthcare today.

Give us examples. Let's say all three of you are investors and then you're saying that this is what I want to Junaid, that this piece is a problem. I want to invest in this piece because it's going to X, Y. And me and Ed has been teaching me the difference between hard ROI and soft ROI. So Victoria. The hard ROI we call, OK, exact, number is going to be reimbursable, blah, blah, but soft ROI, decrease iteration, increase job satisfaction, et cetera, and talk about both of them when you're addressing that answer. as the... Go ahead, Harvey, you start. I'm sorry, I'm biased to Harvey because he's a good... We meet up, I'm just kidding.

Actually, I'm gonna mix it up this time and I'm gonna start with Ed. Let's start with Ed. Because I and I think that'll I know you're gonna bring a lot of stuff that will make Victoria and I to add to it.

Well, you know, I'll stick to something that's not as exciting because, because the two of you, three of you physicians can speak more on the, on some of the quality things and safety things. But you know, the basic things, cause I always focus first on costs. Now don't get me wrong. It's all about patient care and the clinician experience for sure. But because of the reasons I already talked about where there's no money is how do we create money? So to me, there's obvious use cases that exist today, but again, people are so slow and pulling the trigger. I don't understand it. I do understand it. And again, we've talked about this before, just the complexity of decision-makings in hospitals and all of that dysfunction in many hospitals. But one area is supply chain, right? Your biggest cost is typically human costs, right? Typically around 50 % is salaries and benefits. The next big chunk, normally about 30 some percent, is supply chain. And this could be drug costs, which we've been talking about. But just think of basic supplies, orange juice, trays, bed trays, all the different supplies, over 30%. Now you think these are multi-billion dollar organizations, right? So if 35 % of your spend is going towards supplies, that's a great area to disrupt. And they exist. There are startups that do this. I've seen them. I know some of them. So they could come in and immediately, and I've seen examples up to 30%, but I don't know that they could do that in every single category, but for sure, 10 % across the board. So the investment pays for itself immediately, creates margin. Then you can shift those dollars towards doing the great things for patient care and quality and safety.

I'll jump in and say two things. At one point I started a company in healthcare, grew it to about 400 employees. And to your point Ed, a lot of my money was going just to run the bank. And so if I, now that I have AI and I wanted to do it, I would have a gap. And how do I address that gap? How do I do what you're saying? To me, it would be having someone like Victoria or someone to say, I need a loan here. Give me a loan. I'll be able to pay it back because I know my efficiency is gonna get better. And then therefore my gaps gets bigger. And then with that gap, I can pay you back. And I need that little bridge to get me to that point because I know this is there. The second problem that I'm hearing, and I know this is an issue and I tell startups this, we need to make sure we focus on the culture. Cause I can have this amazing widget and to Ed's point, I come into the organization and be like, whoa, whoa, whoa, that's going to replace me. Hell no, I don't want that. And so what I tell startups is start with the Ford, do not present the limousine. Start with something basic that everyone's not gonna argue, that it's gonna help the patient, help the facility, and culturally it will be accepted. That way you're in there.

Another important point that people don't necessarily realize when you're working with different venture groups and you're working with private equity, whoever it is that you're working with, it's such a strong partnership that when you're choosing these individuals that you want to work with, you have to understand that it's going to be the partnership where you can come and ask these types of questions. So many of these companies, don't know who they're going to be working with with strategic. It's not even who's going to buy their products, but you even have to look, you know, in the long run, who's, who's going to buy my company and who, know, what's going to be developed, what's in the market landscape, what's going to be developed. That's going to come in and crush me. And people don't even realize these aspects from an investment perspective of what you actually have to do in terms of due diligence to ensure you don't get into those situations. You got to work with distributors. You've got to work with health systems. You got to work with pharma companies. You got to work with the government insurance. I mean, there are so many different networks that you have to have knowledge of these types of investments. I think the partnership part is key. It's not just, know, you don't know what you don't know. It's who do you know that can get you to that next point. And that's, that's another huge part of it. It's who you know.

So important. So one of my favorite phrases are we as in the age of AI, human trust has gone from gold to platinum because the noise is so much that the signal is less but extremely important and that's your network is your net worth and that is again superbly said Victoria add to your point that it is extremely important for actual financiers and innovations investment offices etc., to actually explore partnerships and the good ones.

One real quick thing, I just want to know from both you guys, if there is one take-home message for someone out there on the VC side and implementation, is there one thing that comes to mind that we haven't mentioned that you guys would like to share with everybody?

I would say when it comes to AI, one of the things to always remember from the investor perspective where we talk about it, our investments are only as good as the data that goes into it. It's key. It's key. It's one of the things that we haven't really talked too much about this morning, but we spend a lot of time on that. kind of understanding that is a critical piece that we look at from an investor perspective. But the one thing I think I will say in general, when it comes to AI in healthcare as an investor, at Ekcuity, we look at HealthTech, MedTech, and Biotech services. AI is what I would call the red thread that brings them all together. It looks at, it's in everything we do today. I think that There isn't a healthcare system. There isn't a services company. There isn't a pharmaceutical company that doesn't look at us and go, what are you doing in AI? It's such an important piece. It's such a strong focus. We only see it getting stronger. And to be honest, it's great to have individuals like yourselves where we can come sit and actually talk about it. So it comes down to We don't know what we don't know, but we've got some great people that we know who can answer those questions for us.

So for me, I always fall back as a common denominator answer that I typically give is you, know, Harvey said you don't know what you don't know. And for individuals who are listening, watching and are responsible. So like if I'm talking to my peer set, you know, chief digital officers or chief CIOs or whatever, you yourself need to jump deep into the AI. You cannot be like, thinking you're in charge of AI and you're not AI enabled yourself. And this happens so much. And it's for me too. I I was challenged a week ago with a professor from university in Mexico and he was talking and he was like, I felt like he's looking right at me and challenging me. like, my gosh. But anyways, I always tell people, are you still using a garage door opener from 40 years ago? You know, like it's on your visor and you click it, you know, same with your thermostat and all that kind of stuff you need to become AI-enabled. that's another one of the challenges that we talked about earlier is, wow, the people making the decisions don't know AI. yeah, they know chat GBT and they know their electronic medical record is some AI stuff, but that's not you knowing AI. It's got to transform your personal life. Then you can start.

Junaid Kalia, MD:

Look at reminder that they're not just buying a product. They're buying a vendor or hopefully a partner vendor. And they want education, support and, you know, follow through. That is such a huge, important part of the sales cycle. People just think, I need to get to that meeting. No, you actually have to go through the whole support system, create trust in a snowy place of AI where it is going to make sure that the signal is better. Again, that's my golden nugget, I suppose, I've learned recently.