A Clinical Champion Partnership: Positioning, Motivations and Compensation
This post continues my conversation (Matching Clinical Champions to Your HIT Product Lifecycle) about clinical champion partnerships with Shameer Soni, an attorney with the Patel Law Group in Dallas. Shameer has worked on over 50 rounds of funding for clients, and currently represents startups nationwide.
Shameer identified three types of clinical champions based on where you are in the HIT product lifecycle: Advisors, implementation partners and influencers. Each brings different skills to address different needs in a startup’s development.
Here we explore positioning, motivations and compensation when negotiating a clinical champion partnership.
To be sure, compensation is often at the core of any business arrangement, but it cannot be the sole motivator. Startups are a gamble and require time and commitment. The mission of the company must take precedence over a clinical champion’s financial goals.
To Shameer, the best clinical champion partnerships start with defined expectations of roles and responsibilities.
Connecting Physicians and Entrepreneurs
Shameer: How to engage is always tough. Entrepreneurs often don’t have that access to the physician network – since physicians are a closed network. In our experience, it is the minority of physicians that are true physician entrepreneurs with a strong business network, valuable grasp of business concepts, and the ability to think at scale.
Entry into the physician ecosystem is about relationships. Accelerators, incubators, and programs built for health tech companies can provide a great access point, after which it is all networking.
Is there a need? Is it a thing? Is it a global problem, or a micro problem? Is a problem want to solve? These are questions you want to ask when you’re dealing with the day-to-day.
Forming a Clinical Champion Partnership
Shameer: Avoid physicians that want to be a part of every company they see.
In my experience, it is much better to have a tight network of really good advisors rather than a large network of advisors that are looking for a free or low cost equity. What makes a good advisor? Somebody who is personally invested in and committed to the product and company. They have to care that you’re successful; that’s the only way they are going to commit the time.
Shameer: On the physician side, avoid companies that want every physician they meet. Pick opportunities you’re passionate about, and commit the time to doing it really well. Do that, and you will create value. Be self aware, if you can’t bring value, then step back. A lot of that comes from experience—the more deals that you are part of, the more you know.
As counsel to companies, I often see startups overcommit to advisors. They work on the assumption that if they bring in enough physicians, some will start throwing money into the deal and they can get funded without going to a venture fund.
As a physician, the decision on whether to advise a company comes down to whether you trust the CEO. You are betting on the jockey hoping he or she will get you to an exit; there’s no guarantee.
That’s the way startups work – they are entrepreneur centric. The product is important but so is execution — What’s the team? What’s their background? What have they done? Whom have they brought in and how have they done it before and so far?
I have spoken with tech companies whose clinical champions serve as unpaid advisors. But for physicians who expect compensation, Shameer offers the following guidelines.
Shameer: It is reasonable to expect a 3 to 4 year vesting period for advisors that receive an equity stake. Vesting terminates if the relationship terminates, so the company retains some control over which advisors it keeps.
In return, advisors will spend a set number of hours determined by the board. If somebody is valuable, the board will continue to pay them. Their pay is based on reaching milestones, equity numbers and vesting. Vesting allows the board to control expectations on both the company side and the advisor side.
What is the typical compensation amount?
Shameer: There is no fixed sum – What are you willing to give? Advising a startup that fails may mean the physician has provided free work. The opportunity cost for the free work is a physician’s day job that pays well. The company needs to ask how it compensates a physician for the opportunity cost of not practicing medicine while he or she advises the startup.
The fact is most physician have the resources to participate in a deal; they may put cash in because they think the company is going to be a winner. As an advisor, they are getting early with some free equity in exchange for their intelligence.
The equity you grant to an implementation partner is less than you grant to an advisor. Typically the company will provide its solution for free or a discount plus some equity in exchange for a physician’s input. Equity is tied to the implementation partner’s insight and knowledge, not the use of the product.
For example, the arrangement would be: Use my product for 24 months and every quarter I receive the report from you in exchange for one quarter of that year’s equity.
Since the company is later stage and therefore less risky, influencers may not take any equity at all, but will utilize the product and receive a sales commission for introductions that they make. You can also compensate influencers on other milestones, such as investors, or articles.
Need help with your positioning to build an effective clinical champion partnership?