Health Wildcatters Featured In Dallas Morning News "Schnurman: Virtuous cycle aids startups"

By Christy Torres • October 9, 2015

Health Wildcatters Featured In Dallas Morning News "Schnurman: Virtuous cycle aids startups"

October 9, 2015 | Mitchell Schnurman | Dallas Morning News

Green Park & Golf Ventures isn’t a household name, but let’s hope that changes soon.

The Dallas group is a prolific investor in startups, averaging a deal a month for the past four years. No rival within 1,000 miles can match the pace of its angel investor model, said the director of the North Texas Angel Network.

Four GPG investments have washed out already, which isn’t unusual in this high-risk niche. Two startups provided OK returns and most of the others have raised outside money, a promising sign. But it’s still early in a process that can last a decade.

GPG typically puts up $500,000 in seed money, including contributions from other investors that it draws in. Most of its young firms are in health care, the business GPG knows best. And about two-thirds are from the Dallas area, providing a much-needed boost to the emerging startup community.

If co-founders Dr. Clay Heighten and Carl Soderstrom do this right, they’ll eventually hit a home run — an early-stage investment whose value multiplies exponentially and attracts millions of dollars from outsiders.

Such an “exit” would validate the GPG model and raise the profile of Dallas startups. Big success stories embolden more entrepreneurs and entice more investors, a virtuous cycle that Dallas needs to become a startup capital.

“This isn’t philanthropic; we want to make money,” said Heighten, a former emergency room doctor. “But we also want to contribute and be creative. We want to build something. And if we have success, others will do it, too.”

GPG has invested about $23 million in 45 startups since December 2011, the co-founders said. Along with principal J.R. Garcia, they’ve brought in about 85 other investors, who typically put up about two-thirds of the total investment. The outsiders get to look at each deal and opt in if they wish.

Heighten and Soderstrom also invest about $100,000 for each class of Health Wildcatters, a business accelerator that buys a small stake in health care startups and nurtures them through a training program. That experience offers more insight into the entrepreneurs and their strategies.

“It’s very helpful to see how they respond to criticism and adapt their business plans,” Heighten said. “The one downside is you really get to like them.”

That makes it tougher to say no to funding requests, but rejection is a big part of the game. In the last three months, GPG heard pitches from 150 startups. On average, just three will get money each quarter.

“We’re very selective and we don’t chase anything,” Soderstrom said.

One pitch they’ve heard too many times: apps that track steps, situps and carbs. They don’t want to compete in an already crowded space.

“We want to see some blue water where they can swim a while,” Heighten said.

One firm that made the cut is CancerGene Connect, which markets a software tool to identify people at greater risk of cancer. The Dallas startup recently raised $700,000 with GPG leading the round.

The funds are being used to hire a genetic counselor and some senior software developers. GPG is also making introductions to doctors and hospitals.

“That’s strategically valuable to us,” CEO Richard Burghardt said.

In the 1990s, Heighten, Soderstrom and their partners built a large physicians group and servicing unit, MedicalEdge Healthcare Group and PhyServe Physician Services. They had over 475 local providers and sold both operations to Texas Health Resources in 2011 for just over $200 million, according to published reports.

That year they started Green Park & Golf, which is named after the streets they live on. Now, in addition to investing their money, they’re raising awareness of local startups and creating a larger investor class in Dallas.

“They’re opening doors by writing checks and bringing in others,” said Jeremy Vickers of the Institute for Innovation and Entrepreneurship at the University of Texas at Dallas.

One of the best ways to lift a startup community is to have successful entrepreneurs, such as Heighten and Soderstrom, reinvest their capital near home and capitalize on their business networks.

“We need 10 more of them,” Vickers said. “The deal flow is there in Dallas. That’s why they’re making so many deals.”

Angel investing is rising nationwide and Texas is grabbing a growing share. Through midyear, the median angel round was $1.1 million, up from $300,000 in 2010, according to the Halo Report by the Angel Resource Institute at Williamette University.

Last year, Texas accounted for over 11 percent of angel deals, up from 3 percent in 2010, the report said.

A big surprise for Heighten and Soderstrom was the cooperation among angel investors. So many startups are emerging here that investors don’t try to hoard the deals, they said. Most angels are eager to let others invest and they’re always welcoming newcomers.

“Come on in,” Heighten said. “There’s plenty of room.”

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