Raising money for your health care business can be exciting but complicated. In this episode, Aubrey Rankin, Managing Partner at First Place Pediatrics, shares what raising capital and partnering with investors really looks like. Learn which early decisions can impact your ownership, how to keep investors informed and aligned, and the key compliance and legal considerations unique to health care investments. Tune in for practical strategies for raising capital confidently, maintaining control, and setting your business up for success.
Listen to the full episode using the player below, or by visiting one of the links below. Contact ByrdAdatto if you have any questions or would like to learn more.
Transcript
*The below transcript has been edited for readability.
Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real world experiences, creating simplicity in 3, 2, 1.
Brad: Welcome back to another episode of Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd.
Michael: As business attorneys for health care practices, we meet a lot of interesting people and learn their amazing stories. This season’s theme is: Asking for a Friend. We’ll tackle questions that practices are sometimes afraid to ask.
Brad: Now, audience fans, remember, this is a safe place and everyone knows it’s not you asking the question if you say the magic protective words that you are asking for a friend. Now, Michael, I’m super excited about bringing on today’s guest for today’s shows. Be fun.
Michael: Yes, I am too. But I have a question for you first, Brad.
Brad: Okay.
Michael: Have you ever purchased a car without test driving it first?
Brad: Yes. The last time I traded in [00:01:00] my Tahoe, that was leasing for a New Tahoe, the model actually had changed. The truck was taller, wider, drove completely different. And by the way, I loved it anyway.
Michael: All right. Well, I tend to always test drive a car first, but I have also done that when many years ago, as you remember when we first met, I drove a pickup truck, I had a F-150. And when my lease came up, I got the exact same F-150, same color, and I did not test drive that one. I could barely tell the difference other than just it was cleaner and had newer electronics in it.
Brad: There you go.
Michael: So would you agree though, Brad, that it’s generally a best practice to test drive a car before such a large purchase?
Brad: Yes. I would agree that, generally speaking, that would be good. Although I just ruined that recently because I just bought my daughter a Bronco and [00:02:00] I never drove it. She drove it and liked it, so does that count, Michael because I didn’t drive it.
Michael: Well, the person driving AKA your daughter, I guess she test drove it,
Brad: Yes.
Michael: And she probably used her money to buy it.
Brad: Yeah, her future inheritance.
Michael: Okay. Now I’m going to pivot on you. Okay. Have you ever test driven a home, so to speak, before you purchased it?
Brad: Not sure how you test drive a home. I mean, I always spent a lot of time walking through a home several times before buying it. So how about you?
Michael: Well, I’ve probably looked at least twice at every house before putting an offer into it. My wife Stephanie at one point during a crazy, crazy hot housing market here in Dallas, was out of town and put a contract on a house sight unseen, but she did have the option period to actually go and see it and get out of it [00:03:00] if she needed to.
Brad: Okay. Well, why are you asking these questions, Michael?
Michael: Yeah, I read an article, Brad. There is an emerging trend with luxury homes for a potential buyer to request to live in the house for a short period of time. So one example I read was in Newport Beach, a couple when this was a mega house actually, was from in Europe. And they asked to rent the house for two months to kind of live in it, see how it lives before they would ultimately make an offer to purchase it. And then there was several other examples in the article where the buyers would request an overnight stay in the house rather than the typical tour.
Brad: Yeah. I’ve never heard of the one night request to test drive the house, but my 13-year-old boy brain just had a lot more to say. But I don’t want to embarrass myself any more than I have to in front of a nice guest, [00:04:00] so I’ll just kind of shut up now.
Michael: You just do that naturally. All right. Let’s bring him on. Joining us today is our friend Aubrey Rankin. He is currently the managing partner for First Place Pediatrics Solutions. He’s previously a co-founder and CEO at HintMD, and this is where we all first met – HintMD had sold to Revance Therapeutics. He is also previously VP of Asia Pacific at ZELTIQ Aesthetics.. Previously a director with PwC M&A advisory group. His MBA at Strayer University and undergrad at the University of Stellenbosch. Is that how you say it? Welcome — and first-time guest on our podcast. Welcome, Aubrey.
Aubrey: Thank you, Brad. Thank you, Michael. Good to finally make the cut to join you guys’ podcast
Brad: [00:05:00] Yes. It’s been too long.
Aubrey: Great to see you. Absolutely.
Brad: We’re going to hit you right up front with a really difficult question here. Very, very important question. Have you ever test driven a house before buying it?
Aubrey: Test driven is, like you say, difficult word to say, but I’ve never slept in the house before I actually bought it, but I love real estate it’s been a, a fun side. “I’ve only done better selling properties than buying them.
Brad: Well that’s good.
Michael: That is good. It tends to be a good investment, although I went through a period of time where I chose to buy high and sell low.
Brad: We’ll talk later about what’s supposed to do.
Michael: You’ll give some advice on that. Alright, well, let’s jump in. Love for you just to introduce yourself to our audience, talk about your background, anything we didn’t cover in the opening and get into it.
Aubrey: Yeah, no, thanks for the opportunity to join again. [00:06:00] And yeah, for those who don’t know me, this little accent of mine is I grew up in the south, so deep south in South Africa. Had a quick, quick stint in the UK for two years and with Deutsche Bank and then joined PWC when I returned to South Africa. And I thought it would do the same. I thought I would just come two years to the US and that was in 2001, so the rest is history. Clearly I enjoyed my stay here. And yeah, so now it’s been a long journey originally, as you stated there with PWC, moving here to the US been fortune to be in the Silicon Valley. And after doing a transaction where I actually joined two medical device companies, they were my clients. We joined Somar and Fraxel into a company called Solta Medical that you know. And that was how I was. [00:07:00] Then my ear was turned to come and join the aesthetic space and leave the consulting world. Very happy I took that chance. And definitely life changing. Made incredible friends in this industry of ours, and now lately even dive a little bit deeper into the health care space so very excited how the US has treated us, myself and our family.
Brad: Well, and speaking of that, I mean, like we had said, Michael said this earlier, we met you a while back when you’re being on the entrepreneur side of it and you’re growing something this idea. But tell us about your current, is it company or companies – I’m not sure. I don’t know how to keep up with you guys.
Aubrey: No, it’s interesting. Yeah. So as I mentioned, we diving a little bit deeper into health care. This company’s more a health care services company. We are actually forming a bigger platform by buying companies. So we are very excited. We’ve bought companies now in California, Florida, North Carolina, and we literally, by Friday we will be in Texas. This is fresh off the press. So we are very excited. We actually will be in Dallas, as our starting point. We have another office up in Austin. So very excited. So the whole premise of our company is, we’re servicing families with high acuity children medically fragile children that has a long term condition. And obviously there’s a lot of wounds by serving this population inside the house versus for long time in the hospital. We are trying to provide a better solution. The industry of home care treats everybody the same. And our focus is really on providing unique solution where we only focus on the most difficult population in this industry, [00:09:00] and trying to really relieve some of that stress with the family by giving them quality long-term care in the home. So we are very excited buying younger, smaller entrepreneurial companies and keep it as a network of boutique companies with one brand and really drive a little bit more sophistication into it. So, very excited about this new opportunity, and it keeps us always on our toes, but I can tell you a lot less gray hair than starting a company from scratch, because I do think that is a tough undertaking and had many, many lessons on that side too.
Michael: what was it like switching from kind of a cash-paced pay delivery system into a kind of, I mean, the commonality is health care, but as you said, going deeper and there’s I’m sure, an adjustment to the [00:10:00] payer systems that would come with your current company.
Aubrey: Absolutely. I think everybody else from the tech space is this world of almost perfection because you have so much competition in the tech-based side that you have to be the best to succeed. And unfortunately, health care and the nature of health care and the predictability of revenue streams, I think you see companies getting away with not delivering the utmost top that they should and being competitive because they have some moats around their businesses. But I also think it screams opportunity. I think bringing a little bit from that FinTech side within DMD a little bit from the Silicon Valley flavor to the space, I think there’s immense opportunity in our health care system. I think if you can have performance based solutions, I think if you can up the standard, getting more [00:11:00] people involved and truly creating win-win solutions. Obviously you guys have seen now a lot of headlines in the media about Medicaid and Medicare.
Aubrey: And if you really think at the end of the day is how do we remove waste? Because there’s a lot of people that benefit from waste, but it’s not the patient. Yeah. and I do think we have enough money in health care, we just have to get it to the right space. And I think, Michael, that is the plus side of being in health care. If you’re doing it, you know what’s coming. It’s very predictable. The cash side is very tied to consumer optimism how the economy is doing, where health care is a little bit more protected. But I do think it brings the other challenges of attracting the best talent – finding solutions and breaking down incumbents that created moats around their business [00:13:00] to protect the easy revenue, you know? But as an entrepreneur when I saw this opportunity with my co-founder who’s had his whole life in this space, and always his previous company that he founded from the ground, he really disrupted in the way they’re doing it. And what we are trying to do now is bring that model up to more scale across the country. And I think that is probably the dream for any entrepreneur is like, you have a real problem and you have a real solution, but most importantly, if everybody wants, everybody wants you to be successful, so very exciting to go after this.
Michael: I love that. I love that. I’m going to tap into the gray hair creating part of your life where we first met, because you’ve probably heard us talking about this, our theme this season is asking for a friend. And we’re tapping into those questions [00:13:00] that our clients are almost embarrassed to ask or we definitely have to build trust before they will talk about these things that they’re thinking about. And so, I want to tap into your experience of the HintMD journey. And so I’m going kind of in the format of a Dear Abbey. We had a Doctorpreneur, young doctor reach out to us with a vision to build a med tech startup and to scale quickly. His challenge is that he needs money, he needs startup capital. And Brad, do you understand startup capital is the same thing as money?
Brad: Oh, no. Where do I find capital? I didn’t even know what it is.
Michael: Yeah. It’s not grammar in this case. So I’m asking for a friend, Aubrey, what is it like to raise money from investors?
Aubrey: Absolutely. [00:14:00] It is a loaded question. I could say that could be the least… for me it’s also, you know honestly, I’m so thankful for my journey because you get exposure and you were able to make mistakes and hopefully not big enough that prevent you from having good outcomes. And like I always say, I will just start off with a caveat. It’s like when you’re a startup, you work really, really hard, and I like always say, you’re naive enough to start, and then it’s fear of failure that keeps you going. But then I also have to admit, you also have to, like my co-founder says, not get unlucky. you have to get the right timing, right things because you have to work and these, and that’s how eventually there’s hopefully a good outcome.
When it comes to capital, for me, it’s probably, I really enjoy it in the sense of it’s [00:15:00] probably the ultimate sales position you can have because you are actually selling an idea. And at most, it’s built on trust. And the more, I think as a first time entrepreneur, it’s always more difficult because you don’t have the track record, and you probably start with the easiest capital with friends and family and yourself, what you can scrape together to just get enough traction so that you can prove a little bit more than to convince the next layer of investors. But I would just say to any entrepreneur that’s go is how far can you go without capital before you start raising capital, because as soon as you take capital, you have a boss and you have to keep that boss happy.
So, I think that is a piece that I would always encourage them. First look, and then also who can help and what type of capital, because not all capital is the same. [00:16:00] You get anything from Angel, to C, to VC to private equity and it’s not just the money source, but what can that money source add for you in addition to it? With Hint, we did talk originally with a lot of venture capitalists. We were very fortunate, to acquire capital from probably the leading guy, really loved what we were doing. But it’s tough for somebody like that to add value in aesthetic industry where it’s truly a combination of 40,000 small businesses or whatever the number is, is somewhere in these different ranges. But where if it’s big enterprise, they have a lot of connections, they can influence that. You know, with us, we took a different strategy, obviously raising capital from physicians, which was actually our customers. We did limit what we asked what we allowed anybody because of the risk nature.
[00:17:00] But again, you do it more so who can help influence, because not only is there a capital source that can help you achieve, but what are the other things you’re getting in addition to capital? And I don’t think entrepreneurs take enough time to evaluate what do I need to be successful? Because when somebody writes you a check, they’re looking at you to deliver. Yes, it’s a great idea, but more important is do you have the team to deliver it? But then who’s going to stand by your team and help open doors and make introductions? That’s, I would say that people should always remember. Raising capital alone and just looking at a check – you hear the favorite saying is they dumb money versus smart money. I don’t think there’s really a lot of, of dumb money out there. I think it’s just money that’s just money. And then there’s money that can add additional value, that I would say,
Brad: You know, going back and kind of thinking back to the day that [00:18:00] you guys were trying to come up with this idea, if you could go back in time and talk to yourself, knowing that you know now, is there any hints that you would give anybody who’s, who’s thinking about going this? Like, Hey, this is what I would’ve done differently from day one? It sounded like a little bit was, hold on to your ownership as long as you was something I kind of heard. But is there anything else because obviously with some investors, there are people who you bringing on investors, but like, before you even bring them on, what are some of the things you were, you would tell back to yourself, Hey, ask for this differently, or anything of that sort from that raising that capital.
Aubrey: You know, what I would say is capital, it’s when do you need capital? Really capital because must say, I talked a couple of days ago with somebody and we talked a little bit about the journey too, [00:19:00] and I said, the advantage for us is we actually quit and then start a company, and we had no choice but to be successful because after three months, the novelty wears off. You start a company, you’re very excited, you move in an office, we actually move into my house and my wife later kicked us out. But that’s a another story for another day. But that forces you to, and you’ve heard the word pivot and then because you’re in it, we started hint off a little bit different business model where we eventually ended out, and it’s because when you in the market and you’re listening, you’re pivoting. It’s a journey that you go and you see, oh no, yes, yes, yes. And then you’re like, wow, the opportunity is really because we were originally a treatment plan platform to make it easier for patients to understand. And then we found out the real challenge was how do I pay for that treatment plan, and how do I make it easy to then stay on that treatment plan? [00:20:00] And at that stage, nobody believed you could do a subscription or a true membership in an office. But when we finally got there, then we felt we had it. And then you have to build a tech. But what I would say to anyone, when you start your journey as an entrepreneur, if you start building, you build tech deck, especially if you build a medical device or software or anything and you start building, it’s sometimes very tough to turn around. I would just say to myself, it’s like, what else can I do?
There’s many companies than phenomenal work on doing a lot more work prior to owning and then going off the capital, because as soon as you got capital, it’s very tough to change your story to your investors because they invested in a specific manner. And if you then change, it feels you can potentially lose trust. I have to caveat out it because [00:21:00] it’s easy to say here from the outside. But what also makes you figure it out and stick to it is that if you don’t have a choice, if you have another job and it’s paying you a salary and you, you don’t have to be successful, you’re probably not going to be successful. It requires you to be all in, be focused, drive it. The first two years we took zero pay until we realized it’s illegal not to pay ourselves anything, so we had to pay ourselves the minimum wage, but that puts a lot of motivation, and figuring it out. And I would just say, if you can in summary, just if you can work a little bit more in the beginning and get people tell you why not, there’s a lot of naysayers out there, so don’t just believe them, but test your model against customers because customers typically give you the right answer.
Brad: Well, and you said something I think is important for the audience. So now you figured out [00:22:00] how to get these investors in, but how do you communicate? How often should you communicate with your investors once they do come in?
Michael: AKA you’re bosses now?
Brad: Yeah. Your new bosses
Aubrey: Absolutely. And I do and in the valley people treat it at a very different. When you get money from a fund, it’s probably less personal when you get money from friends or colleagues or your clients. And that’s typically more private investors. It’s a little bit more relationship driven. I truly believe like I said earlier, funding is all about trust. Do you trust me to give the best effort to make it work? Because most companies fail, so when you invest there’s a chance of failure. And most investors know it, but you want to show, you tried everything humanly possible to make it work, you know? And I think [00:23:00] from that perspective, the trust factor. So we try to communicate every quarter we write a update to our investors so that you can take them on the journey with you, good and bad.
You know, just tell them the reality. They want to be part – they potentially can be part of the solution. We had a phenomenal support that helped us and people steer us. We actually went a step further. we actually invited your friend, Dr. Jay Burns, that’s local there. Yeah. to come and join our board and represent all the physician investors we wanted full transparency. We gave him permission to share with any doctor, or any investor, because he was sitting on all our board meetings. And in fact, he was – which I really respected and I really wanted me, every board meeting was open by him in prayer and we always did it from the right principles in the company from the start. [00:24:00] And I think we got highly blessed at the end. But I would just say in later, we also had an industry partner on the board for a while through Mark Foley, who was a tremendous help. And again, transparency. We wanted trust on the board, we wanted transparency on the board. And then also later got a FinTech advisor in Charles Moldow who was from a bigger venture capitalist, but he personally invested not to fund. So you’re trying to surround yourself with people that can advise you, but more importantly, help build that trust because when things go south, you wanted to make sure everything went well. And hey, when things go well, everybody’s your friend that’s the easy part.
Michael: Talk a little bit, and this is a last kind of wrap up question, but one of the things that stuck with me back when you were, you were in this is listening to you [00:25:00] and how thoughtful you were about spending or deploying the capital that you had raised. Y’all were really responsible from a budget perspective. and so talk a little bit about just that what it’s like when you have the money now, and so now you’ve got to go and use it efficiently and what lessons could be learned from that part of it.
Brad: Can I add in the question I think Michael’s asked is what time do we buy the private plane? Let’s just cut to the chase. When you get the money day one, do you buy the private plane or do you wait like a few days?
Aubrey: No, I would’ve loved if that was the case. I think even the founders, the CEO, I was fortunate to have Vojin Kos as my co-founder. And because it’s a roller coaster, you go up and down and now when you get the capital, [00:26:00] you feel even more responsibility. And like our CTO, Ben Deval he said, “Aubrey, I can build you anything with time and money,” and that’s the problem because you can burn through any amount of money you raise. Many companies raise significant amounts of money and burn through it. I think what’s important is focus. You have to stay highly focused in the key issue you solve because every customer is going to ask you for 10 other features. We made some mistakes there too because you’re doing the journey, you want to please everybody. But I would say for any founder is stay focused, solve one thing first, be successful, then you can always solve more problems.
And listen, startup is stressful enough. If you can try and just stick to a few things versus more things, it’s going to make your life easier. And just [00:27:00] talk to other successful people. You can learn so much from them. You don’t have all the answers – you think you have all the answers, you don’t. Your customers have the most. I think our industry, especially the aesthetic industry, can learn a lot from that. We all come with great ideas, but if our customers don’t support it, and listen, not all is going to support it, but you need to talk to enough to adjust your style because that helps you stay focused and it helps you not spend the money.
I always love to be ahead of my plan. So I would, I would definitely add with people typically feel they have to make these huge promises because they feel that’s going to justify the capital you’re going to gain. I can tell you with our latest venture, First Place Pediatrics, we are actually doing the opposite. We have a saying, “Internal always like under promise, over deliver.” And we really pay attention. [00:28:00] I think we’re very fortunate, that’s why some people might call it sandbagging, but I would say our sandbag model should deliver the investor return because then if you work harder internally, your investors will be ready for your next venture after this. So I would just say Silicon Valley venture especially is typically being too aggressive on all these things because they feel they have to. I think if you very honest with your investor base, you have realistic plans that’s simple; you take a lot of stress off it. And then like I said earlier, with the regular communication, take them through and take them on the journey with you, I think you’ll have a ton of support and a lot more patience from your investors then when you do the opposite.
Michael: I love it. Thank you. We of course once again blew through our time. It was fascinating. [00:29:00] Aubrey, appreciate you joining us on the Legal 123s with ByrdAdatto. We are grateful for you and our friendship. We’ll go to break and then Brad and I’ll come back with a quick wrap up. Thank you.
Aubrey: Thank you guys. Really great to be here.
Access+: Many business owners use legal counsel as a last resort, rather than as a proactive tool that can further their success. Why? For most, it’s the fear of unknown legal costs. ByrdAdatto’s Access+ program makes it possible for you to get the ongoing legal assistance you need for one predictable monthly fee, that gives you unlimited phone and email access to the legal team so you can receive feedback on legal concerns as they arise. Access+, a smarter, simpler way to access legal services. Find out more, visit byrdadatto.com today.
Brad: Welcome back to Legal 123s with ByrdAdatto. I’m your host Brad Adatto, with my co-host, Michael Byrd. And Michael, for those who don’t know this season theme is “Asking For A Friend,” we had a great friend come join us. Aubrey coming in, [00:30:00] really giving us some incredible knowledge, audience members. I mean, so much knowledge that we’ve actually run out of time to give our legal wrap up. But one of the things that we want to note, he was talking about how one of his ventures he brought out some of his people who’d be utilizing his product, the doctors, and understand if that’s a route you want a good go, just hit that pause button before you have those doctors come and invest in something because there’s a ton of federal and state laws you have to be mindful of especially depending on you’re taking federal dollars, and so just be very mindful of that piece. But audience members, that’s all the time we have. While what a great show, Michael, and we are back next Wednesday where we’re actually bringing on a lawyer because we’re asking for a friend how to learn about how to estate planning properly with attorney James Atwood. Thanks again for joining us today. And remember, if you like this episode, please subscribe, make sure to give us a five star rating and share with your friends.
Michael: You can also sign up for the ByrdAdatto newsletter by going to our website at byrdadatto.com. [00:31:00]
Outro: ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney-client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues.
