Investing in the Medical Technologies of Tomorrow | Rachel Butler, President, Catalytic Impact|TBCY
Hey, everybody, and welcome to The Brand Called You. This is a podcast in a video chat. And we're talking to some of the world's most internationally interesting thought leaders. I'm sort of very excited today about a subject that fascinates me. When I was coming of age
professionally, in New York in the early 90s, I remember how decadent it was. And I recently ran into a friend of mine, at a Bar Mitzvah and we started exchanging notes. He was a venture capitalist, and he was describing the decadence of that period, the drugs and the, and the women and the money, the massive amount of money and spending that went on. And it never even occurred to anyone in his office that venture capitalism could be anything other than just pure profit making. And that's why I'm so excited about today's guests, Rachel Butler, who's the president of the Catalytic Impact Foundation, which is a foundation that actually thinks you can do both. They think that you can actually integrate
philanthropy and venture capital, you can actually use profit driven economics, to develop wonderful cures for diseases that are often overlooked. And so I'm really excited to have you here. Welcome. Welcome so much. Thank you for having me. I'm excited to be here. Yeah. So, for those of us like myself that are not so financially savvy. I think what you have is even a little
different than impact investing. It's a very unique modeling that is somewhat recyclable. And I was wondering if you could just in layman's terms, explain how how you work and what kind of investments you're making them? Sure. Well, so the Catalytic Impact Foundation is a kind of a unique, unique type of organization, and it has a unique structure is so just sort of to step back as to who we are and why it exists. So CIF is actually a not for profit
organization, we're a 501 C three public charity. So we bring in donated capital. And whoever the donors are, they get they get tax advantages for doing that it is capital that comes into us to do good in the world, we pull that, and then we actually use it to invest in early stage companies that are developing some sort of technology to address some of the world's greatest health care problems. And problems that
aren't being addressed for whatever reason. So we actually don't make grants like a lot of, of not nonprofits would do, but instead, we make equity investments in these early stage companies. And we really run it like an early stage venture capital fund, the only differences is that there are no limited partners. If we invest in a company that it has an
accent and money comes back in instead of, of sending that out to the partners of the fund, it just gets reinvested back or recycled back into the fund to be invested for more impact in more companies. And what's really important here is that, you know, we have a problem in sort of the economics of funding, innovations in health care for diseases that, you know, a varied number of diseases, But certain areas that aren't that profitable, or are higher risk, especially early on in their development. So they often call this the valley of death, then this is where, you know, incredible work is being done in our institutions, our research institutions, universities all around the world. And this often, I think, you know, they say about one out of every 10,000 of these technologies actually gets out to patients. And part of that problem is that it's that early stage aid, they spin out, they maybe get some government grants, some some grants from the universities, but then there's this period, they call the valley of death, which is where they may not be quite to proof of concept or, you know, they haven't built their team to the degree yet that they will eventually you know, they may not be in the clinic yet, but it they but it could be something that is really, you know, based on incredible science with incredible researchers having put their life work into this. And a lot of the technologies just die at that point. They just can't get the funding. So
it's really important to fund research at universities and basic research. And we're all for that. But that's not what we do. We go into that, that sort of window after they've spun out, they've got some friends and family funding, maybe some, you know, some small grants. You know, that came from the university, but but then there's a period of time before they are really attractive to a typical venture fund that needs to get returns, it needs to limit its risk. That's where we go in, and then we try to help bring in other investors, hence the word catalytic. And then we, you know, try and continue to be supportive, with the hope that it will get to the point where it's much more attractive to a broader range of investors. But
we've, you know, found there are a number of areas that just don't get the funding, women's health, children's health, you know, rare disease. So those are some of the areas that we really focus on, why don't they get enough attention, not enough money to be made? Well, there's different reasons, actually, for different areas. So children's health is a huge area for us, and really was part of the founding of the organization, the mission was because children's health just, you know, children are suffering. And they and there are so few technologies developed, really focused on the needs of children. And in part
that is, because in large part, that luckily, the patient population sizes are quite small. So you know, in a, rare childhood disease, as example, pediatric cancer is the number one. The number one reason children die by disease. And yet, each cancer in itself is a rare disease, which means it affects fewer than 2000 people, luckily, but there are so many of them that it actually, you know, 15,000 children in the United States die each year from pediatric cancer. And over the course of the last 40 years, there have been only six drugs developed specifically for children's cancer, for pediatric cancer. And during that same period of time, almost 200 Drugs developed for adult cancer. So every time a child gets sick, they're being experimented on, because, you know, they don't know that what drug works best, they don't know, what the dosage should be, what the length of time should be, because they haven't done the studies. And there are other
reasons, you know, it's harder to do studies with children, etc. But, but in large part, the returns aren't there, because the number of patients that suffer from that is small. So, you know, a typical venture fund would have to, you know, they need to provide a certain level of returns to their limited partners, and it doesn't make economic sense to support something, even if it's deadly, even if he, you know, it's the humane thing to do. But if they can't, because they need to get a certain level of market returns. Now, later in its development, when it's more proven, it's hit some milestones and some, you know, sort of evidence of efficacy, then it's much easier, then they'll come in. So we go into that early stage and try and help it get to the point where it's more able to get funding from a broader aside from your type of organization, it would have been left to government agencies to go into that early stage. There were no,
there were nobody there was. I mean, in a sense, yeah, they can apply for government funding, but that often isn't going to be enough. I mean, what often happens is it doesn't make it. Yeah, and, and something that could have saved the lives of, you know, 1000s of children just gets put back on the shelf.
So do none of your investors expect to profit? They're doing it solely for altruistic reasons. We don't have investors, we have donors. So that's the difference, right? We have philanthropists who care about these things, who may also be funding research at universities, but who understand there's a next step, right, they spin out from the universities they become, the only way a drug gets to market is if it becomes, you know, part of a for profit company. And then they go through this long process of FDA approval in the United States. And then, you know, to the point
that it can, if it makes it through all of those steps, it can then be available to patients. Sometimes, you know, again, talking about children's health, and there are other areas that we also focus on, but you know, they can get an accelerated process they can get like orphan disease designation, and this is something the FDA has put into place to try and help solve this problem. So that if they can accelerate Rate the process through the FDA, then less money is required to get it to, you know, to patients. So another area we really focus on
is women's health. I'm sorry, jumping in, but you're asking like what other types of things don't get funding what's really interesting, I think about, you know, women's health, it's only 4% of health research funding goes to funding women's health, and only 1% of Venture Fund, a venture capital funding goes to companies that are developing for women's health. And so that's a big area of focus for us too. And we really think about women's health, not just, you know, Femtech-type stuff. So you know, fertility treatments and things like that, but really anything that affects women differently than men, we consider to be part of women's health. So that's heart disease.
You know, for years, heart disease was really just studied in men. And now it's become apparent women experienced heart attacks very differently than men, they have different symptoms. And all of that really wasn't looked at before. Or, you know, Alzheimer's, women have twice the rate of Alzheimer's as men, autoimmune disease, women have twice the rate of autoimmune diseases, they suffer from depression and anxiety at much higher rates than men. So all of this in our mind falls
under women's health. But you know, and there are different reasons, women are not a small patient population for, you know, more than 50%. But, you know, though, that women, mostly I mean, there are many reasons, but in part, nine out of 10 Venture Capital Partners are men, so they have a different view. On what needs funding and and what is critical
in the sort of health field. Yeah, so there's lots of lots of different reasons, things don't get funded with only 4% of the research going on women's health. No wonder they're depressed. Yeah, exactly. Yeah.
How do you go about finding these companies? How does it happen? Do you have to do a lot of research? Does it come to you? Like, what, what's the process? Well, lots just comes to us over, you know, kind of sort of comes in over the transom, but we actually try to be very, sort of intentional and methodical about the way we go about this. So we have a number of CO investing relationships with other other sort of types of investors, early stage, some may be family offices, or types of, you know, people who go in earlier we have and we get good referrals from there. We also go to conferences to try and identify the sort of the most cutting edge work being done and companies that are out there. So we deal flow is really not an issue. We also have a very large
community of advisors. And you know, I have to credit my, my colleague, Rick Lipkin, he is a community builder, and he just has really, but just believes in the power of bringing people together for the greater good. And so we have a tremendous group that's involved in CIF probably 60 or so advisors. And then a larger community beyond that, but these are people who are involved in academia, who are, you know, pharmaceutical executives, who are MDs, PhDs, you know, work in biotech, so they have tremendous connectivity also, to be able to help us really identify companies that we want to, you know, learn more about. And you have had some already some successes, correct in terms of.
Yes, right. And, you know, we haven't been around that long. So we made our first investments in 2018. We now have 47 portfolio companies. We have had four exits, and you know, one of them actually, which was a It's a company that focuses on on treatments for rare disease, or at least their first indication is a rare childhood disease, and also led by a woman who they went public in 2019. They were the fourth largest IPO of 2019.
So not just healthcare IPO fourth largest IPO. So we had was a wonderful kind of proof of concept for our model, because, you know, we had invested quite early in that company. You know, we were and sort of with the friends and family round and just, you know, a year and a half later, we had a great successful exit that money went back into our fund and has already been redeployed and reinvested in other companies. Wow. So, you know, I know from experience myself that my father did cancer research and that often, people that would give to his research had some personal connection to to the disease, whether it was a family member, and I know that you pretty much got into this field based on children's health based on I think, a personal story of your own right. Which I would
Yeah, yeah. So well, my personal background, I guess we can sort of rewind back to that. I did not come from a healthcare background. Although they're, I come from a family with many doctors and medical professionals. But I went when my children were young, I Well, let's go back, I had been an entrepreneur, really, from college on. And that's very much
my background is entrepreneurial, I've launched, built and sold two companies. The second one, though, was when my children were young. And my son, one of my sons, had quite severe asthma and allergies, both food allergies and respiratory allergies, the asthma was such an issue that despite our being fairly knowledgeable, and having resources and having great health care, we could not keep him out of the hospital. And so it really became apparent to me that, you know, if I was struggling to get really good information, and you know, learn that sort of being able to learn about how to manage this disease, then certainly there is a large community out there who also who don't have access to much of this. And so with that launched something called asthma magazine, which is a patient education publication, geared toward helping you know, patients and their families better manage as men with so many chronic diseases. It is all about, you know, education and self management and being able to be compliant with treatment. So we actually ended up
partnering with the American Lung Association and the American Academy of Allergy, Asthma and Immunology. We distributed through to doctors offices, and many physicians used it as sort of a primary source of education for their patients. We also provided the all of the patient education for the launch of mercs, sort of first in class at the time, drug Singulair, we did a lot of trying to make it more accessible to all communities, we had a low reading level version we had, we created Parent Guides, children's game books, we had translated into Spanish so that we could really make it available to the communities and actually asthma is much more prevalent, in fact, quite epidemic in inner cities and underserved communities. So eventually, we ended up selling
it to selling the magazine to Elsevier Health Sciences is one one of the leading journals, medical journals, or publisher of medical journals in the country, possibly the world. And I ended up staying on there for another five years as editor in chief. So that was my sort of foray into healthcare, which I never wanted to go back. I loved it. And I have always had a passion for healthcare and science and, you know, medicine and research. And it's kind of a joke amongst my friends that they always call me before they call their doctor. And I'm like, you know that I do not have an
MD. Yeah, so what's wonderful about CIF is it's, you know, we work with startups and early stage companies. So it's a really wonderful blend for me between my sort of entrepreneurial background, I love working with, you know, founders and early stage companies, but also bringing in the sort of science medicine healthcare piece as well. So it's You guys have any, are you currently funding any asthma related research at this point? Well, again, we do companies not research, although they're continuing to research but it's, you know, as they sort of work toward FDA approval, we actually do I have a company that is that has developed a continuous remote monitoring system for respiratory issues. So that includes asthma and pneumonia. So that and particularly now I think with, you know, what, what was wonderful advancement that happened during COVID Was that telehealth became a much more accepted practice, and which just makes so much sense. And especially, you know, one of the
areas that we're particularly interested in and focus on also one of our sort of pillars is health equity. And so having telehealth be able to be reimbursed by insurance companies and to be more widely available has been huge for underserved communities, whether it be you know, inner city or for rural areas where they just don't have access to two clinicians to the same extent. So one of the nice things about this company is that it works well with telehealth, it's remote monitoring. So at home, you know, it's a system that will identify when, when breathing is worsening, when it's becoming a crisis. I mean, one thing I learned, you know, through asthma magazine is, when people die of asthma, it's almost always on route to the hospital. They just don't, they don't recognize early enough that things are worsening, and that is becoming a crisis. And so this is a great tool for you
know, and then they have a, you know, part of their sort of strategy and mission is to expand it into global health and to expand it into various areas of the world where it could be deployed. And it's a fairly accessible, relatively inexpensive product as well. So that is something in the asthma space. I know, there's so many companies I could talk to you about. But we have a huge following in India. And I understand you also work with several companies in Asia and so forth, I'd love to hear about so well, we have quite a few. So we have a number of companies who have CEOs who are Indian or South Asian, but we have one company in particular that actually spun out of a company in India. So we, this company that we invested in is called
By Kara, and it's spun out of a company, a large global pharmaceutical company in India called Bio Calm. And this, the By Kara is based in the US, but their research and manufacturing is all done in India. And they actually are focused on precision immunotherapy. And so what they do is they combine the drug that they're developing, they combine it with other drugs. So often in cancer, you will get, you know,
a treatment that's initially successful, but then the body builds up resistance, and it becomes less and then there's a recurrence of the cancer. So their approach is to combine their drug with with the other drugs, and together to try and sort of increase the efficacy of, of the drug and keep it from the resistance from building to it. And they're having quite, you know, quite a bit of success. And their first indications are head and neck cancer and anal cancer. So two areas, two cancers that are are challenging to treat. So, yeah, we have we're very excited actually, about that company. I
think they're, they've got great press. It sort of excited me about your organization is your value and pursuit of diversity. And I guess, I always like to ask presidents and CEOs why they think investing in diversity is actually good for business. I mean, because I think you you have so many interesting leaders. Yes. Well, So I joined the company in
early 2018. I was actually part of the founding of it, but I came on full time in in early 2018. And it really became apparent to me quite early on, especially it started really with women. When I read that less than 3% of venture capital money goes to companies led by women, which I found appalling and and not only that, but it's actually gone down since then. I mean, there there are so many people that you know, they talk the talk, but they don't walk the walk. There's so much out there about investing in women, etc. But,
Women are of course is schmoozing enough. Maybe that's I don't know, and I think too, you know, Again, going back to sort of the model of venture capital, you know, you're going into companies early, there's often not a lot there to really evaluate. So again, nine out of 10 Venture Capital Partners are men. And I think it's a natural bias, that's probably not even aware of what they want to invest, you know, you really are often just investing in the team, like, you want to find the best team that, you know, as my colleague often says, great people to do great things. And so I think it's a natural bias to say, this person looks like a winner. This is some I've seen
some, you know, I've seen people that look like this person who've who've really hit the ball out of the park, so I'm going to invest in that person. So, you know, in tech, it's the young guy in the hoodie or, you know, what is the look of that. But I think in life sciences, and healthcare, it has always been men. So they look at companies led by women, women have different styles, different approaches, and it doesn't look and feel quite the same as what they have seen be successful in the past. But what's really interesting is that in 2019, Boston Consulting Group did a study of and comparing companies led by women, to companies led by men, and they found that companies led by women generated 10% more revenue over a five year period than companies led by men. And they found that now remember, women received a lot fewer, many fewer dollars, but they found that for every dollar of funding, women returned, 78 cents of profit, and men returned 31%. So what's so
interesting to me is that, you know, when, when we first started focusing on women, led companies, and we now have, we have finally reached 50% of our companies now have our entire portfolio run by women, we sort of built up to that, but it's, we're now at 50%. But you know, what, I think when we first started, it was like, to 2.7%, I think during COVID, it even sort of hit 3%, 3.1, or something like that. But in 2021, it went down
to 2. something. And now in 2022, I just read it's at 1.9%. So we're actually going backwards, why, I have no idea. Because all over if you read, you know, go on LinkedIn, and you read I mean, it's all like, you know, it's the right thing to do women led companies, but we're doing it, but I don't think many people are because, you know, look, look where we are, it's now gone down since since we started this process. So we've we feel we've had great success in and it's I often say it's sort of a classic case of doing well, by doing good because some of our best companies are those led by women. So we went into this because it was the right thing to do, what we found is that it's like the right business thing to do. And the other really interesting thing is that
it has really helped with deal flow. So we have, you know, when we're talking to others in sort of the life science healthcare community, and we'll say, you know, we really have a bias toward investing in women, we don't only invest in women, obviously, but we always want to at least, take a look, you know, we want to make sure that we're open to looking at these companies. And almost without exception, the response is like, oh, my gosh, I have got to introduce you to this amazing woman CEO. And so we get incredible deal flow. And I also have a theory that I think women have to work a little harder and be a little better to get to this point, just because it's harder to get funding, you know, so you have to be that much better. So I think it's almost a self selection of really competent management and really, you know, high value companies.
So it's been good. It's getting even more excited about your company now. I can't believe how fast the time went by I mean, thank you so much. sliver of your day, in concluding. Is there anything
new and exciting that you guys are working on or expanding in any way or? Oh, well, we are we did just launched this past summer, we had a big event in New York where we launched our designated children's health fund. And we had a wonderful donor who gave us a based out in Seattle who gave a donation to help launch this. It's focused on pediatric cancer, which I think we said before is the number one thing disease that kills children, and also Youth Mental Health and I guess that's something We didn't actually get a chance to talk about but you know, that's a huge area of focus for us and and just something that I'm incredibly passionate about. I mean, suicide rates have skyrocketed in just like, well, and what's really shocking is, in the last 10 years, suicide rates in the United States of children between the ages 10 and 12, have gone up five times. You know, it's shocking. And so we're really focused. Yeah, there is a lot of great innovation being
done out there in treatment for mental health, better diagnostic, better drug development, and we have a number of investments in companies that are helping to sort of accelerate drug development in the space. So that's something that we're really excited about this children's health fund, and we're looking for donors for that. I think that, you know, one of the things that we can really offer to donors is, what are they passionate about? What do they want to fund and we can help do that with their donated capital. So I mean, I also think that all the great research in the world and all the great companies in the world putting out great new novel products, if access to health care for young people isn't available. I mean, that's what is so tragic, as well, you know,
mental health, if what I have read is 80% of youth who have mental health challenges cannot get services for that cannot get treatment. You know, it's a huge problem. And, you know, just in the last in the, again, in the United States, in the last decade, suicide rates are up 30%, almost just under 30%. And globally, as well. So I, you know, there's a lot of work to be done there. I guess the positive note is that your youth is children's, the network that you've started this project, you know, will hopefully really make a big difference. I, you know, in
producing some novel drugs that, you know, we haven't even considered before. Yeah, I mean, and one of the things that's really exciting in this in the area of mental health, and again, we're focused on mental health generally, but really, a big focus on youth mental health, is that there are new ways now, to sort of help with the drug development. If you look at the history of site, and I know, we're almost done. So we don't have time, but the
history of psychiatric drug development, it was really just sort of happenstance that, you know, they would say, Uh huh, this seems to work, we have no idea why. But you know, it's an antidepressant. So it's been used for the last 50 years, but there haven't been a lot of, of unique new drugs developed for bipolar, for schizophrenia, for you know, treatment resistant depression. And now, there really is a lot being done in
this space. And one thing is that we've really started to have better ways to look at the brain to, you know, sort of scan and look at how molecules affect the functioning of the brain. So really, to understand the mechanism of action, we actually have investments in to companies who are using different approaches, but that are able to work with drug companies. So that if you can, you know, narrow 2000 potential, you know, molecules down to the 10 that seem like they're worth pursuing. I mean, that just knocks years off of, of the development time for something like that. And actually one company that is working toward being able to in the clinic, being able to do brain imaging, and to be able to tell a particular patient, this is the drug that will work best for you, which is really a part of precision medicine, because if anyone has had any exposure to mental health, you know, that there can be months or years of trial and error of trying one medicine, trying a different treatment, trying a different dose, and often with terrible results, because, you know, you have someone who's bipolar, who doesn't get the results and loses, loses faith and often with terrible consequences, loses faith that anything will help them.
I mean, the one size fits all, it's really a thing becoming a thing of the past, thank God, thank God. But now, it's still pretty standard out there is just, you know, well, let's try some Prozac. Let's try this. Let's try that and often with very, you know, either terrible side effects or or not being successful. And there's just, you know, too many, as we just talked about too many suicides and terrible outcomes from that approach. So we're really excited that there's an opportunity to change that and we're, we're invested in quite a few companies in mental health that are looking to do that. Thank you, Rachel. It's really been eye-opening.
Oh, thank you. This has been great. I Appreciate You having me. Yeah, I wish you all the best and I'm gonna, you know, obviously follow you guys and hopefully other people will too. So thank you.
Thank you. Thanks for having me on. It gets to like a bye Thank you. Bye bye. Thank you for listening to The Brand Called You videocast and podcast, a platform that brings you knowledge, experience and wisdom of hundreds of successful individuals from around the world. Do visit our website www.tbcy.in, to watch and listen to the stories of many more individuals. You can also follow us on YouTube, Facebook, Instagram and Twitter. Just search for The Brand Called You.