Crowd-Funding for a Cure
How Greg Simon came to lead online healthcare investment platform, Poliwogg, is a tale of fate. Greg had spent over a decade in the public sector, including advisory stints in the White House as Chief Domestic Advisor to Vice President Al Gore, when an opportunity presented itself to dedicate his full attention to a long-standing passion of his: medical breakthroughs.
In 2003, Greg was asked by well-known entrepreneurial philanthropist Michael Milken to start an organization focused on breaking down barriers in medical research. What came to be known as FasterCures led Greg to commit to a regular speaking circuit on the ways cultural barriers inhibit the partnership, technology, and investment needed to allow for important medical discoveries.
Little did Greg know that one of these speeches would make such an impact on the future founder of Poliwogg, then a nameless audience member, and that he would eventually wind up as CEO.
A Grand Coincidence
Fast forward to the founding of a company whose mission was to turn health into an asset class, taking advantage of recent legislative changes that opened investment opportunities up to a greater number of individual and institutional investors. Today, Poliwogg’s investment products allow people to invest in medical breakthrough companies in areas they care about — whether through a direct investment, an investment vehicle such as an exchange traded fund (ETF), or a private placement.
At the time, Greg was taking time off after a stint as a SVP at Pfizer. “I was at a conference in Sweden,” Greg reminisces. “And I ended up sitting next to the wrong person. Someone had moved a book that was holding my seat. I sat next to a man from New York City, and I told him what I’d been doing.” The man extended an invitation for Greg to see him next time he was in the city. “There was a friend he said I should meet.”
Greg did just that, leaving his new friend a message when he had a trip planned to New York. “I never heard back from him,” says Greg. At one point during his trip, Greg found himself in Grand Central Station. “My phone rang,” he recalls. On the other line was Jeff, the founder of Poliwogg. “He said: ‘You don’t remember me, but I met you five years ago. I’ve been looking for you.’”
Conveniently, the fledgling Poliwogg had some borrowed office space in Grand Central, and Greg met him on the spot. “We met around a conference room table which belonged to the guy I had met in Sweden.” After about an hour of meeting, Greg asked Jeff why he was here. “He said: ‘Because you’re the CEO.’ And I said: ‘Well, I guess I am.” That same conference table turned out to be Greg’s new office for the next year.
Leaving Big Pharma Behind
Greg says Poliwogg is reinventing the way people think about health as an investment. “People invest in what they care about,” says Greg. But when you’re buying shares of Pfizer and GlaxoSmithKlein, that doesn’t necessarily ring true.
“We wanted to create new opportunities to invest in the ignored sector of healthcare,” says Greg referring to companies focused on medical breakthroughs. They do this by opening up investment offerings around specific therapy areas, such as a portfolio of Alzheimer’s care companies.
Of the $14 trillion that’s invested in mutual funds and ETFs, $180 billion is invested in health, Greg says. That’s tiny considering healthcare represents a $3 trillion economy. “Not only is it underinvested in, but it’s also mis-invested,” explains Greg. “No matter what mutual fund you buy, you’re buying Pfizer.”
In contrast, Poliwogg’s first ETF (ticker: SBIO) is focused on small biotherapeutic companies with under $10 billion in market cap, which have drugs in a phase II or phase III trial, a certain minimum number of shares traded per day, and exhibit at least two years as cash flow positive.
Poliwogg launched SBIO as an index in 2013 and then as an ETF last New Year’s Eve. “It’s up 29% this year (2015),” says Greg. “It’s the top healthcare ETF by a lot.”
Healthcare, Finance, and Tech
Poliwogg’s business model was made possible by the 2012 Jobs Act, which made soliciting investments in private placements legal and opened up the rules around online investment platforms, more commonly known as crowdfunding.
“The fintech revolution is making it so much easier for anyone and everyone to invest without needing to pay a lot of fees,” says Greg. Even so, he believes the world doesn’t need more tech to help you buy the biggest names in healthcare. “There’s been a change in method but not a change in meaning,” he says. “Your options are no longer treasury bonds and real estate.”
Greg experiments with other financial technologies such as robo-advisors. “Whenever I show those guys my portfolio they say, ‘Oh my God. You have to sell some of these healthcare companies.’ They don’t view it as an asset class.”
“If you have a disease, why are you investing in oil companies?” asks Greg. He points out that investor behavior hasn’t quite caught up to the opportunities new technology and innovative products like Poliwogg’s now affords. “If you buy an iPhone every time a new one comes out, don’t you invest in Apple stock?” he says. “So you’re spending all of this money on your health, why wouldn’t you invest in the companies keeping you alive?”