UPDATE 4/27/20 – Thom pointed out that my initial notes below apply to GuruMD, not Guru by MSBAI (sorry for the mixup). My thoughts on MSBAI are posted further down in the replies to this thread.
—————–
Original message:
Hey Thom,
First off, I’ll start by saying that the telemedicine / self-health space is definitely one I’ve looked at and invested in. I invested in Circle Medical’s round on WeFunder back at the end of 2018, and other home health companies such as Innamed on Republic (blood testing at home) and Vivoo.
Circle Health is probably the closest analogy here to GuruMD, although it’s more of an AI-based solution for primary care (in San Francisco) and GuruMD seems to be targeting more of the ER and urgent care market.
The space is definitely hot/competitive – CallingDr was another campaign on StartEngine, and also mentioned emergency and urgent care.
So my biggest initial question is – what makes GuruMD unique and special in this space? What’s their unfair advantage or differentiator compared to all these other solutions that are out there?
What they cite as a “cutting-edge user experience” isn’t as convincing of a differentiator as I’d probably be looking for.
The team looks experienced, but I wouldn’t say they have any special sauce that some of these other businesses in the same industry don’t have. Seems they have relatively decent traction in their pilots (though the charts are hard to read without labels on any axes…), but I would question whether what works locally in TX/NM can operate and succeed at scale when ready.
A Big Red Flag – Company Repurchase Rights
I’ll be honest, I didn’t dive very deep into this deal, since the very first thing that caught my eye and gave me a sense of the team’s thinking is that they have company repurchase rights in the terms.
“In the event of an institutional or venture financing for $1,000,000.00 or more, the Company may repurchase the shares sold in this offering at the greater of either (i) the valuation of the Company in the institutional financing, or (ii) 110% of the original purchase price.”
I can understand the thinking of the founders in adding these terms to give themselves options in the future, but if this investment ends up being your 1/100 unicorn that does extremely well and starts taking off in terms of valuation, do you truly believe that the founding team will have the best interests of their smaller crowdfunding investors at heart?
Because of this, I view it as being a limited potential upside investment (not subject to a Black Swan type outcome, since my guess is that the founders would do whatever a large VC would ask, which would probably mean buying out early crowdfunding investors).
I’m sure the majority of the time these rights would not be exercised; however, it isn’t the “majority” of the cases I’m worried about, but that 1/100 investments that end up generating the power-law returns required to make an early-stage portfolio successful. And while investors would get perhaps even a “decent” return if they are bought out at a 2-5X+ valuation, investors would likely be missing out on the potential of the 100X+ return truly required to make it worth it.
For that reason alone, I will probably not be investing in this deal; however, it doesn’t mean it can’t still be an investment others decide to make, especially if you believe that the founding team wouldn’t exercise those rights in such a situation (but if that’s the case, why would they include it at all?). FYI – I have invested in a few SAFEs in the past that had repurchase rights, but now I scrutinize those deals much more closely and tend to avoid them for the above reasons.
Having these rights on the Common Stock/Tokens is something I haven’t seen as much…it seems to me that including these repurchase rights mis-align incentives between the founding team and early investors.