Alternatives for RIAs New Co

Mission

Empower RIAs with the tools to invest in alternatives. By automating vital tasks such as capital calls and document processing as well as facilitating portfolio curation, client communication, and access to various alternative investment types, we strive to become RIAs' comprehensive platform for alternative asset management.

Product

The master plan is broken down into four steps. I have validated steps 1 and 2 and have yet to fully validate steps 3 and 4.

1. Become the digital admin for private investments: Recognizing the struggles that RIAs often face in managing the 10-12 different point solutions they typically use, we sought to solve this problem by focusing on data integrations with an emphasis on alternative investments. Managing alternatives today involves a complicated jumble of hundreds of data sources, daily emails, manual data reconciliation, a decentralized tax process, and manual reporting. We saw this as an opportunity to streamline and simplify. Our first step is to provide seamless data integrations, with a focus on automating and predicting capital calls, document processing, and data ingestion. We transition RIAs from a fragmented system to a unified platform - one daily digest, automated data checks, a digital tax list, and digital reporting and integrations. In essence, we become the digital administrative hub for private investments, significantly simplifying the management process and enabling RIAs to focus more on their core responsibilities. I have validated that current offerings currently charge large RIAs over 7 figures to provide some of these features. The high cost positions these offerings as some of the most premium-priced point solutions in the wealth management stack.

2. Provide access: The second phase of our strategy provides access to alternative investments - encompassing real estate, venture capital, private equity, and private credit - while deploying LLMs as a critical enabler. The use of LLMs is central to our approach, enabling us to curate alternative portfolios and furnish RIAs with a powerful tool to articulate alternative offerings to their clients. Information about alternatives is typically more qualitative than quantitative. This qualitative nature of alternatives data can make it more difficult for clients and RIAs to understand and evaluate. Explaining the intricacies of a venture capital firm's portfolio of startups, for example, can involve delving into a wide range of industries, technologies, and business models. Similarly, assessing a real estate investment might require understanding local market conditions, property development plans, and regulatory issues. 

Our initial approach will bundle existing private alternative access providers, such as Moonfare, CAIS, iCapital, and Allocate, based on our validated understanding that these companies are open to this arrangement and see value in us as a channel partner. Ultimately, our goal is to vertically integrate these services and facilitate access ourselves in addition to launching our own funds and liquidity solutions in order to further capitalize on carry while aggregating investor capital into a single vehicle to ensure a smooth process for fund managers. The result: a unified platform for RIAs to manage all their alternative investments, curate customized portfolios and streamline client communication.

3. Enable RIAs to become their own mini banks: Our third step aims to transform RIAs into comprehensive financial service providers, akin to their own mini banks. Recognizing the trust that clients often place in their wealth managers, over their traditional banks (just 28 percent of the millennial and Gen Z generations trust their banks), we see an opportunity to extend the RIAs' service offerings. This expansion encompasses a range of lending products, including personal loans, home equity loans, auto loans, and more, alongside insurance products such as life, car, and home insurance. We envisage achieving this either through white-labeling an underlying banking provider and empowering RIAs to offer these services directly, or by offering products from other banking providers in a marketplace model. Although fiduciary responsibilities present a potential challenge in this realm, our initial validation suggests viable workarounds exist, opening the door for RIAs to deliver a more holistic and trusted banking experience.

The retreat of banks and nonbanks from mortgage lending due to increased risk aversion and liquidity constraints has left a gap in the market that RIAs could potentially fill. This shift in the financial landscape presents a tailwind for RIAs to expand their traditional services and offer lending and insurance products, which were previously dominated by banks. With their client-centric approach and focus on long-term financial planning, RIAs could provide personalized loan services to their clients, thereby diversifying their business model. This opportunity is contingent on RIAs ensuring adequate liquidity to manage associated risks, but the current market conditions indicate a growing need for such services, providing a unique expansion opportunity for RIAs.

4. Become a next gen turnkey asset management program (TAMP): As our final step, we aim to consolidate the various point solutions in the wealth management tech stack to become a comprehensive TAMP. In contrast to traditional TAMP models, our revenue will be driven solely by transaction fees on the platform, not asset-under-management (AUM) based fees which normally hover around 0.1% - 0.5% for TAMPs. Anticipating fee compression in the coming years, we foresee our new business model, which also encompasses alternatives management, rapidly gaining traction. The scope of our TAMP will cover the gamut of wealth management services, including portfolio and performance reporting, CRM, portfolio modeling, rebalancing, direct indexing, trading, billing, financial planning, client portal management, aggregation, compliance, document management, workflow, and proposal generation. This holistic approach positions us as a single, integrated solution for wealth management, streamlining processes for RIAs and their clients.

Market

Despite alternatives gaining traction, most global savings are scarcely invested in these assets, with the average wealth advisor allocating just 0-4% of their portfolio to private investments, largely due to resource constraints and limited accessibility. Representing less than 10% of public markets, private markets ($12T global private markets AUM) remain a largely unexplored, yet expanding, opportunity.

Broader Market Opportunity:

• 6k+ RIAs

• 11k+ family offices

• $90T+ in global private wealth

• 15% yearly total asset growth of RIAs despite the rise of robo-advisors

• $90T * 0.5% (average TAMP fee) = $450B market size

Targeted Go To Market:

• 10% of advisors that are independent as opposed to bank affiliated managers (e.g. Morgan Stanley Wealth Management) and large institutional advisory practices (e.g. Edward Jones).

• $285M avg firm AUM

• $10T AUM * 0.5% (average TAMP fee) = $50B market size

Why Now?

• The private markets are increasing in size and are projected to increase to $15T by 2025 (5x increase since 2003)

• The number of publicly traded companies has reduced by 40% over the last 20 years. Companies are staying private longer.

• The number of qualified LPs has increased by 5x over the past decade and $3T of retail capital is expected to move into alts by 2025

• LLMs provide an unprecedented solution to help curate alternative investment portfolios and articulate offerings to RIAs and their clients

Competitors

Existing companies tend to focus either on providing access to investments or solely on document processing for alternatives (we have reason to believe that the technology behind document processing for alternatives can be easily replicated and offered more affordably). A firm that combines both these services and ultimately broadens its scope to evolve into a next-generation TAMP could carve out significant market share.

• The Coaterie: Limited integrations to the rest of the wealth tech stack. Only supports access to venture funds.

• iCapital: Only supports funds they facilitate access to. Limited integrations to the rest of the wealth tech stack.

• Opto Investments: Only supports funds they facilitate access to. Limited integrations to the rest of the wealth tech stack.

• Moonfare: Only supports funds they facilitate access to. Limited integrations to the rest of the wealth tech stack. Only supports private equity and venture.

• Arch Labs: Solely document processing for alternatives. Does not facilitate access. No automated capital calls.

• Canoe Intelligence: Solely document processing for alternatives. Does not facilitate access. No automated capital calls.

• Allocate: Only supports funds they facilitate access to. Limited integrations to the rest of the wealth tech stack. Only supports venture funds.

• Juniper Square: Does not serve wealth managers.

• CAIS: Only supports funds they facilitate access to. Limited integrations to the rest of the wealth tech stack. Does not support venture funds.

• Cadre: Only supports funds they facilitate access to. Limited integrations to the rest of the wealth tech stack. Only supports real estate.

• Percent: Only supports funds they facilitate access to. Limited integrations to the rest of the wealth tech stack. Only supports private credit.

Risks / Objections:

1. Wealth managers are not going to exist in the future

Wealth managers will continue to play a crucial role in the financial landscape. Despite the rise of robo-advisors, the human element of wealth management has seen annual growth exceeding 15% over the last decade, reflecting the ongoing demand for professional advisory services. Most clients, particularly those with considerable assets, still value and seek this personalized guidance. Furthermore, we envision that wealth managers will increasingly serve as the conduit for clients affluent and above (see appendix figure 1) to access banking services such as loans and insurance, further solidifying their relevance in the future of finance.

2. RIAs are price sensitive. There isn’t room for a new entrant to charge an AUM fee

We agree. Our business model centers around charging transaction fees on alternative investments in addition to carry in the funds we facilitate access to which makes us financially aligned with both fund managers and RIAs.

3. Financial advisors are tech-phobic and difficult to sell to

• 77% RIAs cite automation and digital capabilities as their biggest need in the next 5 years

• 61% of advisors still spend at least 40% of their time on investment management activities

• 78% of clients who cite use of technology as a key factor in choosing or leaving their advisor

• Easily got in front of RIAs during customer discovery and already received 7 figure pilot opportunity (soft commitment)

4. Alternatives are going to stay a velvet rope

Private equity firms have already become fairly commoditized. We see this given their focus on targeting private wealth and through their swift scaling of AUM. Total private markets AUM reached $11.7T as of last year and has grown at an annual rate of nearly 20 percent since 2017. For reference, Blackstone alone manages $881B with $241B coming from the private wealth channel (partnerships with financial advisors). Venture will most likely go this route as well. Early indicators may include A16Z, Tiger Global, Softbank, etc.

5. There is not a clear AI use case

Given their proficiency in curating alternative portfolios and explaining complex alternative investments, LLMs can serve as an invaluable tool for RIAs, aiding in both client communication and their own understanding. The nature of data in the realm of alternative investments is predominantly qualitative, encompassing narrative and descriptive elements about a company's business model, market dynamics, management team, and growth strategies, among other factors. Such qualitative data can be challenging for clients and RIAs to decipher and evaluate. Considering that most RIAs have minimal investment in alternatives (with an average allocation of under 4% and many having no allocation at all), LLMs could have a significant impact in broadening investment in alternatives. Additionally, these models can help elucidate macro trends and monitor news proactively. They can serve as a client-facing tool providing round-the-clock responses to queries, and their training can be tailored to include internal firm documents and intelligence for enhanced context understanding. LLMs can also contribute to compliance efforts (e.g. monitoring internal emails).

6. This is just not that interesting

This approach has the potential to fundamentally transform how individuals interact with essential banking services. By enabling RIAs to offer services like investment management, loans, and insurance, we're reshaping the traditional banking model. Rather than dealing with a bank, customers would engage with their trusted wealth managers for a range of financial services. If we validate this, it signifies a paradigm shift in how we interact with banking services - moving away from traditional banks towards a more personalized, trusted, and integrated experience with RIAs (it's important to clarify that our approach is primarily geared towards clients with more significant holdings).

7. There are too many competitors

While it may seem like there are numerous competitors in the space, it's important to note that many of these entities are more accurately defined as point solutions. Initially, our strategy is to bundle these solutions, offering a comprehensive suite of services to our clients. Over time, we plan to vertically integrate these services, adding value and reducing complexity for our clients.

Additionally, there exists a largely untapped niche: going directly to consumers who are currently managing alternatives on their own without the assistance of a wealth manager. This approach could extend the reach of our services, although it's worth noting that direct-to-consumer finance products in the investment management space have historically faced challenges. Hence, while this is a potential avenue, our primary focus remains on enhancing and simplifying the experience for RIAs and their clients.

Appendix

Figure 1

Figure 2

Hermes Health

Mission

Develop mobile healthcare units with diverse capabilities to bring healthcare services directly to people in their communities. Increase healthcare access by bringing care closer to patients.

Objectives Over Next Four Months: September 2022 - January 2023

1. Product. Construct our first mobile laboratory van. Start offering basic blood tests using the Piccolo Xpress and initially operate as a D2C lab testing company. Develop a relationship with local laboratories to run more comprehensive tests.

2. Development. Define a plan to outfit sprinter vans with laboratory equipment that meet CLIA standards. 

3. People. Assemble a high caliber team of lab technicians, software engineers and hardware engineers to design and outfit lab testing sprinter vans.

4. Operations. Develop mobile lab operating standards to ensure the accuracy of our tests and the safety of our technicians.

5. Financing. Raise a $2M seed round to purchase a sprinter van and lab testing equipment as well as hire the requisite staff.

Tentative 2-year Plan

Following the launch in January 2023 we plan to achieve the following objectives:

1. Product. Develop a fleet of ~10 mobile laboratory vans and a series of X-ray and MRI capable vehicles. Launch our mobile primary care service which provides primary care office visits in our mobile healthcare units.

2. Partnerships. Strike partnerships with local labs and mail order pharmacies to process rarer lab tests and provide pharmacy services to our patients respectively. 

3. Sales. Target a $5M run rate from our consumer division. Partner with at least one payer and sign deals with at least three self-insured employers to offer Hermes as an employee health benefit.

4. Operations. Hire a high caliber team of software engineers, sales reps, interior designers, hardware engineers and medical practitioners (doctors, phlebotomists, nurses, etc.). Aim to grow the team to 30 by the end of the first year and 60 by the end of the second year. While our initial team of medical practitioners will be full time employees, we may look to hire additional staff on contract as demand increases. 

5. Financing. Raise a $15M series A round to fund the purchase and development of mobile healthcare units, purchase equipment and hire the requisite staff among other expenditures. 

Problem

The healthcare industry faces a large noncompliance issue. It has been reported that 40% of patients do not accurately follow recommendations and when a treatment requires a more complex set of steps, the noncompliance rate can jump to 70%. 

There are many barriers to care patients face today which contribute to noncompliance: 

• 53% of low-income adults don’t trust healthcare

• 20% of patients are put off by high healthcare costs

• 25% of patients lack proper transportation to and from medical appointments with longer distances correlated with lower healthcare utilization

• 11% lack proper insurance coverage

• Several patients highlight social isolation, racial, language and cultural barriers

As a result of these barriers, several underserved communities rely on mobile healthcare units. While current mobile healthcare infrastructure attempts to serve these patients, the majority of funding for mobile clinics is philanthropy driven which presents an obstacle for scaling these services and keeping them updated with the latest technology. 

Product: A Mobile Healthcare Fleet

Mobile healthcare has typically been reserved for the underserved. In addition to operating with the financial support of healthcare systems and philanthropic organizations, mobile healthcare providers deliver care in a manner that is more intimate while creating an environment of trust, inclusivity and cultural acceptance that is often lacking in the traditional healthcare system.

Mobile healthcare has been shown to improve health outcomes and reduce costs. Moreover, data supports the fact that healthcare is coming back to the home regardless of one’s socioeconomic status:

• Hospital admissions are trending down across all age cohorts

• In-patient services are expensive and hospital stays can be risky with a significant number of preventable hospital deaths

• Better and cheaper alternatives to in-patient care exist

Hermes is creating a fleet of mobile healthcare vans which aim to service a variety of specialties in order to drive adoption for mobile healthcare. See Appendix A for an example of a mobile healthcare unit. We believe that the mainstream introduction of mobile healthcare units will increase healthcare access, improve health outcomes and reduce costs as is seen in previous studies.

While we plan to start with mobile lab testing vans, we eventually intend to service mobile primary care, dentistry, optometry, X-ray and MRI services among other specialties. Combined with the fact that healthcare tools are continuously getting smaller (e.g. Butterfly ultrasound, Hyperfine MRI machine), up-scale mobile healthcare units have already shown to be efficacious. For example, Carbon Health and Kindbody have implemented mobile healthcare units to increase access to their services.

Our mobile units will be able to swiftly relocate to different communities with the goal being to place primary and specialty care within walking distance for the majority of the country. Patients will be able to easily book an appointment on their mobile app and find a mobile unit nearby. Hermes mobile units will initially be staffed with phlebotomists who will administer diagnostic tests which patients can order directly through our mobile app or redeem via a referral from their physician. While we plan to start with mobile lab testing, we intend to launch a series of increasingly complex healthcare specialties. The following is a tentative list of our proposed mobile healthcare services in the order we intend to launch them:

• Lab testing

• Primary care with ultrasound capabilities

• X-ray with mammography capabilities

• MRI

• Optometry

• Dentistry

Summary of Key Competitive Advantages

• Able to service multiple specialties

• Mobile units provide easier access to care and encourage more frequent visits

Market: Mobile Healthcare

According to research by Malone et al. there are an estimated 1500 to 2000 mobile clinics nationwide, servicing 5.2 to 7 million visits each year. Most patients include women (55%) and ethnic minorities (59%) with the majority of patients being either uninsured (41%) or on public insurance (44%). Not surprisingly, the most common service models for mobile healthcare are primary care (41%) and preventive care (47%). 

According to Pew Research, ~18% of Americans live more than 10 miles away from a hospital while 24% live between 5 and 10 miles away. Hermes aims to provide primary and specialty care that is within 10 minutes walking distance for the majority of the country which rivals the median distance of 0.9 miles to the nearest food store. 

As explained further in the business model section of this plan, Hermes aims to work with payers and employers to provide easily accessible healthcare for their members and employees respectively. Before doing so, we plan to refine our service through a direct to consumer offering which we will further leverage to gather the requisite data to prove the effectiveness of our services. We plan to launch our D2C offering in northern Plains states given that residents of those states have the longest travel time to the nearest hospital (16 minute drive) and aim to target families with small children who would benefit from easier access to healthcare services. Other initial target demographics could include younger millennials with disposable income who wouldn’t mind receiving healthcare on the go as well as seniors who would otherwise skip a trip to the lab or doctor given the traveling involved. 

While our goal is to initially target higher paying customers such as private insurance organizations and self-insured employers, we eventually plan to work with Medicaid and local communities to reach the underserved. Doing so will require us to refine our offerings and prove the effectiveness of our mobile units which we plan to accomplish through working with higher revenue generating customers. We aim to target partnerships with organizations such as CityBlock Health in order to reach this $600B + Medicaid market.

Competitors

Several mobile healthcare solutions exist with the most notable competitors being home health agencies. Companies such as Heal and Dispatch Health offer at-home primary care while companies such as Sprinter Health and Luna offer at-home specialty point solutions (at-home labs and physical therapy respectively). 

While house calls certainly make it easier for patients to receive healthcare, the service is inefficient from an operations standpoint. It’s easy to understand why having patients report to a centralized facility is more efficient than a doctor, nurse or phlebotomist going door to door. Hermes aims to strike a balance and give patients the benefit of easy to access in person healthcare and also allow healthcare providers to see patients at a higher throughput.

Furthermore, home health companies are limited in regards to the different specialties of care they can offer given the expensive nature of certain pieces of medical equipment. It’s not surprising that house calls for X-rays, dentistry and optometry are few and far between. Hermes plans to outfit mobile healthcare units for a wide range of specialties while achieving similar throughput to brick and mortar clinics.

Business Model

In an effort to service a consistent amount of visits, Hermes plans to do business with employers and health plans. This is similar to One Medical’s business model which focuses on the enterprise market and leverages B2B contracts to ensure a consistent stream of revenue. We plan to charge a monthly out of pocket membership fee in addition to per visit fees which can be covered by insurance. Companies and health plans would either cover the monthly membership fee or subsidize it for their members. The proposed evolution of our business model is as follows:

• Launch as a direct to consumer cash pay offering to refine the service and collect the necessary data to prove cost-savings and increased health outcomes

• Pivot into the enterprise market and offer Hermes as a health benefit to employers in addition to partnering with health plans to get our services covered by insurance

• Expand into the Medicaid market and take on risk based contracting (value based care)

It should be noted that in addition to operating as a traditional tech enabled clinic network, Hermes mobile healthcare units could also serve as an extension of existing telemedicine providers. Telehealth companies interested in extending in person services to their patients could send patients to our mobile units to receive services such as lab work, vaccines and biometric data collection among other services. While this may sound lucrative, adoption of home health services by telehealth providers has been lackluster as can be seen by the recent shutdown of Workpath, an at-home healthcare subsidiary of Ro. Therefore, such business will be approached with caution if at all.

Team

Hermes will require a mix of mechanical engineers, interior designers, software engineers, and a sales team with experience selling to employers and health plans. We plan to target One Medical, Carbon Health, Heal and Forward Health among other next generation primary care startups for an initial talent pool.

Vision

We envision a world where most individuals can easily walk to in-person primary and specialty healthcare. In addition to closing gaps in care and boosting health outcomes, increasing access to care will encourage more frequent interactions with healthcare products and services which will lead to increased health data collection. With the average person in the U.S. visiting their primary care physician once every 1-3 years if at all, one’s healthcare data is more like a snapshot than a movie which comprises thousands of frames. Collecting more data will allow us to predict future health trends far before they happen and stitch together a more complete view of one’s current and future health. Coupled with advances in omics technologies (gene sequencing, microbiome sequencing, biometric monitoring, etc.), we anticipate an explosion in the amount of health data collected for each person in the coming decade and plan to situate ourselves in the middle of this health data revolution.

Anticipated Financial Expenditures September 2022 - January 2023

Salaries ($260,000)

• Software engineers (2 people at $12,500 / month + benefits)

• Marketing lead ($12,500 / month + benefits)

• Interior designer ($12,500 / month + benefits)

• Phlebotomists (3 people at $5,000 / month + benefit)

Rented mobile lab van ($6,000 / month)

Rent & Utilities ($20,000)

G & A - including travel and legal ($25,000)

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Total Expenses: $329,000 

Appendix A

Source: Forbes

Appendix B

Source: Mobile Health Map

Independence Health

Mission

Enable digital health companies to grow and scale through invoice factoring. Make the process of billing insurance and managing accounts receivable (AR) easier.  

Objectives Over Next Four Months: September 2022 - January 2023

1. Product. Start servicing 1-2 digital health companies by advancing claims with our own funds (~$100k) to better understand how invoice factoring works.

2. Tech. Bring the initial trading platform to market. Develop a preliminary risk score prediction engine that leverages prior claims data.

3. People. Assemble a team of engineers and marketers to lead the company through its rapid growth.

4. Financing. Raise 3M seed round in order to complete the trading platform, hire the requisite staff and provide liquidity to the nascent trading marketplace. 

Tentative 2-year Plan

Following the launch in January 2023 we plan to achieve the following objectives:

1. Trading Volume. Issue $100 million annually to our set of healthcare clients and achieve an annual trading volume of at least $70 million.

2. Operations. Hire a high caliber team of software engineers, marketers, sales reps and financial analysts. Aim to grow the team to 15 by the end of the first year and 50 by the end of the second year. 

3. Financing. Raise a $15M series A and a $50M debt instrument in order to support our growing team and provide liquidity to our growing exchange. 

Problem

Healthcare providers and digital health upstarts face a problem with their accounts receivable. Dealing with health insurance claims reimbursement is a headache for most of the healthcare industry given that it takes payers ~60 days to fully pay out claims with only around 70% of claims being reimbursed. This creates an accounts receivable problem for healthcare companies that want to scale given that they need a dependable source of cash to spend on a myriad of expenses such as malpractice insurance, marketing, payroll, EMR technology as well as unexpected costs. 

Product: Trading platform for healthcare accounts receivable 

Independence Health is building a trading platform for healthcare accounts receivable that is based on invoiced claims to health insurers. We allow healthcare businesses to advance their claims and reliably receive money up front while investors get exposure to the cash flow these businesses generate. Said another way, we turn one’s accounts receivable into a tradable asset which healthcare companies can sell to investors eager to earn stable and reliable yield. Our exchange driven financing platform works as follows: 

1. Clients send us the claims they wish to trade

2. Independence Health calculates a risk score based on one’s prior reimbursement history

3. Investors competitively bid on bundles of claims

4. Clients receive instant payout of insurance claims

5. Following proper reimbursement from payers, investors receive payout and earn yield. 

We intend to primarily service digital health upstarts across the telehealth, pharmacy and medical device verticals as there has been a tremendous amount of growth in the digital health industry as can be seen by the over 1,000 full stack digital health companies that have come to market in the last three years alone. While instant payout solutions have existed, they have been reserved only for larger groups and have not been made available to healthcare upstarts.

A trading platform allows us to use the power of the open market to drive competition amongst bids and give our clients the best rates. Our flywheel continuously improves our business over time and works as follows: 

• Lower interest rates encourages investors to seek yield elsewhere which leads to more bids on our marketplace

• More bids leads to more competitive pricing

• Better prices allow Independence Health to be more competitive amongst alternative funding sources

• This leads to more healthcare clients trading their AR through our platform

• More clients leads to more trading volume and builds trust in our new asset class 

We eventually plan to offer additional services such as patient billing, coding and credentialing to further help our clients deal with accepting insurance.

Summary of Key Competitive Advantages

• Instantaneous payout of claims

• Exchange flywheel drives more bids, better prices, more clients and more liquidity

Market: Healthcare Factoring

The company intends to focus initially on servicing digital health companies and traditional healthcare providers. We expect to see rapid growth particularly in our digital health customer base given the growth the industry has achieved to date (27% CAGR, $176B market size). In fact, over the last three years, there have been over 1,000 full stack digital health companies that have come to market.

Currently, the global factoring market size amounts to ~$3B. We expect this number to grow substantially given the flywheel explained above and the expansive $5T healthcare reimbursement market we service.

We plan to initially focus our efforts on digital health companies that already accept insurance (e.g. One Medical, Teladoc, Dr. On Demand, MDLIVE, etc.) before attempting to work with those that do not currently accept insurance.

Competitors

There are several traditional healthcare factoring businesses that exist today. Xynergy and PRN are two of the larger companies offering healthcare factoring services. Such businesses leverage their own capital to purchase AR. 

Instead of operating as a traditional healthcare factoring business, Independence Health plans to launch an exchange where investors can competitively bid on AR deals. In addition to providing clients with the most competitive rates driven by an open market, our flywheel allows our model to continuously improve over time driving more investors, better prices and more trading volume. While we intend to initially provide liquidity to the marketplace with our own funds, we eventually plan to transition towards a pure exchange driven approach.

In addition to our exchange model, Independence Health leverages software to automatically approve and assess the risk associated with a specific client. Instead of waiting a couple of days to get approved from traditional healthcare factoring providers, Independence Health leverages its internal risk prediction engine and various EMR integrations to instantaneously approve clients and allow them to trade their AR immediately.

Business Model

Independence Health operates an exchange for healthcare AR. Instead of charging factoring fees as is commonplace in the factoring industry, Independence Health charges both the investor and healthcare client a 1% fee per transaction. 

We plan to upcharge users for additional features such as patient billing and credentialing in the future.

Team

As can be seen from similar businesses such as Pipe, AR trading ventures require a significant capital investment. Therefore, the team should be equipped with leadership proficient at fundraising. We plan to target Cedar, Kareo, Oscar, Athena Health, Clover, Bright Health, Devoted Health among other digital health finance and insurance companies for an initial talent pool.

Vision

Digital health companies are increasingly shying away from accepting insurance given the laborious process involved with credentialing, billing and managing AR among other difficulties. While our initial goal is to help users manage their AR, our ultimate mission is to get more digital health companies to accept insurance so that they can more easily service the 297 million Americans that are insured. We envision a future where billing insurance is as easy as operating a cash pay model and seek to develop an ecosystem of features that digital health companies can leverage to more easily accept insurance.

While we could expand past healthcare and operate our factoring trading platform for other industries, we plan to focus exclusively on healthcare for the time being and develop specialized features for various verticals such as the telehealth, pharmacy and medical device sectors. We’ve observed that factoring businesses can be prone to poor management as can be seen by the downfall of Greensill Capital and plan to avoid such outcomes by focusing exclusively on a single industry and hiring a team with expertise across that industry.

Anticipated Financial Expenditures September 2022 - January 2023

Salaries ($300,000)

• Software engineers (5 people at $12,500 / month + benefits)

• Marketing lead ($12,500 / month + benefits)

Factoring Test Run ($100,000)

Rent & Utilities ($20,000)

G & A - including travel and legal ($25,000)

------------------------------------------

Total Expenses: $445,000 

Shaft Technologies

Mission

Decrease the cost of shaft sinking by developing vertical shaft sinking technology and leveraging vertical integration. Enable new space saving applications and engender a new ecosystem for underground habitation. 

Objectives Over Next Four Months: September 2022 - January 2023

1. Product. Rent an existing vertical shaft sinking machine from Herenkeret. Train staff and/or leverage contractors to operate the machine.

2. Project Development. Draft plans for a privately funded vertical shaft project which will be used to showcase possible use cases of our shafts (storage, parking, ventilation, etc.)

3. People. Assemble a high caliber team that is well-versed in construction and tunneling. Recruit high-level mechanical engineering and tunnel contracting expertise. 

4. Partnerships. Develop a partnership with The Boring Company to provide shaft sinking services for horizontal tunneling projects 

5. Financing. Raise $15M seed financing in order to complete the initial shaft project and hire the requisite staff.

Tentative 2-year Plan

1. Sales. Construct 3 vertical shafts (150 feet deep, 12 foot diameter) for a price of $10M per shaft (going rate is ~$50 M).

2. Operations. Hire a full team capable of operating existing and newly developed shaft sinking machines by the end of the first year. Supplant such a team with a staff of ~100 mechanical engineers, software engineers, welders, civil engineers and business development leads. Build out executive org chart similar to The Boring Company.

3. Financing. Raise ~$50M Series A financing in order to support hiring needs. While we plan to turn a profit through contracted shaft construction, we plan to invest heavily in R&D and operate at a loss in order to build better vertical shaft sinking technology.

Problem

Shaft sinking is both slow and expensive. At the moment, shaft sinking progresses at a rate of ~2.7 m per day and can cost upwards of $1M per meter. Putting this in perspective, shaft sinking is 10 times slower than a snail (1 mile per hour) and is around 2x - 5x more expensive than conventional horizontal tunneling projects which can cost upwards of 1 billion dollars per mile. In addition to cost and speed, shaft sinking projects often involve several contractors and subcontracting agencies given that no single company is capable of servicing the entire project.

Product: Vertically Integrated Shaft Sinking

System. Shaft Technologies constructs safe, fast-to-construct, and low-cost vertical shafts to enable new space saving applications and engender a new ecosystem for underground habitation. Primary use cases for our vertical shafts will be parking, storage, sewage, tunnel boring launch shafts, elevators, ventilation and gravitational energy storage. Through vertical integration and improvements in shaft sinking machinery, Shaft Technologies dramatically reduces the cost and increases the speed of constructing vertical shafts respectively. Following the design, build, finance, operate and maintain (DBFOM) project delivery method, Shaft Technologies is able to serve as the sole contractor and maintainer for shaft sinking projects. We plan to build our own custom shaft sinking machines in house and hire the necessary staff to fully complete and maintain projects without the need for external contractors. 

Speed. There are several improvements to the current shaft sinking process we aim to put in place to increase shaft sinking speed: 

• Automated initial excavation

• Simultaneous mining and automated installation of reinforcement segments

• Increase in shaft sinking machine power

• Continuous dirt removal

• Modified cutter design

Cost. We aim to leverage our vertically integrated shaft sinking methodology to reduce cost. Shaft Technologies aims to follow the DBFOM project delivery method and construct our own custom shaft sinking machines and hire the necessary staff to complete projects as opposed to relying on a network of contractors and externally manufactured shaft sinking machines. We also plan to standardize our shaft diameter (12 feet) which will allow us to reuse our shaft sinking machines as opposed to having to purchase or rent custom machines for every project.

Summary of Key Competitive Advantages

• Lowest cost shaft sinking through vertical integration and standardization

• Fastest shaft sinking through custom designed machinery

Market: Vertical Shafts

The company intends to focus initially on existing shaft utilities. Target customers are private companies and public works projects that seek vertical shafts for a range of use cases:

• Tunnel boring shafts ($9B tunnel boring machine market size)

• Elevators ($8B elevator market size)

• Sewage ($282B sewage market size)

• Ventilation ($25.8B ventilation market size)

• Mine Shafts ($144B mining equipment market size)

• Automated underground parking garage ($25B parking lot & garage market size)

  • Appendix A provides a breakdown of the number of parking spaces as a function of shaft diameter and depth

  • Appendix B illustrates an automated parking garage 

• Underground storage and fulfillment ($96B e-commerce fulfillment market size)

• Gravitational energy storage ($211B renewable energy storage market size)

Currently, shaft sinking projects cost upwards of $50M and progress at an extremely slow pace. As a result, several of the above innovative use cases such as automated underground parking garages and fulfillment centers have not been explored. Shaft Technologies seeks to leverage its ability to deliver a significantly cheaper alternative (~10 M per shaft) to attract customers and enable new use cases. As opposed to engaging in conventional marketing, we plan to engage with customers through the traditional bidding process that is commonplace amongst construction and infrastructure projects with a goal of convincing clients to submit proposals with our specific specifications. 

Competitors

Similar to horizontal tunnel boring, shaft sinking contractors rent or purchase shaft sinking machines for each of their individual projects. This leads to an increase in price and operational inefficiency given a lack of vertical integration. Herrenknecht, a German company that manufactures tunnel boring machines is currently the market leader in vertical shaft sinking machinery and rents equipment to shaft projects worldwide. Herrenknecht currently manufactures several types of shaft sinking machinery:

Shaft Boring Roadheader (SBR): Outfitted with a mining drum. Was developed for soft to medium-hard rock. See Appendix E for an illustration.

Shaft Boring Machine (SBM): Outfitted with a disc cutter as opposed to the pencil bits on the SBR. SBM can dig through rock and hard rock. See Appendix F for an illustration.

Shaft Boring Cutterhead (SBC): Outfitted with a conical-shaped cutter head equipped with disc cutters. Can dig through rock. See Appendix G for an illustration. 

Business Model

Initially, we plan to finance shaft projects through conventional methods and receive full payment for completed shafts. For shaft projects that introduce a consistent recurring revenue stream such as an underground parking structure, we may choose to engage in a revenue share agreement with the customer and decrease the upfront cost we charge to construct the shaft. 

Team

We plan to target SpaceX, The Boring Company, Herrenknecht and other prominent construction companies for an initial talent pool. The Boring Company org chart which will serve as a model as we build out our team.

Vision

While our efforts will initially focus on constructing shafts for existing utilities, we envision a future in which there is a vibrant subterranean ecosystem. Living underground conserves heat, protects residents from various natural disasters and may be the safest place to survive an impending climate emergency. Moreover, with 60 percent of the world’s population expected to be living in cities in 2050, it will be necessary to find alternative housing for the 2.5 billion new people who will want to reside in urban areas.

Living underground is not a new concept. In fact, back in 1800 BC, the people of Cappadocia (modern day Turkey) constructed an entire underground city which is still in existence today. In addition to Cappadocia, several nations such as Singapore, Mexico and Finland have already drafted plans for large scale underground business and residential spaces. Appendix C provides an illustration of what a subterranean city could look like although we envision a city made up of a series of vertical shafts as opposed to horizontal tunnels. 

We plan to construct modular housing and business units that can easily be installed once a shaft is dug. Prototype systems already exist in the form of luxury doomsday bunkers. Appendix D depicts an existing underground apartment complex for affluent individuals looking to plan for the apocalypse. The subterranean unit contains its own greenhouse, swimming pool, living quarters, library, school and more. 

Shaft Technologies aims to engender a new ecosystem for underground habitation which we believe will be necessary to preserve our standard of living amidst the increasing threat of climate change and overpopulation.

Anticipated Financial Expenditures September 2022 - January 2023

Salaries ($310,000)

• Construction Crew (15 people at $2,500 / month + benefits)

• Construction Manager ($8,000 / month + benefits)

• Contracting Lead ($8,000 / month + benefits)

• Mechanical Engineer ($8,000 / month + benefits)

• Electrical Engineer ($8,000 / month + benefits)

• Civil Engineer ($8,000 / month + benefits)

Test Shaft - 150 Feet ($5M +/- $1M)

• Shaft Sinking Machine Rental ($500k / month)

• Ancillary Shaft Sinking Equipment such as tanks, power supply, conveyor belts, muck removal, etc. ($350k / month)

• Soft Costs such as EIS/EA, feasibility studies, permits, insurance, finance ($100k / month)

• Permanent material ($150k / month)

• Construction material, temporary works, consumables, etc. ($75k / month)

• Modular underground storage unit ($300k)

Rent & Utilities ($20,000)

G & A - including travel and legal ($25,000)

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Total Expenses: $5.4 M +/- $1M

Appendix A

Appendix B

Appendix C

Appendix D

Appendix E

Appendix F

Appendix G