Longworth Venture Partners Blog

With the news of Sermo’s $27M in third round funding it was a perfect time to update you on Sermo’s progress and success with some Q&A with Sermo’s CEO and Founder, Daniel Palestrant.

Q: Did you find it challenging to introduce such an innovative and dynamic technology to a profession that is used to hand-writing patient charts and only interacting with colleagues in their own hospital or specialty area?

Daniel: Trying to get physicians on-line and engaged has long been a holy grail for the technology and venture capital communities. There is a long, very impressive list of companies that have tried and failed to “crack the code”. With over 20,000 physicians Sermo is now the largest on-line physician community ever, making us one of the few “successes” in this regard, but an early success at that. In our case we have benefited from a very talented team of developers, a talented management team, and a very active and involved board of directors. However, I would not want to underestimate the role of luck in all of this.

When Longworth first invested in Sermo is was little more than just an idea. In fact that’s all it was, me and some PowerPoint slides. The diligence process was much more of a long working session to feel out the strengths and weaknesses in the Sermo concept. While this was a much more involved and time intensive process than other potential investors were pursuing, it was mutually beneficial for me and the Longworth team. In the end, we were able to convince ourselves (and each other) that there was enough “right” about the idea that it was worth pursuing.

As Sermo moved from concept to execution, there was much that changed in the opportunity, evolving from a straight information arbitrage to an on-line community. The fact that our physician members were pointing us in this direction made it a very easy decision. We did not have to convince physicians to do anything, or necessarily change their ways. We had only to listen very carefully to what they were saying and act upon it. It is at that moment that so many companies, management teams, investors, or boards fumble. In our case, we have been fortunate enough to have people at each of those levels that were engaged enough so that when those opportunities presented themselves, we could seize upon them.

Q: What is one of the most powerful examples of doctors accomplishing more by collaborating than they could have done alone?

Daniel: The examples are almost too numerous count. There are literally hundreds of posts that hit the site a week. However, the two posts that have been the most powerful, and emotional for me as a physician, were in some ways the most simple. The first post involved a patient who presented with a buzz saw blade embedded in their hand. The patient was ultimately seen in the ER and treated in the OR, however, the treatment course was an interesting dilemma because the blade was serrated in one direction and angled in the other direction. Removing it in either direction could cause significant tissue damage. After the patient had been treated in the OR, a physician posted this “puzzle” of sorts to the community along with a photograph of the impaled finger. In just a matter of hours, there were dozens of responses and comments. However, later that day, a doctor posted a “trick of the trade”, that described a way to slit a drinking straw, and use it as a “shoe horn “of sorts. This meant that the blade could be removed with little or no additional damage, probably at the bedside in the ER. Think of that. Those are the sorts of “pearls” that very dramatically impact day-to-day patient care. That sort of information would never have a home in a text book, a journal, even the web. It is now part of the fully searchable corpus of knowledge that Sermo is rapidly assembling.

The other case involved a proverbial “needle in the haystack” diagnosis. A patient came to their physician with a complaint that their lips had been “burning” for months. Thinking that this was a run of the mill contact dermatitis, the physician ran through several different combinations of anti-inflammatory medications. On a hunch, the physician logged into Sermo and described the clinical situation. Sure enough, one of the physicians who read the post noticed that the patient was on an anti-seizure medication. The consulting doctor asked if there was any chance that the patient had switched from the brand name to the generic form of the drug, because there were some rare reports of this side effect. Guess what?….problem solved.

Q: In what ways do you foresee Web 2.0 technologies, like Sermo, changing the medical profession?

Daniel: Healthcare is an inherently collaborative undertaking. Not only do physicians benefit from each other’s insights, the aggregation of collective knowledge allows the entire profession to advance, and with it, the quality of patient care. Indeed, this is why journals and medical societies were originally created. Today, however, medicine is increasingly out-patient. As physicians spend less and less time in the hospital and more and more time in the office, the usual places for discussion have disappeared, and with them, the opportunity for physicians to benefit from each other’s knowledge. In that regard Web 2.0 technologies, and all of the social media plays re-enable this exchange of information. So Sermo definitely is changing medicine, but in some ways, the more they change, the more they remain the same.

Q: Are there any measures in place to verify the authority of specific postings by physicians to ensure that only accurate information is shared with the community?

Daniel: Social media in general and Sermo in particular use a different paradigm from conventional editorial oversight. On Sermo, the validity of information is based on its degree of corroboration in the community. While the barrier for someone to post something is very low, the community is able to render an opinion and insight on that posting with incredible speed and consistency, ultimately making a very effective screening mechanism. In many ways, though, this is similar to the peer review method that medicine has been using for hundred of years. The main difference is that the peer review process is taking minutes, rather than months and is tapping into the collective insights of literally thousands of people, rather than a select few. With this said, however, it is important to note that Sermo goes to great lengths, through our physician authentication/credentialing process and our rating/ranking process to help the community surface the most valuable information.

Q: Have you considered launching additional interactive communities in other professional fields? If so, which ones and why? If not, why not?

Daniel: Sermo’s technology, business model, intellectual property, even our branding would be easily transferable into other verticals. Indeed we have had several parties approach us about taking Sermo into other verticals. Having said this, healthcare is the largest industry in the country. We increasingly have a commanding lead in terms of penetration into the physician community, yet there is plenty of untapped opportunity, both in terms of bringing new resources to the physicians and finding ways to build value around that community. Sermo’s biggest challenge is prioritizing our opportunities and staying focused. For now, the plan is to stay absolutely intent on the physician community.

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