Lemhi Ventures’ Tony Miller could be called “Mr. Disruptive.”
David Brewster, Star Tribune
Of his work at Lemhi Ventures, Tony Miller says, “There is no better organizational model for disruptive change than venture capital.”
David Brewster, Star Tribune
Over the coming weeks, Honing the Edge will profile four people whose skills and backgrounds are needed to launch a successful start-up: the Inventor, the Entrepreneur, the Venture Capitalist and the CEO. Today, we look at Tony Miller, a venture capitalist and founder of Lemhi Ventures.
Money is his weapon of choice
- Article by: THOMAS LEE
- Star Tribune
- March 24, 2011 - 9:10 AM
John Feikema was stumped.
Normally, the CEO of a start-up would seize the opportunity to lobby a venture capitalist for money. But Feikema, CEO of Minneapolis-based VisionShare, viewed his 2006 meeting with Tony Miller as simply a "casual update."
VisionShare, which makes technology that allows hospitals and doctors to securely transmit information to Medicare over the Internet, had just completed a round of financing and didn't need more money. Or so he thought.
"Tony asked, 'So how much do you want?' " Feikema said. "I said, 'Uh, we are just closing a round. Our current business plan suggests we don't need any more. We are doing fine.' "
Miller replied: "I think [you're] undercapitalizing the business. I think there is a lot more opportunity. Everything that you told me suggests that, if you don't move fast, you are going to leave opportunity on the table."
"That was not what I was anticipating," Feikema said. Within two months, Miller had joined the VisionShare board and the company got more venture funding.
Doing the unexpected has become a trademark Tony Miller move.
The founder of Definity Health and Carol.com has consistently demonstrated a knack for upsetting convention or, to borrow one of his favorite verbs, "disrupting" the status quo.
Over the years, Miller, a 41-year-old native of St. Paul, has established himself as one of the nation's leading proponents of consumer-driven health care, the idea that consumers -- armed with detailed information and the right financial incentives -- should purchase health care the same way one might shop for a car or a pair of shoes.
Through Excelsior-based Lemhi Ventures, Miller the entrepreneur has become Miller the venture capitalist, a position that affords him the time and resources to accomplish loftier goals.
Most VCs want to make money; Miller wants to save health care in the United States by blowing it to smithereens. Call it ego. Call it hubris. Miller doesn't seem to mind.
"The space could use more of what I call 'swashbuckling VCs' [who] are willing to toe the idiocy line a bit," Miller said. "Not that I want to trip over that line. We do stuff that most other funds say, 'That looks crazy.' "
Blunt, even intimidating
People who know Miller describe a driven man whose intelligence and bluntness can border on intimidation. While polite, Miller seems biologically incapable of wasting time, especially on people who are unprepared or ill-informed.
"Tony is extremely blunt and demanding," said Kyle Rolfing, CEO of Minneapolis-based RedBrick Health, who worked with Miller at Definity. "But you can go toe-to-toe with him. He's not trying to be intimidating, but his passion can be confused as intimidation if you don't know him."
Miller says his interest in health care was incidental. He was a premed undergraduate at St. Olaf College, but only because his older sister, Marianne, was doing the same thing. While studying for a master's degree at the University of Illinois, Miller took a public health class and got hooked. After stints at UnitedHealth Group Inc. and Deloitte consulting in Chicago, Miller said he realized the U.S. employer-based health care system was fundamentally flawed.
"Everyone talks about how health care is broken," Miller said. "Unless we actually change design [of delivery], all of the stuff we talk about is just noise. ... What's really frustrating for me, working with employers, is that employers are always talking about [health benefits as] their money," he continued. "I would be sitting there saying, 'No, no, it's not really your money. It's really a proxy for compensation that you have promised this individual.' "
The solution, Miller thought, was to empower consumers to take charge of their health care decisions. Along with Craig Swanson, Miller founded Definity Health in 1999, which introduced the nation's first health reimbursement and health savings accounts. Individuals pay their own medical bills from the accounts before insurance takes over.
"Tony was clever to do something revolutionary, but works within the confines of the system," said Stephen Parente, an associate professor of finance who has studied consumer-driven health plans for the Carlson School of Management at the University of Minnesota.
UnitedHealth bought Definity for $300 million in 2004. But Miller wasn't done disrupting the nation's health care system. To effect real change, Miller founded Lemhi to fund companies that he hopes will replace the current business models of entrenched health care companies.
"There is no better organizational model for disruptive change than venture capital," Miller said. "You literally start with a white board and say, 'Here is something that is broken. Wouldn't it be cool if we could fix it by doing it x, y and z?' "
Ryan Phelan, CEO of DNA Direct, the San Francisco-based company that sells DNA information, says she sought Miller out because of his maverick reputation.
"When you hear someone's name a couple of times, you think, 'That's someone I think we should find,' " Phelan said. "Tony is truly not risk-averse. ... He's always 10 steps ahead."
A venture capitalist's job is to nudge entrepreneurs into reimagining their businesses, Miller said.
"We stayed in touch with [VisionShare's Feikema] over a six-month period of time," Miller recalled. "We got to the point when we looked at the business, the most important question we asked -- and which really stopped John -- was: 'What would you do if someone gave you $10 million? How would you invest $10 million to grow this business?'
"His first reaction was, 'I don't know what I would do with $10 million,' " Miller continued. "To us, that was the problem. Because, as a CEO, you should be thinking, 'If I had $10 million, what would I do with this business?'
"You have to disrupt the way they see the company, because they are so close to it. To jump-start the disruptive process is the real value a venture capitalist can provide."
Thomas Lee • 612-673-7744
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