What to pay attention when investing in a medical start-up.
Knowing that 9 out of 10 of them will fail, and that 75% of companies that have received funding and investor’s trust will never return the money invested?
Financial pressure. So why will there be less money and services will cost more?
It is estimated that the pandemic will cost the world economy between $ 8.1 and $ 15.8 trillion. Every year we set new records in financing medical care. The pandemic will be a catalyst for further increases. Security procedures, limited access to medical equipment, materials, and additional remuneration for overburdened employees of the health care system increase the costs of medical procedures. Moreover, an accelerated course of adaptation to new conditions and the need of rapid and mass launch e-services in order to save operability and secure the revenue stream…. drains the pockets of medical service providers.
So what to expect?
Starting tomorrow … less cash in the system caused by the widespread GDP decline, increasing pressure on operators related to medical procedure costs… and desperation in quick finding magic solutions that will change the healthcare paradigm…
In the long run… further availability of medical services limitation by operators, at least through physical contact with a doctor, further health plan rates increases, in parallel… development and implementation of solutions supporting or perhaps relieving doctors in clinical decisions… at least at the initial diagnostic stage.
Why worse prospects mean better prospects?
The pursuit of effectiveness and cost reduction in the long term may bring other positive solutions, in accordance with the principle: “It is better to prevent than to cure” will lead to education, popularization of prevention and a long-term view of the capital like health. Today, insurers popularize programs of immunization, health check-ups and cancer prevention. However, I am convinced that this is just the beginning of what awaits us in the coming years.
Trust by verify!
Personalizing care by introducing dedicated solutions depending on risk groups – for smokers, obese people, suffering from civilization diseases. Remember, the insurer bears the costs at the end, after all. Assessment of patients’ lifestyle, development of individual activity plans, thanks to digitization and wearables, active support of the insured in achieving health goals, as well as real rewards for reaching them, will change the landscape of the health service in the long term. Perhaps soon the patient’s consent to continuous monitoring by IoT devices will be a reason for a discount in the healthcare plan. Maybe maintaining proper blood pressure and glucose levels will avoid the plan rate increase? Either way, the pandemic will change the landscape of the healthcare system.
It is insanity, to do something over and over again, expecting different results each time. /A.Einstein/
New opportunities have opened up for medical start-ups. Mainly due to the coronavirus and thus the observed explosion of e-services in national health care systems, the rapid introduction which broke the long-standing resistance of the system.
In addition, there is an urgent need for mass- meaning: quick, cheap, simple, effective solutions in the field of counteracting the development of COVID. In various areas – diagnostics, treatment, monitoring of the infected and their activity, disease dynamics, development of pandemic development models, etc.
Therefore, it is commonly believed that the current situation is an opportunity for new businesses, audacious scientists, authors of unconventional ideas and those who will do something because they simply do not know that it cannot be done.
5C meaning: Challenge, Client, Clinician, Cash, Crew
Challenge means the right solution to a real problem
Ask yourself whether the product you want to invest in is the answer to the real challenge of the system? For how many other 4Cs brings added value in the form of an ideal solution, saving money and time? Is it not an apparent solution? Can you scientifically prove that what you want to deliver works in the real world? Is the marketing of your product not ahead of its real possibilities, and the promises made will not be covered in reality? If the answer to one of the above questions is negative- best case scenario is- no one will pay for your product, and in a crisis situation, you will share the fate of… Theranos and you will have to pay for the damage it has been caused.
Client means Patient
The only reason someone will want to implement your solution is… Patient. Without understanding the patient’s needs, preferences, possibilities, problems with his treatment, the challenges of the staff or the payer towards providing a proper care, it will not be possible to create added value. Therefore, it is important that from day no. 1, thinking about the patient is no. 1. But not only in the marketing message. I mean real patients assessing your solutions, pointing out barriers and directions of your product development. By diagnosing problems that you should eliminate, striving to offer a product that patients will expect from their doctor, insurer and caregiver or which they will buy themselves.
Clinician means Medical Staff
Medicine is the field where the team matters. Human life depends on its efficient operation, communication, procedures, and sometimes understanding each other without saying a single words. Will the technology you provide be adapted to the current workflow? Will its implementation entail consequences that you have no idea about today? What if it is beneficial to only one narrow group of users, disrupting the work of others? Finally, it is the medical staff that influences the patient’s decisions. They consider some solutions valuable, others not. Make sure that at every stage of its operation, the medical team actively participates in developing solutions… which they will use in the end of the day.
Cash means who pays for it all
Is your solution profitable and to whom? Who is saving on it? Who is making money on it? Who will offer a better product thanks to you and win the competitive race? Today, almost everything can be quantified and I do not mean only the financial dimension. Therefore, for them to be willing to invest funds in your product, excel formulas must match. It is you who will present the solutions and their benefits to the client. You should know better what it needs, what can be improved thanks to you. Repeatedly, you should be able to show them opportunities that they would never see alone. In the area of safety, patient satisfaction, process efficiency, but also financial savings.
Crew means your team
What do you bring to the start-up besides your money? A start-up is often created by a group of enthusiasts who try to make up for the lack of experience with ambition. Sometimes knowledge. An expression of the utmost concern for your own money will be providing all possible support in the organizational area. Especially where usually young teams do not have the right resources. Definitely, the key will be to structure the finance area, especially after capital injection, to develop KPI’s, set up Goals & Objectives and reporting tools on budget implementation. An important element will be support in the field of communication and marketing, after all, the implementation of any new products requires intensive work with opinion leaders, future customers and the market regulator, if any. In addition, networking support that will open up new areas related to testing, product sharing, communication with future customers, acquiring additional technical partners or someone who can offer a complementary solution with you that will expand the potential base of your customers.
Where are the causes of failure?
According to research conducted by Start-up Genome, there are 5 main reasons why companies fail to survive. 34% indicate that the product does not match the market needs. Inadequate product marketing and communication account for 18% of failures. The team is responsible for another 18% – its inappropriate selection, lack of experience, accountability, overlapping responsibilities. On the other hand, 16% of failures are due to financial problems.
In the coming years, we will surely witness spectacular changes on the healthcare market. Incredible ups, loud failures and unfulfilled hopes. Also because the market of healthcare start-ups today comprises 31 companies with a capitalization of more than $ 1 billion each. Moreover the AI healthcare market will grow between 2017 and 2026 by an average of 39.7% annually, increasing its value from less than $ 1 billion to over $ 19 billion. Investors will therefore finance similar projects, counting on substantial profits on the market, which as history shows is stable and resistant to economic turmoil.
