Building a product for the healthcare market is an entrepreneurial experience like no other. The sales cycles are unique, the regulatory challenges complex, and product testing tightly bound with illusive stakeholder buy-in. Even if you’re a seasoned technology entrepreneur, launching a product in the healthcare space can throw up a set of completely fresh and nuanced challenges. As a VC investing in health and biotech products, these are the 3 things all founders considering this space should know:
Fundraising will take longer than you think
Most start-ups underestimate how long it will take to raise the investment they need. In the healthtech space, it takes even longer. Investors aren’t only looking for impressive founders with ideas that have a clear market fit, they’re also considering a myriad of other issues. These include: the regulatory implications, your ability to access healthcare decision makers, data and security provisions of your product, feedback from your patient or clinical champions, and the scientific and research landscape for your proposition. It can be a painstaking process, but it’s necessary. Good healthtech ideas can fall at the first hurdle if they fail to live up to the understandably high standards of the market they’ll be selling to.
Estimate how long you predict fundraising will take. Then double it. This will ensure you have the runway to cope with any delays and won’t be under pressure to take funding from investors that aren’t the right fit, or make deals that ease short-term financial anxieties but will come back to bite you.
The road to commercialisation is not linear
Many healthcare entrepreneurs make the mistake of focusing too much on the product and not enough on their route to commercialisation. Selling technology or services into the health sector, whether B2B or B2C, is hard. It’s rarely a linear process. There are many stakeholders to engage with, multiple silos to overcome, and the reality of distributed decision making to grapple with. Additionally, the focus of healthcare professionals is (quite rightly) on the patient, meaning it’s rare that you and your offering will be the priority.
As a result, growth can be often lumpy. The mechanics of lead generation and sales conversion regularly happen in a non-logical way. For example, you may start by working with one department in a hospital in order to secure proof of concept, but it can be a long time before you’re able to secure Trust-wide conversations. It’s therefore essential to set realistic expectations internally and with your investors around milestones and revenue targets. In the same vein, a constant emphasis on capital efficiency is important if you’re to go the distance.
Don’t shy away from the case-study ‘chicken and egg’ challenge
Creating a new market offering can mean figuring things out as you go along. However, in healthcare, this doesn’t cut it. To secure the investment and client side buy-in needed to grow a business, you’ll need to demonstrate clinical impact in a real, rather than theoretical, way. This can create a chicken and egg situation. Without robust case studies, it’s hard to get commercial backing. But without the funds and contracts needed to turn an idea into a business, a tangible use case can be hard to come by. There’s no silver bullet to answer this conundrum, but it’s a challenge all founders must factor into their planning. How will you create this clinical evidence, and which champions can you call on to make it happen? Being able to figure out an answer to this question could not be more critical. Don’t bury your head in the sand.
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