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 is tightly bound with elusive 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 healthtech products, these are the three 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.
Fundraising is about mutual fit, and this is even more important in healthtech than elsewhere. You need to spend time finding investors who will be able and willing to understand the constraints you are working under. Once you’ve signed the term sheet, you’ll need people who can open the right doors to clinicians, providers, payers and other stakeholders. This means you must factor in the time it takes to find the right investment partners.
Estimate how long you predict fundraising will take. Then double it. This will ensure you have the runway to cope with any delays, won’t be under pressure to take funding from investors that aren’t the right fit, and don’t make deals that ease short-term financial anxieties but 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 and 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-sequential manner. 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.
It’s all about understanding care pathways and workflows
However great your idea, what’s more important is how it fits into existing care pathways and the positive impact it will have for patients. If your route to patient impact is to uproot existing pathways, traction could be hard. Instead, it’s important that products fit into existing pathways or complement them by filling gaps. As a first step, it’s therefore essential that founders understand what these pathways look like and that all ideas are centred around creating patient impact.
This remains true whether you’re planning to sell your product to providers or direct to consumers – centring around the patient and understanding care gaps should always be the first step.