In the first quarter of 2022, CB Insights found that the $10.4 billion that was invested in global health tech startups was down 36% compared to the $16.2 billion that was put into the global market from Q4 of 2021. Experts predicted this drop and don’t believe a rebound as drastic as the one seen during the pandemic will be happening any time soon.
This not to say, of course, that the health tech industry will be seeing its end. There is still an obvious need for innovation and development in the area. Rather, the funding frenzy of 2020 and 2021 has come to a halt, and the explanation as to why is rather simple.
The cool-off in health tech investing has much to do with the normalization of COVID-19. It follows a larger trend of investors pulling back from backing startups after a year of all-time-high cash flow for the businesses.
The stagnation in funding for health tech in particular followed a massive jolt of investment in response to the COVID-19 pandemic. It makes sense – the perceived value of the industry in the short-term shot up exponentially. But now that the immediate need for health tech innovation has receded, VCs are exploring what other industries may be the next to explode. And why wouldn’t they? Compared to other ventures, the health tech industry has slower ROIs due to its longer and expensive cycles of R&D, not to mention the bureaucratic hoops. It’s likely that investors are looking to shift their ventures towards markets with a clearer path to returns.
The success of any technology startup begins with a solid foundation made up of the three P’s and two S’s. The three P’s are people, process, and partnerships.
The three P’s are supported and enabled by the two S’s – security and scalability. To understand how the P and S elements work together to create that solid foundation for a successful startup, here’s an outline on the benefits of each:
The Three P’s
People – You can have all the processes, partners, security, scalability and synergy but if you have the wrong people it can mean the difference between fast success and fast failure. Be uncompromising on those first dozen or so hires. Not only do they have to be a great technical fit but they have to be someone you can work with who also brings a shared value-system to the company. In industries as competitive as technology, some qualities should include an unflappable nature, resourcefulness, innovative vision, and the ability to bring creative solutions to the table. The flexible nature of the team as a whole is critical to the success of a startup and you will be spending more time with this immediate team than anyone in your life for the foreseeable future, so choose wisely.
Process – At the start you need to begin defining and implementing the right processes to emulate how your business will run post startup phase. Establishing and implementing specific tasks and workflows will be a fluid process until you get up and running. You may have to pivot until you determine the flow that works best for your team. If you want to avoid a killer headache don’t wait till later to try to adopt the proper structure when things really start to take off. You’ll be able to identify the scope and limitations of the business sooner if you implement processes early on and will learn when it’s time to make a change.
Partnerships – Choosing the right partnerships to help your startup grow successfully can be a challenge. Knowing which technology partner your business needs to scale is critical. Your potential partner should have the experience and expertise in the areas that are important to your organization.
Likewise, try to find a partner whose vision is aligned with yours. Because of the uncertain nature of early-stage startups, it is not uncommon for there to be a lot of anxiety among partners and staff. Transparency and clarity among members is critical to your success, and this includes regular communication. Continuing to provide one another with feedback on milestones and deadlines will create the positive and nurturing environment required for a successful startup.
Collaboration is at the heart of successes over history — in Darwin’s words, “those who learn to collaborate and improvise most effectively have prevailed.”
Yet the healthcare space has been slow to learn that lesson. Far from functioning as a team focused on a single goal, healthcare stakeholders operate on a fractured playing field, each one trying to get to the goal on their own. From that perspective, everyone becomes a competitor — and the ability to reach the goal line becomes nearly impossible.
Nowhere is the tension more obvious than in the struggle to integrate technology and healthcare.
On the surface, they are unlikely partners. Healthcare isn’t exactly a profession for risk-taking, and rightfully so — in every decision, the safety of a patient is at stake. A new drug or tool has to run the gamut of regulatory burdens and clinical validation before it gets anywhere close to adoption. Adoption and implementation is arguably even more challenging, including everything from integrating new solutions into legacy systems, convincing practices to abandon the sunk cost of preexisting solutions, or overcoming the lack of financial incentives — without practice reimbursement, the challenge of adoption becomes that much more daunting.
Technology, on the other hand, is a high-risk, high-reward market (there’s a reason that billion dollar-valuation startups are called “unicorns”). Many tech startups achieve their success by delivering direct-to-consumer solutions, cutting out the middleman and individualizing experiences for the user. It’s a formula that doesn’t map well onto the healthcare field where the success of patient care and outcomes relies on a web of relationships.
And tech companies that have tried to take these formulas from Silicon Valley and apply them to healthcare learn that really quickly. The graveyard of digital health tools is littered with companies trying to sidestep the problems of the healthcare system by dealing with the patient directly, and removing the care provider from the equation.
eVisit is the telemedicine software platform for physician’s offices. Its cloud-based SaaS application allows physicians, PAs and NPs to evaluate and treat their existing patient population remotely, via webcam interaction. Unlike competitors, eVisit is the only platform for providers, designed to allow telemedicine reimbursement from third party payers. eVisit can increase patient flow up to 300 percent; and can decrease “no shows” by 80 percent, allowing a practice to recover up to $120,000 a year.
eVisit is telehealth software that enables providers to increase patient flow and revenue, while providing convenience to their patients with online treatment.
Bret Larsen, Co-Founder, CEO. Glen McCracken, MD, Co-founder, president.
We are actively marketing through strategic channel partnerships and product integrations.
The Primary Care Market generates $135B/year in revenue with a CAGR of 2.6 percent. It employs 745,642 (246,090 physicians) over 130,526 medical practices; 90 percent of primary care physicians operate in SMB medical practices, our target segment (IBISWorld). This segment represents a $9.99B/year addressable market (221,481 buyers x $1,200) + ($121.5B x 8 percent billing fee).
How your company differentiates itself from the competition
Competitors offerings include B2B models with value propositions of lowering costs, B2C models offering convenience or enterprise hardware and software (none offer physicians ability to bill a patient’s insurance, the doctor-patient relationship is non-existent and patients are being asked to pay more).
Healthcare practice sign up on a subscription that is charged on a per user, per month fee of $99.
We are currently raising our seed round of investment ($1M) and actively looking to hire talented developers.
In the land of health IT, innovation is power and those that control it king.
There’s no status quo here. Resting on your laurels, despite all of the industry standardization related to efforts like meaningful use, will get you no where.
As several vendors are discovering that just because they’ve had products in the market for 20 or 30 years doesn’t mean they’ll be in play forever. We’re in the health 2.0 era. Heck, we’re in the era where even the federal government has entered the open source environment.
As such it’s great to see such a resource like Rock Health dedicating itself to the health IT entrepreneur. If you haven’t checked it out yet, you need to do yourself a favor and take a few minutes to familiarize yourself with its site. Then, you need to forward some of the information featured there to all of your entrepreneurial friends.
Not to sound like a commercial for the service, but it’s hard not to since some of the things going on here are pretty incredible. Actually, this is the kind of thing that happens in a country like ours when leaders, innovators, entrepreneurs, creative folks, business minds, a little money and some passion mix.
The cocktail that commences is Rock Health.
So, what is Rock Health?
It’s an accelerator exclusively for health start ups providing capital, office space, mentorship and operational support to entrepreneurs working on ideas in health. As a nonprofit, Rock Health looks for product-centric ideas that solve real problems in healthcare; “Products can be in the form of web or mobile apps, services, have a hardware or sensor component, and should be early and pre-VC funding.”
Ideas can be of anything as long as it solves a healthcare problem.
For those start ups bidding to participate in the Rock Health program, the selected start up receives a $100,000 investment offer from a VC group for an ownership of between 5 and 10 percent.
Other great Rock Health offerings (found on its site and free for everyone) include an interactive funding database that provides the public with sources for potential healthcare start up funding; videos that teach the unknowledgable upstarts almost everything they need to know about topics like marketing, creating boards, accounting, HIPAA, fund raising and dealing with the FDA; healthcare event listings; a great start up handbook that provides legal and financial advice (it’s comprehensive and overwhelmingly impressive); and finally, perhaps my favorite bit of information offered: interesting health facts that once learned will impress everyone, including your closest and most cynical friends.
You get the point.
Rock Health is more than an incubator and a disruptor for health IT — established vendor giants should be concerned about efforts like this — it is the future of innovation in the space, and if you haven’t taken notice, you should.