In an industry that receives as much funding and attention as digital health, it’s sometimes difficult to imagine how tough it is to get going as a new digital health startup.
Digital health startups raised $63 billion in funding in 2021, up 1×6 times from the year before, according to Dealroom.co. The combined valuation of both healthtech and biotech companies founded since 1990 is now over $4 trillion.
However, the road to a successful digital health startup can be quite rugged and requires a lot of patience and due diligence.
Having ideas is only one step in the process of building a health tech startup. The process takes hard, deliberate work.
Like any other sector, health tech startups are businesses. When building a business, one of the first steps is understanding the market in which the business will grow. Skipping this simple step is one of the reasons why many health tech startups fail.
When studying the market, ensure to do thorough research on the most important criteria.
You can structure your market study as an important set of questions to be answered, such as:
What is the state of the industry?
Who are my target customers?
Will my target customers be willing to pay for my product?
How much are my target customers willing to pay for my product?
Who are my competitors? How do I look compared to them?
Asking and answering these questions requires diligent fieldwork and can seem time-consuming. However, with the number two reason for failed startups being a misreading of market demand, it’s well worth the effort. A proper market analysis helps you contextualize your new ideas, provides a more solid basis for product development, and enables you to project realistic revenues as you scale.
One of the distinguishing features of the health sector is the amount of expertise and sophistication required to break into the market. Regulatory standards, workflows, technology trends, and other factors follow a more tortuous route than other sectors. Also, medical science is quite complex, requiring years of training and practice. With a medical board by your side, you can get important perspectives on your ideas and proposals, suggestions on how to improve the science of your propositions, suggestions on how to improve your tech to become more suited for the industry, and important updates about relevant regulatory changes. This advice can prove extremely valuable when you get into the market.
Additionally, medical experts with years of experience help lend credibility to your company. This is essential when you’re seeking funding from investors. It is also important to have a diverse team, as this will help to provide balanced perspectives on nuanced issues.
Benjamin Franklin’s quote, “By failing to plan, you are preparing to fail,” couldn’t hold truer for startups. With so many moving parts in your new startup, you cannot afford to run on assumptions. To help your startup succeed, you’ll need an excellent business plan. It’s important to start your plans by calculating the costs of getting your business up and running. Consider overhead and capital expenses such as property, assets, rent, insurance, taxes, et cetera. Also, include personnel costs such as salaries, benefits, income taxes, outsourcing costs, etc.
Among the most important things to plan for are development costs for your tech solution. This can be one of the costlier aspects of getting a health startup going. Consider the costs of development, maintenance, features, hosting services, et cetera.
With the costs all figured out, you’ll need to determine how to get funding. It’s important to get your budgeting done correctly, as running out of funding before hitting your goals is a common reason for failed startups. Typically, your funding sources will be from VCs or angel investors interested in the health tech space. Your market research, product design, and medical advisory board connections will be essential in this phase of your project. Ensure that your financiers are well informed of the relatively long time it takes to profit in the healthcare startup industry, to avoid the problem of unrealistic expectations.
Building an MVP (minimum viable product) is a critical phase in developing any tech product. When you should build your MVP will depend on the complexity and scale of your idea. If it’s relatively inexpensive to prototype, you can bootstrap the first iteration. However, certain products require more funding to get off the ground in any real sense, so you may seek funding first with such a product.
In your MVP, focus on the immediate problems of your target customer. Your team may add additional features as the product evolves.
When you’ve developed the first few iterations of your product, it is important to note that the work is far from done. Look into your new product for potential problems customers may have using it, additional features that may be integrated via APIs, and standardized tools that are common in the industry. You can run a beta test to see how different product versions fare.
Also, ensure that your product meets regulations and industry standards in the localities where you launch it, such as the HIPAA. You can hire a technical company to help audit your product at this stage.
When your product is ready, it is time to go big and loud about it. Attend conferences, trade shows, expert sessions, and other events in the health tech niche. Highlight the problems your product solves and how well it does so. The health sector is big on evidence-based practices, so you should be ready to support your claims with scientific research. Ensure to garner interest from critical decision-makers. With these done, you can then release your product to users.
After you’ve promoted and released your product, it is time to look for ways to improve and expand. Collect feedback from your users, address their issues, and improve their experience. You can then seek more funding – or bootstrap on newly found revenue – and scale your startup faster. Always stay proactive, and approach each new territory with diligent research, intentional collaboration, and a deep-seated understanding of the problem to be solved.
The health startup industry is growing rapidly as innovators seek tech solutions to perennial problems in the healthcare sector. However, the companies that will succeed are those that consciously employ the basic cornerstones of market research, meeting customer needs, and utilizing sustainable business principles.
About Med-Tech World Summit:
Med-Tech World takes place at the same time as Malta Week, SiGMA Group’s flagship event of the year. Combining all of the company’s brands into one massive event, this is the perfect opportunity for delegates to get the best bang for their buck.
Visitors of both Med-Tech and AIBC Summits will benefit from cross-pollination, experiencing the massive overlap between digital health and emerging technology, such as in the use of robotics in surgery, or the benefits of the Metaverse for the life sciences.
The event takes place in November, over two days of panels, workshops and networking opportunities at The Hilton Hotel Conference Centre in Malta.
More information below.