As a healthcare technology entrepreneur and founder of a healthcare company, I have had an exciting and rewarding journey that has also come with a unique set of challenges.
I founded a digital health startup in 2016, which focuses on digital therapeutics for neurorehabilitation, based on my own personal experiences with physical and neurorehabilitation following an accident. The mission of my company was clear from the start, i.e., improving patient outcomes and access to care above all else.
However, the journey from founding a healthcare company in a heavily regulated space to improving patients’ lives has not been easy. Over the years, I have learned some valuable lessons that have helped me navigate the complexities of this industry successfully.
Understand what your business model is very early on in your journey
A critical lesson that I learned was to understand the business model very early on in the journey. Entrepreneurs in healthcare must know who will pay for their solution, who the payors/insurance players are depending on the country they are focusing on, and what the routes to reimbursement for their solution are.
Focusing for a moment on digital health solutions: in the US, for example, a number of Current Procedural Terminology (CPT) codes already exist for certain digital health services, whereas in Germany, there is the Fast-Track Process for Digital Health Applications (DiGA), and in Belgium the mHealthBELGIUM platform for certified mobile health solutions is live. Entrepreneurs must also be aware of regulatory aspects of their solutions, such as FDA (US), MDR(EU), CFDA (China), MHRA (UK), etc.
The most significant barrier to widespread adoption is coverage and payment by health insurance providers. Therefore, entrepreneurs should focus on attracting investors who understand the healthcare space and are willing to invest in the long term.
Understand the regulatory landscape
Understanding the regulatory landscape is another critical lesson that I learned. Healthcare is one of the most highly regulated industries globally, and entrepreneurs must have a solid understanding of regulatory requirements. They must be prepared to invest time and resources in ensuring that their products or services meet those regulatory standards. Failing to comply with regulations can result in significant fines, penalties, and other legal issues. Therefore, it is important to work closely with legal and regulatory experts to ensure that your product or service meets all the necessary regulatory requirements.
Although there are now more guidelines for digital health solutions developed by regulatory bodies today than when I started my healthcare company in 2016, there is still work needed to improve those further and establish new ones as the adoption of digital health solutions in a healthcare setting grows further.
Funding requirements pre-revenue are substantial compared to other industry verticals
Obtaining funding is a significant challenge that healthcare entrepreneurs face. Healthcare is a capital-intensive industry, and startups in this space require significant investment to develop and bring their products or services to market. However, investors are often hesitant to invest in healthcare startups due to the high costs associated with product development, regulatory requirements, and clinical trials. Healthcare entrepreneurs must be prepared to present a strong business case and demonstrate a clear path to profitability to attract investors.
In most cases, healthcare startups require significant investment to develop and bring their products or services to market. Therefore, raising funding from investors who understand the healthcare industry and the challenges healthcare startups face will benefit healthcare founders significantly. It will save you many unnecessary discussions around why validation studies and proving positive outcomes for end-users/patients are needed before product launch and why the whole process requires the necessary funding you are raising upfront. Believe me, I wish I understood the enormous value of focusing on raising funds from investors who understand the healthcare industry when I founded my company in 2016. However, at the time, while I understood the grant funding space really well, I was a novice in navigating the VC world, so I, unfortunately, had to sit through a few unnecessary conversations to get to that point. Also, healthcare investors will have a great network in the healthcare space to connect you to. So definitely a win-win!
Explore strategic partnerships early on
Another important lesson that I learned was to explore strategic partnerships early on. Corporate partnerships (focus on medical devices, pharma, biotech, tech) can provide additional routes to market, market access, co-development partners, and funders/investors.
Collaborate with healthcare professionals
To further elaborate on the importance of collaborating with healthcare professionals, it is crucial to note that their expertise can be invaluable in the development of a healthcare product or service. From the initial stages of ideation to product launch, healthcare professionals can provide insights into the industry's challenges, share their experiences, and identify areas that need improvement. Moreover, healthcare professionals can help entrepreneurs understand the regulatory landscape, navigate the complex healthcare ecosystem, and gain access to resources and networks.
Early engagement with key opinion leaders (KOLs) and clinical teams is vital to establishing a strong and trustworthy relationship with healthcare professionals. Building a robust network of advocates is essential to create a successful healthcare startup that addresses real problems and has a positive impact on patients' lives.
Focus on the end-user and co-create with healthcare professionals and patients from day 1
In addition to collaborating with healthcare professionals, it is essential to focus on the end-user/patient and co-create with healthcare professionals and patients from day one. By involving end-users/patients in the development process, entrepreneurs can ensure that their product or service meets the needs of patients, providers, and payers. This approach can lead to higher adoption rates, improved patient outcomes, and a stronger market position.
In conclusion, the path to founding a successful healthcare startup is definitely challenging. Healthcare entrepreneurs face a wide range of challenges, from regulatory hurdles to raising funding and obtaining reimbursement, but by solving a real problem in healthcare, collaborating with healthcare professionals, understanding the regulatory landscape, and focusing on the end user, healthcare entrepreneurs can overcome these challenges and make a significant impact on the healthcare industry.
As a next step, readers can take the lessons learned in this post and apply them to their healthcare entrepreneurship journey. They can reach out to healthcare professionals, collaborate with end-users/patients, and iterate until they have a product or service that addresses a real problem in healthcare and makes a difference in people's lives.To further explore the topics covered in this post, I have included a few resources below related to medical device regulations and reimbursement options.
CPT codes: https://www.ama-assn.org/topics/cpt-codes