The past year and a half has been a hotbed for healthcare innovation. Seeing the recent success of many digital health startups, other entrepreneurs are attempting to break into the market for themselves.
But in a highly regulated and competitive industry like healthcare, finding your way in the marketplace can be a daunting challenge.
“Starting a company can be complex in and of itself, but if you’re starting a company where you eventually want to sell to health systems, the complexity goes up exponentially,” Anita Watkins, a managing director at UNC Health’s Rex Health Ventures, said at HIMSS21.
Watkins was joined by Rebecca MacKinnon, the founder and CEO of 5D Strategies, in a HIMSS21 educational session, where they offered early-stage startups insights into the healthcare ecosystem.
Above all else Watkins and MacKinnon stress the importance of having a clear company strategy starting from the early days to help guide growth.
“As you go through the early-stage thought process, one of the key pieces is not just product, not just the context you have within the health system, but your overall strategy,” Watkins said. “Understand really early on what that funding strategy, what that product development strategy – all of those are critical to success.”
Because so many strategic factors in healthcare are decided by external sources, getting control over those internal factors is crucial, MacKinnon said. Nailing down the focus, target region and operational insights as soon as possible will set companies up for success.
“You can’t think of any one of these factors of strategy alone. You have to think of it together, and then you have to start thinking about the capital equation,” MacKinnon said.
Once a startup reaches the stage where it starts to bring in capital, a whole new set of complications arises.
“One of the things that we really want to focus on with each of these layers of funding is knowing each fund,” Watkins said. “This is not just knowing a category. Every angel investor is going to bring something different to the table. Every venture fund is going to bring something different to the table, and it can really impact where your company goes in the future.
“It’s so important that you get into the minutiae of each of these funds. You ask questions: What kind of check size do you write? What type of companies do you typically invest in? Where do you like to invest? What role do you like to play? Do you require a board seat? Are you hands-on, or are you an inactive or passive investor? What time horizon are you hoping to see return on your capital? These are all critical questions regardless of where you are on this continuum.”
But another element of being strategically prepared is a willingness to pivot when needed, according to Watkins.
“While we keep saying be strategic, do your homework. Plan. Know that the markets are going to change as your company grows,” she said. “And be mindful of what those changes may mean for you.”