Funding for health IT has reached more than $956 million in 2014, according to an October 2014 study by HIT Consultant, bringing with it an explosion of startups. Additionally, changes in our healthcare system have brought opportunities to grow health-tech startups in many fields. Many of them don’t make it. Check out these tips from three successful health-tech startups:
1. Stand out by filling a need or solving a problem.
“The U.S. healthcare industry has been and continues to be the most inefficient industry on the planet,” says Dean Stephens, CEO of health-tech company Healthline, a health-information site with millions of monthly visitors. “The perverse and muddled financial incentives, coupled with high localization and fragmentation of services, create hundreds of billions of dollars of inefficiency.”
As when starting any company, those interested in starting a health-tech company should try to fill a need or solve a problem within the industry. This will help them to stand out from the competition and show why their business is relevant and worth paying attention to.
Benjamin Wolin, co-founder and CEO of Everyday Health, a digital-media company that owns sites and produces content related to health, started the business in 2002 with two co-founders with the goal of allowing different players in healthcare to reach out and communicate with consumers. They knew consumers would come online to get health information and make healthcare decisions.
“We wanted to provide great content and tools to help consumers live a healthier life,” Wolin says. “We knew that if we aggregate a large enough audience of consumers -- and now healthcare professionals -- we would be able to provide a valuable service to marketers and other healthcare constituents looking to reach consumers and healthcare professionals.”
2. Be willing to learn.
The health-tech field is still relatively new and growing and changing every day. Because of that, those wanting to start a health-tech company need to be willing to learn and adapt to the changing industry.
“When we started the company, the market was far from saturated in good health-tech ideas in our space,” Stephens says. “It has taken years of IP development to build the foundation that we can now leverage to address the healthcare transformation that all of us are witnessing today.”
Wolin’s advice? Companies should be nimble and open to evolving their business, thinking and strategy.
“Building a business is always a work in progress,” he adds. “Always leave yourself open to change. Be willing to be off-balance for a little while so you can eventually find your stride.”
3. Having the right team is important.
At the end of the day, it’s always about your people, Wolin says. “I always knew that having a great team is important, but I don’t think I really appreciated the difference between a high-performing team and just a good team.”
Dr. Hubert Zajicek, CEO and co-founder of Health Wildcatters, a healthcare seed accelerator, agrees, saying no health-tech entrepreneur has all the insights and answers.
“Having a complementary team with diverse skill sets in place can be the biggest differentiator,” he says. “Ask a ton of questions, and get someone with a healthcare background on your team.”
4. Be prepared for challenges.
Starting a business is never easy, and the health-tech field comes with its own set of challenges, including slower penetration because of regulatory FDA concerns, HIPAA patient privacy rules, reimbursement rules and bottlenecks.
“The digital healthcare landscape is changing quickly,” Wolin says. “Digital health and the healthcare system are disconnected, but are slowly starting to converge. That convergence is creating tremendous disruption, but also tremendous opportunity.”
Stephens faced challenges as well, including taking on a product-architecture design that was larger in scale and complexity than what was envisioned at the beginning, and growing a culture that fits today’s needs in a highly competitive marketplace for talent.
5. Fundraise, fundraise, fundraise.
To make it, entrepreneurs need to have tenacity and some irrational exuberance. Stephens found making it through two deep recessions difficult, saying Healthline needed to “hoard cash to keep the lights on.” His company went on to raise more than $60 million in venture capital.
Entrepreneurs who want to found a health-tech startup should always be fundraising to make sure they have the funds to keep their business going.
Wolin and his co-founders raised $100,000 from friends and family to get Everyday Health started. Now, the highly successful company is listed on the New York Stock Exchange with a market cap exceeding $400 million.
“We had one employee and had to find a way to pay their salary,” he says, adding that for every "yes" an entrepreneur receives, there will be 100 "no's" to follow.