Digital health companies are on the rise and medtech funding is increasing globally. This comes as no surprise because there are invaluable benefits to embracing this new trend, despite the fact that most industries are still struggling to manage Big Data and lock down digital security. Below are 5 key incentives for companies to digitally adapt:
- Quality: Human error is decreased and precise lead targeting is improved.
- Speed: With cloud computing and AI, it is quicker to analyze and automate data.
- Collaboration: Easier to share large amounts of data internally and externally.
- Cost: Digital solutions are more cost efficient than non-digital resources and functions.
- Integration: The science and business sides of a company can be connected more seamlessly.
The digital revolution also has the potential to improve innovation within the life sciences. However, this is a drastic transformation that is being implemented within a notoriously slow to change and highly regulated industry. The health and pharmaceutical space presents unique challenges that have prevented our industry from embracing these changes as quickly as other industries have been able to. Pre-existing digital health companies and young startups often require guidance navigating this uncharted territory, so below I’ve compiled some top advice from three current digital health CEOs:
FUND RAISE STRATEGICALLY
Ed Seguine, CEO of Clinical Ink, is pioneering a global clinical trial technology platform that captures patient data in real-time to reduce costs and simplify the process. When asked about his biggest challenge as CEO of a digital health company during his CEO Leadership Series interview, he jumped to the topic of fundraising.
“The biggest challenge of running Clinical Ink was to make sure that we were capital efficient so that we didn’t outstrip our funding and could control our own destiny. […] There’s a company that recently announced a very big deal and they’ve loudly touted the fact that they’ve been able to raise $100 million. In my view, that’s utterly short-sighted and evidence they don’t have a legitimate business model. Why raise that much money before you have a known, viable platform? You don’t get credit for raising the most money, and a lot of companies have lost sight of that.”
When asked about his own strategy for raising capital, he shared his unique approach on how to fundraise within the digital health sector. “In the early stages, you do whatever you can to raise money. Over time you need to have a plan to “recycle” investors—essentially match your investor base with an exit time horizon. What happens in this industry—at least, in our part of it—is a lot of technology companies start up, they get funding for three or four years, and then they sell out because they can’t build the operational capabilities and they can’t build the credibility fast enough.
“We raised smaller amounts of money incrementally and, although we were a little bit messy in our financial structure, we were able to deploy that money well. Then, last May we packaged up our early investors, sold their shares to a private equity group, NovaQuest, and reset with a new investor base for the next stage of growth.
“So, my philosophy is that you only fund yourself with the resources and the investor group that you need to get you to the next valuation inflection point. In order to get to that valuation inflection point, you need to be ruthless about what you need to do with the technology and what you have to do operationally to get there.”
LEARN FROM YOUR CUSTOMERS
Foad Dabiri, CEO of Wanda Inc., and his team have developed a cloud-based platform that combines remote patient management with machine learning to help improve patient outcomes and reduce costs. During his interview with Ashton Tweed, he shared one of the biggest lessons he has learned so far as CEO of a digital health company.
“One lesson I learned the hard way is that companies, especially new companies, have to treat customers as their own team by interacting and working with them on a day-to-day basis. The amount of learning you can get as far as your business model or product goes will be invaluable.”
But how does a company go about doing that? He explains why and how this is key to the success of a digital health business. “So, at Wanda, our product is a new solution, as are many of the modern digital health solutions—meaning you are introducing a new product into customers’ day-to-day workflow. Regardless of how good your product is, it’s new and it takes time for customers to adapt.
“When I say we treat customers as our own team, it means that we go stay with the customer for a few days and observe how they interact on a day-to-day basis and how they use our product. There is no reason for discussion; simply observe how and why they use the product.
“When they have feedback, don’t treat it just as one of your customers giving feedback. Treat them like one of your team members who’s coming up with a new, good idea, which increases the value of that feedback. We literally ask our team members to go and stay with the clients for a couple of days, shadow them, and then listen and continue communicating with them after the visit. That significantly improved both our product and the adoption of the technologies on the customer side.”
BUILD AN A+ TEAM
After spending years guiding healthcare companies as the top financial executive, Fred Toney and his general partner Ted Ridgway co-founded Launchpad Digital Health, the top venture fund in early stage digital health. In our latest CEO interview, Toney answered our question of what he looks for when considering working with a new startup.
“Wow, we don’t have enough time to answer that question fully,” he starts. “But it comes down to the team. The team is number one, two, and three. Everyone we screen has a decent product idea and a big market they’re going after, but they also have to have a team that can truly execute and scale. So, it can’t just be a good idea on the canvas. Team and tenacity are what matter the most. Every company will have very difficult times and working through those often become the key to success.”
So, what should startups focus on in their team building? Toney states, “We advise them to focus on making sure that that next layer of people are all A+ players. Many companies fail because they don’t hire folks at a high enough level, and that’s critically important.
“It doesn’t have to happen right away, but it does have to happen over the first year or two. When founders start hiring people, they don’t have to be VP-level to start with but there has to be a very high-quality founding team that’s doing a lot of hard work. Then they can start to layer in the junior people under that. By the time the founders have raised significant seed money or are getting into A-round money, they have to think about that next layer of management and finding those experts.
“Founders have to be comfortable hiring people who know more than they do to help execute the plan. That’s really critical for the next stage of growth and ability to scale.”
As digital health companies develop new and innovative technologies, their leaders must continue to tailor their business approach in order to set their products up for success in our hard-to-impress industry. In the end, it takes more than a good idea and a sound platform to have a game-changing impact on the medical world. The CEOs featured above have learned from real life experience about how to progress in this emerging sector, and their advice is worth consideration for leaders venturing into the space. Have any additional thoughts or advice on this topic? Please share with us in the comments below!
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