Like fintech, which brings together technical innovations related to finance, MedTech is also primarily based on technology. However, the impact that automation has on medicine is only part of the picture.
Telemedicine illustrates how complex change occurs. It has long been successfully used in European countries. About 10 years ago, it was “legalized” in the United States, taking into account the new opportunities that the Internet provides. In 2014, the first online hospital in China was opened.
The United States, for example, saves hundreds of millions of dollars annually on one remote approval of treatment plans.
A slight decrease in this number of visits to doctors will relieve the burden on the medical staff. And it will save patients time, at the same time eliminating the need to go to the hospital with the risk of catching a new virus in transport or queues.
Relatively simple information and communication services make significant changes in the healthcare industry. And not only patients and doctors will notice this. The development of telemedicine will affect logistics because the need for travel will decrease. More employees will work from home out sick, further reinforcing the telecommuting and outsourcing trend.
What to expect from more critical and complex innovations? If e-books and symptom chat rooms are taken as a starting point for changes, many other startups look like signs of tectonic shifts. Here are typical examples of projects on the main vectors of medical technology.
- Tara Biosystems, Inc., an NYC-based in vitro human biology company, raised $10m in Series A2 financing. Cloning and growing organs in vitro can solve a variety of health problems. New York-based startup Tara Biosystems is at the beginning of this journey. The company is engaged in the cultivation of heart cells. Not real full-fledged hearts, suitable for transplantation – but laboratory ones, in the form of small tissues. These samples are sufficient for necessary tests. It is a proving ground that improves accuracy and dramatically speeds up the testing of new drugs. And most importantly, it makes preliminary analyzes safe for people.
- Grail, Inc. is based in a Menlo Park, California, and Washington, D.C. The healthcare company raised $390m in Series D funding.
Grail develops medical devices specializing in the early detection of cancer. The main focus is on screening tests to detect cancers at their onset: when they are most likely to be successfully cured. The Grail works by combining scientific, technological, and population-based clinical research to find cancer in its earliest stages.
Grail’s methylation-based technology preferentially targets the most informative regions of the genome. It is designed to use its proprietary database, and machine-learning algorithms to identify the presence of cancer and identify the tumor’s tissue of origin.
- Digital Pharmacist Inc., an Austin, Texas-based digital health company, closed a $6.5m Series B financing. The company plans to spend new funds to enhance the adoption of the company’s platform and build new products that improve treatment outcomes among older patients.
The health tech startup’s mission to connect patients with pharmacists creates content about health topics and builds a growing community.
Digital Pharmacist is more than a collection of health-related articles and videos (all of which are heavily vetted by pharmacists). It also streamlines communication between pharmacies and customers, making it easier to replenish the process and even help figure out copays.
- Proteus Digital Health, Inc. based in Redwood City, California. This MedTech company, completed the second closing of its Series G financing, raising over $172m.
Recently Proteus Digital Health launched smart pills. These are pills with a tiny microchip that transmit a signal after they enter the patient’s stomach. The doctor monitors the signal with the help of the devices that the patient wears in their belt.
According to the startup, more than half of patients do not follow the doctor’s orders and take prescribed drugs at the wrong time in the US. Keeping track of your treatment schedule is very important.
In some cases, this is required by law. For example, the first “smart pills” of proteus are available for the treatment of schizophrenia. The conditions of detention and the supervision of patients depend on the time they are received.
Under the data of the Silicon Valley Bank, venture funds worldwide have invested 50 percent less in early-stage MedTech startups over the last several years, with a decline from 11 percent of total venture capital dollars in 2012 to 5 percent in 2019. They are alternatively injecting funds to startups that provide services like car-sharing and couch-surfing.
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While some of these investments have improved the efficiency of grocery shopping and task-doing, investments in medical innovations over the last decades have increased life expectancy (by an average of five years) and prevented people from dying from heart disease, stroke, and breast cancer.
With the possibility of transforming healthcare and improving lives more significant than ever, why would every investor not jump at the opportunity?
One of the reasons is medical software/devices often have a longer path from idea to market. Developing a medical solution requires clinical trials and regulatory approvals before entering the market as a tool to improve the lives of patients. But it takes more than just waiting skills, namely, capabilities and resources. That’s why venture arms at healthcare companies are so critical to continued innovation.
Startups have many opportunities at the start-up stage, and they can apply for participation in incubator programs. Below is a short description of some of them:
- eHealth Ventures is an incubator for medical tech startups launched in 2017. Helps startups develop a product from idea to product commercialization.
- Kamet Ventures is a startup studio and startup development platform that collaborates with projects from areas such as insurance, healthcare, and mobile technologies.
For startups at the launch stage, there are many acceleration programs. Among them stand out such as:
- 365x is an accelerator with offices in Kfar Saba (Israel) and New York (USA). The criteria for selecting startups are IoT product, innovation, viability. The program lasts 6 months, during which entrepreneurs work to improve the development strategy of the project, its roadmap, structure, and prepare it for scaling. The accelerator has 4 strategic partners – Microsoft, Prodware, TechData, Salesforce, and some corporate partners.
- MindCET Accelerator – helps early-stage startups grow a product from MVP to market and raise capital. The program lasts 4 months, and the next one will start in April this year.
During the growth stage, startups are actively seeking funding. Below are several of the active venture capital firms.
- Kleiner Perkins is a venture capital firm based in Southern California.
Since the company was founded, it has made a total of 1,136 investments. They made significant investments in software and hardware, and they have since expanded to include the biotechnology, mobile, healthcare industries.
Unlike many other firms, this venture capitalist began to provide venture capital funding to early-stage startups. In comparison, the investment-to-exit ratio of Kleiner Perkins is around 21.13 percent; their success rate increases to under 79 percent when they are the lead investor. Beyond Meat, Twitter, and Uber are notable exits that Kleiner Perkins has had over the years.
- Khosla Ventures has made over 700 investments, 96 of which have gone to IPO. They usually provide placements to early-stage startups, making them a viable option during seed funding and the Series A round of financing. They were founded in 2004 by Vinod Khosla of Sun Microsystems fame, the Menlo Park-based firm’s most recent health tech investment. This month, it occurred when it led a $21 million Series C for Neurotrack, the provider of a platform that addresses Alzheimer’s disease by assessing and reducing patients’ risk of cognitive decline.
Startups must understand that even the most massive funding is not a guarantee of success. It is essential to consider all factors that can affect the project.
Mistakes that Startups should avoid
Having 9 years of experience in software development GBKSOFT team helped many different startups launch their projects and enter the market smoothly. We have worked with some of the early-stage healthcare companies. We are proud to play a role in helping new companies get their innovative technologies to the patients who need them.
But there were many failed efforts because healthcare is a challenging sector grounded in science and regulated by the government. Throughout the life of any startup has plenty of opportunities for missteps. Any changes are not as easy as is the case with companies developing tech solutions, like a messaging app. Mistakes in a healthcare startup can be fateful.
But you should not expect that your startup makes one. Knowing the most frequent mistakes, your company can avoid them. Keeping that in mind, here are the most common issues we saw that can cause a healthcare startup to fail and some tips to solve them.
- Incorrect formulation of the value of a proposition.
The value proposition is a brief presentation. Too many healthcare companies use such “better, faster, cheaper” to describe themselves than this is everything that was already on the market.
You have to be ready to name your unique value proposition for all angles, and you need to understand economics interests of each stakeholder in the health care.
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- Lack of an end-to-end evidence generation strategy.
Health care companies should gather specific evidence and data to achieve key milestones such as raising capital, regulatory clearance or approval, and obtaining insurance reimbursement or payment. A common mistake is linearly thinking about evidence generation and focusing just on what they need for the next milestone.
To avoid this, start talking with all relevant stakeholders at the early stage about what data they will need. Besides, consider the Food and Drug Administration’s innovative Payor Communication Task Force.
- Choosing the direct-to-consumer model will make life easier.
Many healthcare startups develop a strategy that will let them sell straight to consumers. The problem is that it’s a mistake that consumers are willing to pay out of pocket for products and services, but they want their health plans to pay.
As a result, consumer health startups often wind up pivoting to pursue a regulated device strategy.
- Putting too much money and effort into pilot programs.
Early-stage companies need to have pilot programs, but no one can guarantee that any particular pilot will turn into a commercially profitable solution. That’s why companies need to put the right amount of resources into these programs without going overboard on them. A fundamental way to know how much funds to allocate is to discuss the terms of a post-pilot contract with a potential customer.
- founders come up with a Startup Idea and live through it from the beginning to the end. But the invited CTO probably would not burn with the idea like founders do. Being a mediator between the owner and the team, CTO has more chance to miss important things, and the result will be distorted.
- experienced CTO services are usually expensive.
- It may be hard to assess the technical skills of CTO. When startups want to find a technical co-founder or CTO, they typically expect him to be a qualified developer. But if founders don't have a technical background, it may be challenging to understand this person's real competence.
At first, glance finding a partner may seem a good idea. But if you want to achieve a good result, spending reasonable time and money, outsourcing appears to be the golden mean. More answers to this question, you will find here.
Developing medical solutions is a time- and labor-intensive process. The wrong step can lead to long delays and escalating costs. But just because some startups fail doesn’t mean yours will do the same. There are no shortcuts or magic pills. It is not possible to find an alternative for buckling down and learning as much as you can about your market, your competition, and the needs of your potential customers and potential acquirers. That is why we always insist on the discovery phase that gives a clear understanding of the market situation and the direction to move forward. Also, we recommend you to read how to get money for a startup in our article The Nuts and Bolts of Startup Funding
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