Health startups: Caution

startup failsKEY TAKEAWAY: Within 3 years, 92% of startups failed. Of those who failed 74%, failed due to premature scaling.  Premature scaling means spending money on marketing, hiring etc. either before you found a working business model (you acquire users for less than the revenue they bring) or in general spending too fast while failing to secure further financing. Nowhere is more true than in health care startups.

According to StartUp Health 2015 was the year digital health funding hit its stride and 2016 is stepping it up a notch with a record-setting first quarter. Signs continue to point to a market transitioning from something reminiscent of the Wild West to the early stages of maturity.  2016 started strong with a record $1.8B in funding, Q1 2016 started with big numbers. 2016 already saw 4 deals over $100M, as compared to 7 in all of 2015.  Yet, sadly, most will fail because they just don’t understand what patients want from health care.

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Now don’t get me wrong, pharma companies do need help when it comes to everything from big data to patient marketing, but a lot of these startups are hoping to strike it rich by shooting arrows in the dark.   I have worked with some startups and I am amazed at the lack of processes to build better business models.  Most have not done ANY research with HCP’s or patients and once again there seems to be a “let’s get funding, build it and worry how to make money later.  For a look at what is wrong with some startups read this on Hubspot. The problems at Theranos should be a warning shot for everyone who makes “rock stars” out of wood be Steve Jobs for health.

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Patients have specific wants and needs when it comes to health care and HCP’s also want their voices heard but that seems to be ignored.  I understand that out of failure comes success, but let’s try and use a little common sense when it comes to throwing money at health startups.