Question

Question : Healthcare startups struggle to navigate a business world that’s set up for them to fail them

Challenge 1: Institutional policies and hierarchical systems stunt innovation

Challenge 2: Healthcare doesn’t understand early-stage tech companies

Challenge 3: Pilots are set up to hurt more than help.

Promising opportunities ahead

Please explain those context

Answer 1

Digital ihealth istartups iseem ito ibe istruggling ito ithe ipoint iof ifailure. iMany iinsights iinto iwhy ihave iaddressed ihow itechnology’s itraditional imodel iof iquickly iputting iout ia iminimum iviable iproduct ithen ifinding iuseful iapplications iand ibusiness imodels iisn’t iworking. iThe imodel imight iwork iin ithe igeneral itechnology istartup ispace, ibut iit irarely igoes iwell iin ithe icomplex iworld iof ihealthcare. iDr. iPaul iYock, ia icardiologist iand ifounder iof ithe iByers iCenter ifor iBio idesign iat iStanford iUniversity, ibuilt ihis ibrainchild iprogram ion ione iphilosophy ito ihelp ihealthcare istartups: ineed-based iinnovation.

Need-based iinnovation iis ia iprocess iin iwhich iproblems iare iidentified iand isorted ibased ion iimpact iand iopportunity. iOnce ithe itop iproblem ihas ibeen iselected, isolutions iand icommercialization iare iapproached.

While iI icompletely iagree iwith ineed-based iinnovation, iour ihealthcare isystem iis iset iup ito idiscourage iall iforms iof iinnovation iright inow. iWe ialso imust itackle ichanging ithe iecosystem ithat ihealthcare istartups ineed ito inavigate. iAs ia iphysician-innovator, iI ihave iexperienced ihow iinstitutional ipolicies, ihierarchical iand iadministrator-driven isystems iand ipilot iprogram idynamics iare icreating ia istunted iecosystem ithat iis inot ireaching iits ifull ipotential.

When iapproaching iany istakeholder ia ihealth istartup iusually iworks iwith i— ian iadvisor, ia ihealthcare isystem, ia ipilot isite i— ithe iwheel ioften ineeds ito ibe ireinvented. iThe ientrepreneur iis ifaced iwith ia itime-consuming iand icostly idisadvantage ithat ifrequently iforces ithem ito ienter ideals ithat ihurt ithem. iThe ideals ialso icounter-intuitively ihurt ithe istakeholder ithat ithey iare ibringing ion iboard ibecause ithe itechnologies iand icompanies ion iwhich ithey iare icounting iare iset iup ito ifail. iThere ineeds ito ibe ia iclear iset iof irules ifor ieveryone ito iplay iby ito iaccelerate igrowth, iwith ithe iphilosophy ithat i“a irising itide ilifts iall iboats.”

These iare ithe imost icrushing ichallenges iof ithe icurrent iecosystem ithat ineed ia ihard ilook iand iinnovation ithemselves ibefore ihealthcare istartups ican ideliver.

Challenge i1: iInstitutional ipolicies iand ihierarchical isystems istunt iinnovation

Many ihealthcare istartups iare iborn iduring ia ifounder’s itime iat ia ihealthcare ior ieducational iinstitution. iThe iinstitution ipromises ito ifoster ithe iinnovation iand imake ithe inuances iof ithe ilegal ilandscape ieasier. iHowever, iinstitutional iinnovation ipolicies iare inot ioptimized ito ifoster iinnovation, ibut irather ito imaximize iownership iand ifinancial ireturns. iMost ipolicies iwill irequire iall ifiled ipatents ito irun ithrough ia i“Tech iTransfer iOffice,” iwhich iis iassumed ito iprovide ivalue iby iperforming iFreedom ito ioperate isearches iand ihelping ifile ifor iprovisional ipatents.

Unfortunately, iin itoday’s iworld iof isoftware, ipatents iare isomewhat iless ivaluable iand irelevant ithan ithey ionce iwere. iIf iany iIP iis ifiled, ithe iinstitution iwill iclaim iownership iand iwill iconsider ilicensing iit ito ithe iinventor ifor ia iroyalty iagreement. iSometimes, iif ithe iinstitution idoes inot ibelieve iin ithe iability iof ithe iinventor ito icarry ithe iIP iforward ito icommercialization, ithey iwill ieven icut ithem iout ientirely ifrom ithe iagreement.

An iadditional iapproach ithat iis ibecoming imore icommon iwithin iinnovation ipolicies iis ian iequity istake iin iany icompanies istarted iby ian iinstitutional iemployee, iregardless iof ithe iexistence iof iIP ior iwhether ithe iinstitution iwas iinterested iin iit. iAll iof ithe iabove iscenarios iobviously itake imore ifrom ithe ihealthcare istartup ithan ithey igive ibefore ian iinnovator ieven ihas itime ito iblink.

Challenge i2: iHealthcare idoesn’t iunderstand iearly-stage itech icompanies

Why ithese ipolicies iare idesigned ithis iway? iPart iof ithe iproblem istems ifrom istakeholders iconfusing imedical itechnology iwith ibiotechnology i(aka ipharma). iThe iinnovation ipathway iwithin ibiotech iis ivery iwell-defined, iwith iestablished ibusiness imodels, iestablished iprecedent iand iunderstandable irisk iprofiles. iIt iis iquite icommon ifor idrug idiscovery ito istart iin ithe iacademic isetting. iInvestors, iboards iand iexecutive iteams iare iaccustomed ito ithis imodel iand ican iplan iaccordingly. iLicensing ipatents iand icollecting ia iroyalty ion ibiotech isales iis ia imarket inorm.

When iit icomes ito iearly-stage itechnology icompanies, itheir ichallenges iand iearly idevelopment iare idrastically idifferent. iThe itwo icritical iresources ian iearly-stage icompany ihas iare icash iand itime. iThe igoal iis ito iunlock iadditional icapital iwith iproduct-market ifit, iand ithese icompanies ineed imaximum iflexibility ito ibe iable ito imove iquickly ito ifind iit. iUnfortunately, iinvestors isee ithe ihealthcare ispace ias icomplex iand ihigh irisk, iwhich iis itrue. iSo ithese istartups iface ifundraising ichallenges ifor ithe ispace ithey iare iin, ias iwell ias iunnecessary iadditional ihurdles ifrom ithe ihome iinstitutions, iincreasing ithe ilikelihood iof iscaring iaway ialready iskittish iinvestors.

Challenge i3: iPilots iare iset iup ito ihurt imore ithan ihelp

Startups iare ioften icompletely idependent ion ipartnerships ior ideals iwith ilarger ihealthcare iorganizations iin iorder ito igrow iand isurvive. iThese ideals ioften istart iwith ia ipilot. iUnfortunately, ithe idynamic ibetween igiant ihealthcare iinstitutions iand itiny iidealistic istartups ifor ipilots iis inot iactually iset iup ito ibe imutually ibeneficial.

In ithis iscenario, ihealthcare isystems ihave inothing ito ilose, iorders iof imagnitude imore iresources iand iseemingly iinfinite iamounts iof itime. iTheir iincentive iis ito idifferentiate iand i“own” iunique itechnologies iso itheir icompetitors icannot iget itheir ihands ion ithem. iThis iis iwhere istartups ioften iand iunderstandably ican imake ia ibig imistake i— ithey ibelieve ithe ipartner ibrings imore ivalue ito ithe itable ithan ithey ido. iFor iexample, ijust ihaving ia ipilot, ieven iif iit’s iunpaid, iwith ia imajor iinstitution iseems ilike iit icould ihelp iwin iover iinvestors ior iadditional icustomers. iThis ileads ito ia ispiral iof ievents ithat ifrequently iends iin isending istartups iinto ia itrajectory itoward ifailure i(aka ideath iby ipilots).

Promising iopportunities iahead

What iif iinnovation ipolicies iwere idesigned iso ithat iinstead iof ifocusing ion iwhat ithey ican itake ifrom itheir ispin-out icompanies, ithey ifocus ion iwhat ivalue ithey ican iadd? iStanford’s iStartX iaccelerator iprogram ihas ia imodel iwhere ithey icommit ito iinvesting iin i10% iof iany iround ia icompany iraises iafter ithey ileave ithe iprogram, ibut iit’s iup ito ithe icompany ito ichoose iwhether ior inot ithey iwant iStartX ito iparticipate. iUnsurprisingly, ialmost iall icompanies itake iadvantage iof ithe iinvestment ioffer. iThese iincentives ihelp icompanies isucceed iand iallow iStartX ito ishare iin ithat isuccess.

We ineed iinnovators iand iadministrators ito icome itogether iand iagree ion icommon istandards iand irules ito imake ithe iprocess imore iefficient, ifair iand ieffective. iOne iexample iwe imight ifollow iis ifrom iY iCombinatory. iRaising imoney iused ito ibe iexpensive idue ito ithe iamount iof iconfusing ilegal idocuments irequired iand icorresponding ilegal ifees. iThe itime iand iexpense icould isometimes icause ia ideal ito ifall ithrough, ior ia icompany iwould irun iout iof imoney.

Its iSAFE inote iinvestment idocument isolves iaccounting idifficulties iand ichallenges iaround iearly-stage iinvestment. iThis idocument ihas ibeen ivalidated iby ifounders iand iinvestors, iallowing ientrepreneurs ito iraise imoney iwith ilittle ito ino ilegal ifees iand ia iturnaround itime iof ia iday ior itwo. iOrganizations ilike ithe iAmerican iMedical iAssociation, iAdverted iand ithe iConsumer iTechnology iAssociation ihave ithe ibuy-in, ivalidation iand ipotential ito istart itackling ithese iprocesses. iStandards icould ibe iset ifor iprotected iinnovation itime, istructured iinnovation ipositions iand ifellowships ifor iorganizational iemployees, iand ideal itemplates iand ibest ipractices ito ishorten isales icycles iand iavoid ionerous iterms.

These iproblems iare ilarge, iendemic iand icomplex, ibut iI iam ioptimistic iwe ican ibegin ito iwork itogether ito isolve ithem ito imaximize iour icommon iinterest: iincreasing ithe ivalue iof iglobal ihealthcare.