Medical Startup Trap
We publish the translation of Min-Sang Sin Kim, a partner of XLHEALTH, a Berlin-based venture fund that specializes in A-series investments in digital health technologies. Min-Sang Sin Kim believes that medical startups with innovative solutions have the potential for impressive social change.
Min-Sang Sin Kim:
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Although 2015 was very successful for digital technology in medicine, having collected a total of $ 4.5 billion in venture capital investment , medical startups got into the news for other reasons when reports of such sensational projects as Theranos blood test lab and brain training app appeared Lumosity , proving that their products are not effective and do not provide accurate data.
According to Kleiner Perkins Caufield & Byers, Beth Seidenberg, digital medicine startups are increasingly seen as a means to reduce costs, increase profits, and reduce paperwork for patients, doctors, and service providers. Concentrating on company performance and company growth, they often forget about such an important factor as TRUST.
In the light of recent developments in this area - and there are especially many of these events now - medical digital entrepreneurs should remember the importance of building and maintaining trusting relationships with key stakeholders to support their business.
Trust value
Although building reputation and credibility is important for all startups in different areas of activity, it is especially critical in medical technology. It's not just that people are more demanding when it comes to their health and well-being; Doctors also choose contractors in this area very carefully, due to the complexity and responsibility of the tasks performed.
Many entrepreneurs in this area say that the main problem they face is the attraction of financing and the formation of a business model. Both are somehow connected with the issue of trust.
The market for digital technologies in medicine is still relatively young, that is, many investors are only getting acquainted with this rapidly growing industry, and are not eager to lay out money. One of the tasks of an entrepreneur is to convince potential investors that they know the market, to provide evidence that their product / technology is effective, or to demonstrate how to make a profit on numbers.
How can an entrepreneur demonstrate the reliability of his product / service?
In addition to attracting capital, the question of which model to choose is equally important: B2C or B2B. I do not think that it is necessary to choose or / or; it would be better to combine these models to develop a comprehensive strategy. Having already seen 2,300 startups in this area, and having attended many meetings with portfolio companies, I noticed that the B2B interaction model absorbs most of the revenue. And making deals on the B2B model usually comes down to two things: customer retention and trust.
A high percentage of customer retention within the B2C model is an indication that the startup somehow makes a profit, but to demonstrate the reliability and attractiveness of your company, potential partners need confidence in the product. If the basis of a business relationship is not trust, such transactions will be very difficult to conclude.
It is also important to remember that each transaction and operation can either strengthen or weaken the partners' faith in your project, and if they lose faith in a startup, for example, if a scandal arises due to an inaccurate assessment of the company's value or a controversial motivation, it will be difficult recover.
Creating a solid reputation
How can an entrepreneur demonstrate that his product / service is reliable and trustworthy?
The first right step in demonstrating product reliability will be obtaining an FDA (Food and Drug Administration) approval or product certification. For mySugr (a startup in Vienna that aimed to change the perception of diabetes care), adherence to FDA / EU standards was a priority from the start. The company wanted to make it clear to those interested that it offers a medical product that solves real health problems, unlike gadgets that improve well-being.
Creating a brand with a good reputation takes time.
After launch in 2013, mySugr registered its Logbook application with the FDA. Michael Forish, quality director at mySugr, told me that in order to receive a certificate, ultimately, it was necessary to clarify how the application will work, including how to hire employees and manage patient risks using certain FDA terminology. In general, the process of obtaining a permit at the FDA depends on the complexity of the product, but start-ups should plan at least 6 to 8 months for certification in the EU and 9-12 months in the US.
Forish explains that, as mySugr cooperates with pharmaceutical and diagnostic companies, obtaining FDA approval was critical, because compliance with regulatory requirements is a prerequisite for product implementation in these industries.
Jörg Land, director of the Sonormed project, said that obtaining the European Certificate of Compliance for the Tinnitracks tinnitus application (the cost of which is covered by the large German insurance company Techniker Krankenkasse) was an important step in building trusting relationships with patients, doctors and partners.
Mikko Kiiskila, director of the Finnish company MeeDoc , shares his opinion, despite the fact that the certification process took more than a year and a half and demanded the involvement of lawyers and government representatives, and said that it is very important to demonstrate the quality of the product when working in such a conservative area as healthcare . Today, the cost of the product is compensated by the state insurance policy of the Finnish government and by insurance companies in many countries.
An alternative way to demonstrate the value of your product is clinical trials. Unfortunately, testing, as well as certification, can take a lot of time. German startup Emperra, together with an insurance company, conducted clinical trials to demonstrate the medical benefits of digital solutions for monitoring diabetic patients.
Although the research took 2 years, Emperra Director Christian Cray believes that product testing was a significant factor that allowed the product to be included in the package of insurance companies, as well as satley as a serious argument in negotiations with partners - all parties wanted to wait for the test results before concluding an agreement.
Similarly, the German company NeuroNation , engaged in applications for brain training, conducted tests in conjunction with two German universities. Studies have proven that an application can improve users' short-term memory. Although it took a year and a half, the co-founder of NeuroNation, Jacob Futoryansky, said that testing was an important step in the process of gaining user confidence, and ultimately allowed us to establish a higher level partnership (with insurance companies, clinics, etc.) and increase the percentage of customer retention.
In general, entrepreneurs engaged in digital healthcare solutions. must remember that creating a brand with a good reputation that will be trusted is a long-term, continuous process, and yet is critical to the success and stability of a company that seeks to achieve the status quo in health care.
Min-Sang Sin Kim:
')
Although 2015 was very successful for digital technology in medicine, having collected a total of $ 4.5 billion in venture capital investment , medical startups got into the news for other reasons when reports of such sensational projects as Theranos blood test lab and brain training app appeared Lumosity , proving that their products are not effective and do not provide accurate data.
According to Kleiner Perkins Caufield & Byers, Beth Seidenberg, digital medicine startups are increasingly seen as a means to reduce costs, increase profits, and reduce paperwork for patients, doctors, and service providers. Concentrating on company performance and company growth, they often forget about such an important factor as TRUST.
In the light of recent developments in this area - and there are especially many of these events now - medical digital entrepreneurs should remember the importance of building and maintaining trusting relationships with key stakeholders to support their business.
Trust value
Although building reputation and credibility is important for all startups in different areas of activity, it is especially critical in medical technology. It's not just that people are more demanding when it comes to their health and well-being; Doctors also choose contractors in this area very carefully, due to the complexity and responsibility of the tasks performed.
Many entrepreneurs in this area say that the main problem they face is the attraction of financing and the formation of a business model. Both are somehow connected with the issue of trust.
The market for digital technologies in medicine is still relatively young, that is, many investors are only getting acquainted with this rapidly growing industry, and are not eager to lay out money. One of the tasks of an entrepreneur is to convince potential investors that they know the market, to provide evidence that their product / technology is effective, or to demonstrate how to make a profit on numbers.
How can an entrepreneur demonstrate the reliability of his product / service?
In addition to attracting capital, the question of which model to choose is equally important: B2C or B2B. I do not think that it is necessary to choose or / or; it would be better to combine these models to develop a comprehensive strategy. Having already seen 2,300 startups in this area, and having attended many meetings with portfolio companies, I noticed that the B2B interaction model absorbs most of the revenue. And making deals on the B2B model usually comes down to two things: customer retention and trust.
A high percentage of customer retention within the B2C model is an indication that the startup somehow makes a profit, but to demonstrate the reliability and attractiveness of your company, potential partners need confidence in the product. If the basis of a business relationship is not trust, such transactions will be very difficult to conclude.
It is also important to remember that each transaction and operation can either strengthen or weaken the partners' faith in your project, and if they lose faith in a startup, for example, if a scandal arises due to an inaccurate assessment of the company's value or a controversial motivation, it will be difficult recover.
Creating a solid reputation
How can an entrepreneur demonstrate that his product / service is reliable and trustworthy?
The first right step in demonstrating product reliability will be obtaining an FDA (Food and Drug Administration) approval or product certification. For mySugr (a startup in Vienna that aimed to change the perception of diabetes care), adherence to FDA / EU standards was a priority from the start. The company wanted to make it clear to those interested that it offers a medical product that solves real health problems, unlike gadgets that improve well-being.
Creating a brand with a good reputation takes time.
After launch in 2013, mySugr registered its Logbook application with the FDA. Michael Forish, quality director at mySugr, told me that in order to receive a certificate, ultimately, it was necessary to clarify how the application will work, including how to hire employees and manage patient risks using certain FDA terminology. In general, the process of obtaining a permit at the FDA depends on the complexity of the product, but start-ups should plan at least 6 to 8 months for certification in the EU and 9-12 months in the US.
Forish explains that, as mySugr cooperates with pharmaceutical and diagnostic companies, obtaining FDA approval was critical, because compliance with regulatory requirements is a prerequisite for product implementation in these industries.
Jörg Land, director of the Sonormed project, said that obtaining the European Certificate of Compliance for the Tinnitracks tinnitus application (the cost of which is covered by the large German insurance company Techniker Krankenkasse) was an important step in building trusting relationships with patients, doctors and partners.
Mikko Kiiskila, director of the Finnish company MeeDoc , shares his opinion, despite the fact that the certification process took more than a year and a half and demanded the involvement of lawyers and government representatives, and said that it is very important to demonstrate the quality of the product when working in such a conservative area as healthcare . Today, the cost of the product is compensated by the state insurance policy of the Finnish government and by insurance companies in many countries.
An alternative way to demonstrate the value of your product is clinical trials. Unfortunately, testing, as well as certification, can take a lot of time. German startup Emperra, together with an insurance company, conducted clinical trials to demonstrate the medical benefits of digital solutions for monitoring diabetic patients.
Although the research took 2 years, Emperra Director Christian Cray believes that product testing was a significant factor that allowed the product to be included in the package of insurance companies, as well as satley as a serious argument in negotiations with partners - all parties wanted to wait for the test results before concluding an agreement.
Similarly, the German company NeuroNation , engaged in applications for brain training, conducted tests in conjunction with two German universities. Studies have proven that an application can improve users' short-term memory. Although it took a year and a half, the co-founder of NeuroNation, Jacob Futoryansky, said that testing was an important step in the process of gaining user confidence, and ultimately allowed us to establish a higher level partnership (with insurance companies, clinics, etc.) and increase the percentage of customer retention.
In general, entrepreneurs engaged in digital healthcare solutions. must remember that creating a brand with a good reputation that will be trusted is a long-term, continuous process, and yet is critical to the success and stability of a company that seeks to achieve the status quo in health care.
Source: https://habr.com/ru/post/300126/
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