For a country with over 1.3 Bn people and a $400 Bn healthcare market, we’ve only a few healthcare-focused VCs. because the health tech system matures over a consecutive decade, we have a tendency to ar coming into the part wherever VCs with deep sector experience can add a great deal additional worth to their portfolio through their accumulative expertise, collective knowledge, and shared information.
This begs the question, however, do these investors (who were erstwhile healthcare professionals or operators) understand the system, and do they judge health tech startups any differently? Let’s break down that question:
The drawback
Total Addressable Market (TAM) terms and options in virtually each pitch deck we see, however sadly it remains one of the foremost misunderstood terms within the system. usually in health tech startups, we tend to see cap as being calculated in ‘billions of dollars supported the amount of potential patients times the common lifespan pay on the health care condition.
The real question is what proportion of this can be aimed to be potential revenue for the corporate and that we continually appreciate a bottom-up calculation to grasp the precise thanks to reaching the Serviceable obtainable Market (SOM).
Competition is another key thought. As a template, this can be shown as ‘the different 3-4 start-ups within the space’ in a 2×2 supported two convenient axes specified this startup stands out! provision isn’t concerning distinctive startups, it’s concerning how patients get care nowadays. Competition ought to embody everything:
• Legacy solutions: To answer the question, “Why can’t hospitals do this?”
• Traditional solutions: To answer the question, “How will this take issue from a home remedy?”
• Non-healthcare school solutions: To answer the question, “Can Whatsapp solve this?”
• Adjacent player solutions: To answer the question, “Why can Practo or 1mg not begin this?”
The last item specific to Indian health care is the elaborate understanding of its distinctive neutral dynamics once thinking of the matter. the truth of average financial gain in an Asian country, skewed health care access, and the poor sum of money, among different factors, should be factored in once thinking of an answer. it’s demoralizing to envision terrific technology solutions while not having a deep understanding of how and why can doctors, hospitals, or perhaps patients can ever use these!
The answer
We in health tech finance manage this question daily — virtually and figuratively. we have a tendency to should perceive that provision could be multi-stakeholder machinery and also the introduction of the latest components is extremely tough unless the answer is exponentially higher. simply another EMR, online pharmacy or surgery individual has no area for worth addition to stakeholders unless it offers an exponentially higher worth proposition. This should be tested by speaking with relevant stakeholders on whether or not they can pay for or partner with this answer nowadays or not.
As a healthcare-focused fund, our diligence focuses to a large extent on care protocols and clinical outcomes. Best health tech companies often look for such funds. There should be how to live and show improvement in patient health! that’s the core reason this trade exists. Engagement and patient satisfaction scores are important, and clinical outcomes are of utmost importance to create a long-run invulnerable business in health care.
A key part of the puzzle is technology quantifiability. Healthtech ought to ideally provide us the flexibility to start motor exponential growth at some stage of its journey wherever the speed of provision exceeds the speed at which we tend to invest in resources to deliver that care. we glance for founders and firms to own a ‘technology-first’ outlook although they’re finding a conventional drawback in an offline setting.
And last up is restrictive compliance. As we have a tendency to see Aadhar, UPI, and ABHA adoption, we are going to move towards additional rules in health care record maintenance and information privacy. we have a tendency to judge the potential tailwinds or risks that an answer is exposed to, supported by these trends.
The Problem Solvers!
Fundraising goes on the far side of providing capital, it’s concerning the formation of a business partnership. to confirm a fortunate collaboration, investors closely check out who the skipper of the ship is. In health care, it’s necessary to grasp the motivation of the founders, to be aligned on the vision and values, and continually be on the proper aspect of health care.
The innovation team ideally ought to have a powerful sense of the health care system and its workings that leads them to a key insight that nobody else has. The success of VC investments is joined to finding alpha founders.
Proof point Of the answer working
The problem is massive enough and necessary, the answer is smart, and the founders are stellar. currently, the sole issue to probe is execution. The proof points for the measure vary in step with the stage of the corporate and a few are specific to health care.
• At the concept or pre-seed stage, we tend to over-index on the team’s prototypes, speed, depth of experimentation, and early indicators of execution (like pilot results, partnership commitments, etc). The vision and work arrangement of the founders are necessary guiding documents.
• At the seed to series A stage, we glance for additional quantitative client measures to envision client adoption and engagement (Number of days to one hundred customers and D30 retention), internet Promoter Score (ideally quite eight), and fortunate clinical outcomes from early pilots and studies. At this stage, we tend to wish to see some stability within the money metrics in addition (ideally LTV/CAC larger than 5) and also the infrastructure in situ for clinical validation or trials. Within the case of an EU/US GTM, we tend to pressure-check the understanding and sensible feasibility of obtaining CE/FDA approval if relevant.
• At the series A+ investments, the main target could be a ton additional on operations excellence, elaborate review of financials, and hardiness in restrictive and clinical protocols. We tend to also be stricter concerning the money projections and scrutinize all assumptions supported by traction to date and trade comparables.
In Summary
Every analysis is followed up by thorough due diligence. The standard of the information area could be an important indicator of the company’s internal processes and may ne’er be underestimated. The diligence spans legal and money details and involves a great deal of your time, capital, and resources from all parties. Hence, it’s crucial that the best health tech companies accurately represent their company and keep it clear.
