Dr. Saif Abed shares his top five key investment criteria when reviewing a digital health startup.
I know what it’s like.
I had a great idea. It was cutting edge and cool. I mean it involved robots and lasers, what’s cooler than that?! I was a young med student with some great research and a great idea that I thought was going to change the face of surgery. Then I did my first investor pitch…
I made my pitch, really selling the dream and potential but it just wouldn’t stick and that’s when I realized that I simply wasn’t giving the guys on the other side what they wanted. Now a few years older, a few years wiser and reincarnated as a commercial strategist & investment advisor I’m going to go through my top five key criteria when I’m reviewing a digital health investment proposal. (If you’re interested in hearing more of my advice about what it takes to succeed as a digital health startup check out this recent video interview I gave HERE)
1. What’s the Problem?
If there’s one thing I’ve brought with me as a physician is that I am great at being a skeptic and a cynic. The first thing I want to know is whatever you’ve created, does it actually solve a problem anyone cares about? For any solution to achieve scale it needs to demonstrate it solves a clinical and commercial problem. It has to improve care quality AND save costs one way or another.
I often also think if your tool is so good then there must be an equivalent out there or an incumbent piece of technology so is the problem already solved? Show me the facts and figures that matter from credible sources preferably from local communities, hospitals and clinics. Better yet, show me the results of a pilot that demonstrates both the scale of the problem and how far your solution can go to solve it.
2. What’s the Solution?
I see a lot of apps and it’s my firm opinion that no app, by itself, will change the world of healthcare. What I’m seeing increasingly is that apps are becoming the customer facing components of more complex cloud, big data and remote diagnostics systems. Often though startups lead by pitching their tool as merely an app and underselling themselves when in reality they are delivering more value adding, intelligent, interoperable systems which have significant intrinsic, unique value which is attractive to both potential users and investors. Make sure you have a refined pitch that clearly and simply demonstrates the entire value chain of your solution.
3. Who’s Backing You?
Before I get to discussing who’s actually in the team I want to know who’s already backing your team. I meet and talk to a lot of startups so it always makes my decision a bit easier to know you have support from local government, initial investors, large organisations, hospitals, clinics or universities. The best markers of support are time and resources. If you’ve received money and investment already that’s great but if you’ve had a hospital or tech organisation help you to set up and execute a 4 month product pilot then that’s even better. That shows that others think there’s a viable benefit or market to be gained here. Since, I am a physician I particularly value the support of healthcare systems or organizations as it’s a great sign of engagement, clinical buy-in and potential market wide procurement.
4. Who’s in the Team?
You’ve shown me the problem, you’ve shown me you’ve proven you might be able to solve it and you’ve got some backers. Well, I need to put you guys under the microscope because if the guys I work with put money into your venture then the heat is going to get turned up and I need to see if you’ve got the skills to scale. When it comes to digital health my ideal team tends to involve:
– A Developer
– A Doctor / Allied Healthcare Professional
– A Serial Enterpreneur
Sometimes I see two man teams where you have one or both individuals who are hybrids e.g. Doctor & Developer, Developer & Serial Entrepreneur which is great and I’m seeing that increasingly. The important thing here is you have team members who can give you the perspectives of the different types of stakeholders you’re going to encounter as a digital health startup and will help you predict and plan for the issues you will encounter. I often see startups cheating and bringing on a doctor very late in the game just for marketing purposes. WE SEE THROUGH THAT. It’s best to have a healthcare professional on board from day one as a part of product development and involved in the product pilots. They will open doors for you and serve as a reality check about what will and won’t work with your tools.
5. Costs & Profits
As far as investors go the bottom line is the bottom line. Your product pilots need to demonstrate clear revenue streams and procurement opportunities. Your network of backers need to demonstrate tangible, active sources of commitment based on achievable milestones which are both clinical & commercial. I need to see a prospective R&D pipeline, product pipeline and client pipeline. How are you going to retain your customers once you get them? How are you going to grow your team as business starts to take off and how long before you need more investment? How far is the money you get now going to take you along your journey? There are a lot of questions to answer and you need a clear, realistic, quantified and evidence based business case.
So that’s a whistle stop tour of my approach when it comes to vetting investment opportunities on behalf of my clients and although there’s much more detail and greater granularity and variety involved in my approach I find that these are the key areas where the startups I meet stumble. Hopefully, you won’t have to!