Does a young company invested in digital health have a chance at success? Co-founder of US-based accelerator Blueprint Health Matthew Farkash explains the challenges, as well as the potential, in a booming sector
Matthew Farkash has noticed an unfortunate trend when technology-based websites report on health startup news.
“You’ll get a really positive headline: ‘X amount of money raised for direct to consumer healthcare product,’” he says.
“Then things go quiet, and a year later, there’s another article saying the company has pivoted away from consumers and direct to employers. Because they haven’t been able to figure out a way of selling to consumers and having that be a sustainable model.”
As co-founder of Blueprint Health, a health accelerator operating in a market where outpatient rehabilitation alone is worth US$19bn a year – one might expect Farkash to be more optimistic.
But, in a climate where venture capitalists such as Dave Chase call 98 per cent of digital health startups ‘the walking dead’, it pays to be pragmatic, Farkash says.
He, along with other accelerators worldwide, sees an ultimate end-game where novel ideas about curing our diseases, our hospital systems, can be translated into successful and sustainable businesses.
“A lot of people are excited about doing something in the healthcare space, because of the fact you can do good and do well. But it’s not a typical Silicon Valley startup, and therein lies the rub,” he says.
“People come in bright-eyed and bushytailed thinking they’re going to have positive effects on patient outcomes and things like that, but it’s actually really challenging to build a sustainable business in the healthcare world – and if you can’t stick around, then you can’t impact change.”
However, it is clear that he is willing to give it a go. The US-based accelerator Blueprint has produced success stories such as online rehab portal Tweeq, appointment booking platform NexHealth, founded by Alamin Uddin and Waleed Asif, and SimplifiMed, where patients take photos of their medication.
Their success can be attributed to a 300-strong community of mentors and a 3-month intensive programme that has ended up building Blueprint an investment portfolio of 78 companies, which is, says Farkash: “sort of the nature of the accelerator model – you’re investing in batches of companies at the same time, you build up [a portfolio] relatively quickly.”
Speaking to Vision during his visit to Dubai to meet digital health startups on the Dubai 100 Accelerator, Farkash is ultimately positive about the future. Below, he lays out some of the key lessons for a digital health startup to remember.
Remember that you are often working within antiquated systems
“Healthcare in general is sort of chaotic, archaic and has operated in the same way for a long time. As the sector is lagging as it relates to the implementation and adoption of technology, that creates a lot of opportunity. But the challenge is being able to sell into large healthcare enterprises, whether it’s hospitals, medical device companies, or pharmaceutical companies. There are long sale cycles. But, these large companies are slowly waking up to the fact that technology will have an impact on their business.”
Decide who you’re selling to
“In the US, patients are not used to paying for their healthcare. If you have an idea on how to improve the patient experience, it sounds like a good idea, but who would pay for it? That’s really a key piece of what we’re looking for when we’re looking at companies. Understanding what the problem is, whose problem it is, and what the willingness to pay is. You could have the greatest solution for a patient in the world but if you don’t understand physician workflow or reimbursement, you’ll get zero adoption.”
Don’t adopt a ‘build it and they will come’ mindset
“In order to have longevity you need to raise some capital, because of the long sales cycles of the larger enterprises. In Silicon Valley for example, there are a lot of consumer businesses who have had the mentality that if they have enough users, at some point they will figure out how to monetize them. That’s worked in a few cases, but they are few and far between. Every investor wants to bet that they find the next Facebook, or Instagram, or WhatsApp.”