Managing risk in healthcare startups

Transcription

1 Managing risk in healthcare startups

2 Venture capital investors focus on risk and how they can decrease it. They want to make sure the entrepreneur knows about the risks ahead, and how is he planning to cope with them should he need to. Some entrepreneurs are not willing to talk about those risks, as they think maybe the investor will factor them and therefore the start-up will receive a lower valuation Right? Wrong. Well, if the investor does not hear about the risks, he will quantify them himself pretty ruthlessly, usually with a bigger impact on the valuation. The message you want to send to the investor is that risks are under control, and you are ready to face them.

3 "Free" business models in healthcare

4 Is it possible to give away something for free in healthcare and still make a decent profit out of it? Well, in my opinion it certainly is. Free or low-cost will come to healthcare in the coming years. Free is what citizens want and free, increasingly, is what they are going to get. But free does not mean no profits. The start-up that is giving away the good for free can make a living by capturing the client and charging him/her for different things.

5 What is value in healthcare?

6 Value can be defined from an economic perspective as outcome divided by cost. Value in healthcare services is often defined as clinical excellence, and that means that receiving the best medical treatment at the lower cost would be the best value scenario. Right? Wrong. There s a lot more in value than its economic perspective. Some healthcare initiatives are failing to see this and are betting on the excellence dimension as the only dimension that really matters. I am not saying that excellence is not important, I am just saying that in a world of excellence inflation (everybody is excellent), there are many other dimensions of value that really make a difference when the patient chooses to stay at a hospital or pay for a service.

7 Strategy 101 for healthcare start-ups

8 Healthcare professionals are not used to strategical thinking. Strategy is about choosing a future for your idea and about defining how to get there. Strategy is about choice, which affects outcomes. Healthcare start-ups can survive for short periods of time in conditions of relative stability and little competition. But, guess what, in the real world there is no such thing as stability or little competition. So, you need to have a strategy.

9 Identifying lies in financial projections

10 One of the most dangerous mistakes an entrepreneur can make is to seek confirmation of his actions rather than seeking the truth. They want to do something, so they talk about it with people who work for them. They talk to their families and friends. But they're only looking for confirmation; they're not looking for the truth. They're looking for somebody to tell them they're right. But the truth always comes out, especially in financial projections.

11 Some thoughts on personalized medicine

12 Personalized medicine could be seen from an economic point of view as delivering mass customization to people in a healthcare context at an affordable cost. Personalized medicine has attracted a lot of hype and is often perceived as a far-future initiative that is not yet ready for useful value delivery to realworld patients.

13 A different venture capital model?

14 Venture capitalists fund insights that is, they let the magical process that generates new ideas take its course, and then they jump in. I ve always wondered if a different kind of model could fly, a model where a venture capital company makes insights rather than funds them, hiring smart people, coming up with ideas, patenting them and then licensing them to interested companies. Science fiction?

15 Knowledge is slower than innovation Imaging technologies are nowadays so good at peering inside our bodies they may have surpassed our capacity to interpret the results. Many findings are today what we doctors call incidentalomas, that is, false positives; for instance, images that look like cancer but after surgery turn out to be benign. We see smaller things, and smaller, and smaller, but we are unable to correlate them so quickly to what is normal and what is not. This should be a concern for healthcare professionals.

16 Value for Physicians

17 Physicians and investors have a very different view on value. Physicians tend to focus only on the product (they love to talk about it, to share it with others), and therefore they are concerned about product-related milestones, such as prototyping, patent request or administration approval (FDA/European approval).

18 Value for Investors

19 Investors on the other hand, think in a more complex way. They are not really interested on the product, they are more interested in all the milestones needed to take it to the marketplace, and capture value. They focus on team building, distribution, manufacturing, market introduction and potential exit milestones. Both parties speak different languages.

20 Healthcare 2.0: hype or reality? The Internet will end up by rationalizing, and making transparent all of those forces that have contributed to the current health care market failure. Health 2.0 will be a game changer, wikis, mashups, videos, bloggers, and assemblers of usergenerated data all designed to connect health care consumers, providers, and players in a seamless web of data and ideas.

21 Refining healthcare business models

22 The question here (and in every healthcare initiative) is "where is the money"? * In the sale of the product? * In the recurrent revenues month after month? * In services that we may sell in the future to this customers?

23 Healthcare services value chain

24 This is a useful diagram to show how value is generated in a healthcare service... This concept was created by Michael Porter, and I find it extremely useful to evaluate healthcare opportunities in the services sector.

25 Evaluating a medical device opportunity When evaluating an opportunity in the medical devices sector, it is always interesting to focus on how the product fits with the fundamental economic drivers of the health care system. Investors usually assume anything you are telling them about the product is fine (subject obviously to a later thorough due diligence), but they want to see the medical device from the business side of health care and work their way back to its science and technology.

26 94% 94% of life sciences companies (biotech, diagnostics, medical devices) start in hospitals or academia... So, no "garages" in healthcare entrepreneurship. When will hospital managers realize the immense potential they have inside their institutions?