A few of the biggest mistakes and misconceptions in health startups
Just a fools observations...
So a year ago, I wrote this piece as there were some misconceptions that kept popping up and seriously leading many astray.
Somewhat unsurprisingly, here we are a year on - and it’s still relevant as ever.
But, since so many of you legends have joined since then (oh hey you extra 3000), and I’m often asked about this, I decided to dredge it up again. 💜
So - without further ado, here is me being lazy. And recirculating this gem (cringe ) from 2022…
DISCLAIMER: These are just my old observations. Everyone is different and take my word at your own peril. Disagree with it? Epic - let me know!
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Over the past few years, I’ve spent far too much time talking to entrepreneurs, industry, and investors.
And in Startup and “innovation” world, there’s a lot of noise and BS. Which can be hard to break through. So now, sitting firmly (lol, it’s been like a second) in the investor seat - I thought it was time to clear up a few common misconceptions I see on the daily.
Now before we get to it, a word from some legends at…
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Ok, Here we go…
1) Funding ⍯ Winning
This “sexy” measure of supposed success is the biggest misconception out there. But, raising capital, or a big round that made the press - doesn’t necessarily mean a company is “winning”.
At least, at what matters.
Yes, it’s often crucial - with large amounts often needed for health ventures. And to be celebrated. But nothing can beat execution, product, customers, and outcomes.
The reality is you will never know the full story behind the curtain of companies… The dirty details. The close calls. Sacrificed equity, control, or sanity.
How many startups have big press releases then disappear never to be seen again? Or raise crazy numbers just to crash out? Or land in court? *Cough* Theranos
Getting funding and building are two very different games. But if you do both well, that’s a winning combo.
2) It's a Relationship Game
Life is. Yet, some seem to forget this.
People usually want to help, work with, and invest in people they like and/or respect. But relationships take time. So start early. And be human. You never know who, or what will be useful or lead somewhere amazing.
Especially from an investment perspective. Investors often like to get to know you, follow your journey, and build conviction - as often, what you’re really investing in when you invest in a company is the people building it. Ideas are a dime a dozen, and execution is everything.
And, you attract what you put out. So if you treat people like a transaction, they will feel it. And it might not get you very far.
“At the end of the day people won't remember what you said or did, they will remember how you made them feel.”
― Maya Angelou
3)Understanding what Investors actually look for…
No one will ever care for or understand your business like you. Nor should they. But to get others on board, it’s useful to think about what drives them.
And usually, at the end of the day, it’s a growth and money-making game.
VCs are looking to make big returns.
I.e. - You need to be looking to build a bloody big business to get in the door
Usually big with a B… for Billions…
“But so many companies get funding”.
Sure, but in true VC this is done with the knowledge that often only a small fraction of those will ever make a truly big return, and make up for the rest. Which may go to zero. It’s the power law.
So unless it’s one hell of a big category in Australia or globally - many won’t touch it.
💡But every investors approach, values, expected returns, and processes are different.
So, make sure you do some research and know who you actually want to talk to. And how they operate. It will save you a hell of time and heartache.
They do say it’s like getting married after all…
Make sure you’ve asked yourself…
Do I really want, or need VC funding?
And, is this route, or these investors the right fit for my business?
And remember, there are many more investors in the game than just VC…
4)Concision and clarity are your friends
The true valuable commodity these days is attention. And you usually win by creating a great experience. Want to win people over? Respect their time and attention.
Quality > Quantity.
This applies to well, most things.
Decks. Emails. Marketing. Product features. At least, in the beginning… But it seems to be something, health companies especially - seriously struggle with.
Because with decreasing attention spans - regardless of the medium, you probably have only seconds to capture it. And them.
5) Keep it Simple Stupid
When explaining things like deeply technical or scientific concepts, approach it like you would a 10-year-old (but damn, 10-year-olds are pretty darn smart these days).
Pro tip: Unless they specialize in the area, treat us investors, kind of like idiots (at least initially). And try to make your concepts as simple as possible.
You’re the expert - not us.
But even when simplifying… make sure you paint a decent picture and don’t leave seriously important info - like what gives you your special sauce out.
6) Invest early in the things that matter
By the time you realise you need something, it’s usually too late.
Relationships, PR, staff, funding.
It’s a cliche, but for good reason - foundations are everything. So if you really are in this for the long hall, it pays to lay solid ones early.
Relationships & Brands take months to years to form. Recruiting top talent takes time and serious incentives. Funding… is almost always underestimated. And can drag on far longer than you could imagine.
The good news - is by planting seeds early and investing in your story, relationships, brand, culture & processes… You can speed up everything infinitely for yourself later.
It’s like compound interest. It might seem like a waste today but it sure as hell won’t be tomorrow.
7)Bigger isn’t always better
Growth is great. As are big valuations and funding rounds. But like anything, it depends on the situation. And it’s often overhyped.
If you grow too fast, take a sky-high valuation, or bite off more than you can chew, you might be in for a rude wake-up call. Whether it’s going unceremoniously up in flames like Fast, your team or product breaking, or heavy expectations from investors to deliver on milestones. It can get ugly.
The market was hot. Now… it’s just not.
With mass layoffs, funding pullbacks, and valuation cliff drops. And multiple industry darlings going bankrupt.
Money is great. But only if you’re ready for it and at the end of the day it’s all about what you do with it.
8)Undervaluing Storytelling - The importance of Brand, Messaging & Marketing
These are some of the most important tools you can have. But it seems to be the thing many put last. And my personal pet peeve.
I know… I used to be skeptical too.
But just think…
Why do you know Coke?
And, will you likely buy it over the 10 cheaper but unknown brands beside it?
Why are some companies getting so much PR?
Or known as the place to go to work?
Because. Of. Brand.
Storytelling + Distribution
People invest in, and buy from people, or brands, they trust.
Build it and they will come is BS - You know what you’re doing, but nobody else does. So how and why would others care? That’s where a strong story, brand & marketing can help.
9)Not tailoring your Message
Just like one size definitely doesn’t fit all, neither does one message.
Tailoring your message for your target audience, whether it is a specific customer, investor, partner, or even the medium - is the best way to win.
If you are everything to everyone, then you are nothing to no one.
It’s not about you - it’s about the other person you are trying to reach.
So don’t just blanket message or copy and paste. You are infinitely increasing your chances of being ignored.
10) Let’s talk about D*cks baby...
Decks. We’re talking about decks. And they are often… a little lacking.
If the reader doesn’t get a rough idea in 1-2 minutes of reading your deck- there’s a good chance they are not going to go any further.
Coming back to less is more. And valuing, and capturing attention… It’s best to make it as easy as humanly possible to understand.
And telling a good story.
Communication is a superpower. Not to mention, a sign of truly understanding a topic - is being able to distill it as simply as possible.
“But what I do is so complicated and can’t possibly be distilled”.
I know. Health and science are hard. But if you nail it - the rewards can be huge.
11) Don’t be a dick
The world is a small place. In the “normal” business world and medicine - coldness and savage competition are often rewarded. But not really startup land.
Why am I raising this point? Because there seem to be a lot of “traditional” operators who enter the space and don’t seem to quite get this.
Pro tip: Give first. And you’ll find what comes back will usually be far greater.
The saying you catch more flies with honey than you do with vinegar is definitely true.
Basically - You need it. With industry, stakeholders, customers, and patients.
It’s one of the biggest predictors of success.
To quote the cliches from our panel at DHF 2022
"Teamwork makes the dream work
Community is Key
And network is your net worth”
13) Underestimating Health’s “Special” Challenges
Health startups are extra hard. With endless extra hurdles.
Sales processes & cycles. Regulation. Trials. It all takes a hell of a lot of time, and almost always more than you think. We all know it…
But it seems in chats with investors, many either:
1) Dance around it
2) Think because there has been 1 chat, a partnership, or “pilot” means “it will happen”
3) Claim to have a lil more traction than they do
Avoiding “elephant in the room” like obstacles do you no favours. And doesn’t instill confidence or faith that you are the right person/people to make it happen. Best to tackle it upfront or be prepped for these questions.
That by no means, means don’t be confident you’ll get there. 😊 You’re obviously not expected to know it all. But being aware and acknowledging the potential or current problems is a big bonus.
14) Learn IP & Equity Early
These are two fundamentals that can set the baseline for your success. But damn, it’s tricky.
If you partner with certain players; Universities, Accelerators, or Venture Studios - they often set certain terms or may take a chunk of either. Which could, even enable them to take control. So, try to know your stuff, or have people around who do.
These are things that can make or break your business. With a great impact on if you are able to raise more money, get future investors, or make your own decisions.
There’s a heap of good resources out there to help with this - like the book Venture Deals, Accelerators, Incubators, or industry experts.
15) Be open and have that growth mindset
This is possibly the most important trait you need. In Startups. And life.
There’s a hell of a lot we all don’t know.
You can learn something from everyone. And the only thing that is certain in this game, is that what you think will happen, almost certainly won’t… at least in the way you think it will.
But being open and approaching everything as a learning opportunity is a surefire way to get somewhere. ✨
👉 TL;DR 🎉
Money & funding isn’t everything
It’s a relationship game
Know your target audience, how the game works & where you want to play
Quality > Quantity
Keep it Simple. At least at the start.
Invest early in the things that matter
Don’t undervalue the power of Storytelling, Messaging & Brand
Tailor your messaging
Bigger isn’t always better
Don’t be a dick
Collaboration is key
Don’t overlook the elephants in the room
Know the basics before you get too far
A growth mindset is non-negotiable
What have I missed? Disagree? Got an experience to share? Hit reply to this email or drop a comment below!
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If I can help, I will. And, I’m investing in pre-seed and seed companies with a killer crew of experienced founders and operators at Side Stage Ventures.
Okie dokes, catch you soon
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