A few of the biggest mistakes and misconceptions in health startups
A few of the biggest mistakes and misconceptions in health startups
Just a fools observations...
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Over the past year(s) Iāve spent far too much time talking to entrepreneurs, entrepreneurs, industry and investors.
In startup world, thereās a lot of noise and BS. Which can be darn hard to break through. So now sitting firmly (lol, itās 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.
DISCLAIMER: These are a few of my observations and views. Everyone is different and take my word at your own peril. Disagree with what Iāve written? Epic - hit reply and let me know!
PS - Since a few people seemed to have missed it, I want to make something abundantly clear
I am investing in and working with fab founders as an Angel & with epic āreal investorsā at Side Stage Ventures (wew!)
So if you are doing something cool, or know someone who is. Give me a shout š š
What can I help with?
Insights into the health and investment space
Networks and introductions
Distribution
Marketing, brand and value prop
Cool š Now before we get to it, a word from some legends over atā¦
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Here we goā¦
1) Funding āÆ Winning
This āsexyā measure of supposed success is one of the biggest misconceptions out there. But, raising capital, or a big round which the press made a hoo-ha over - does not necessarily mean a company is winning.
At least at what matters.
Yes, itās often crucial - with usually, large amounts needed for health ventures. And to be celebrated. But nothing can beat execution, product, customers and true outcomes.
The reality is you will never know the full story behind the curtain of companiesā¦ 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 spectacularly? *Cough* Theranos
Getting funding and building are two very different games. But if you do both well, thatās a winning combo.
TLDR - donāt let it dishearten you2) It's a Relationship Game
All of 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 the investment perspective. Investors often like to get to know you and build conviction - as what youāre 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 might not get you very far
āAt the end of the day people won't remember what you said or did, they will remember how you made them feel.ā
ā Maya Angelou
3)Understanding what VCs actually look forā¦
No one will ever care for or understand your business like you. Nor should they. But to get others on board, itās useful to think about what drives them.
VCs are looking to make big returns. Sure, help companies succeed etc tooā¦
But at the end of the day, itās a growth and money-making game. I.e. - you need to be building a bloody big business.
āBut so many companies get fundingā. Yes, 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 of the investments. Itās this thing called the power law.
So unless itās one hell of a big category in Australia or global - many wonāt touch it.Ā
NOTE: 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 its like getting married after allā¦And, make sure youāve asked yourself..
Do I really need, or want VC funding now?
And, is this route, or these investors the right fit for me?
4)Less is more
Concision and clarity are your friends
Quality > Quantity
This applies to well, most things. Decks. Emails. Product features (at least in the beginning). Specialist Feedback.
But it seems to be something, health companies especially - eternally struggle with.
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. Because with decreasing attention spans - regardless of the medium, you probably have only seconds to capture it. And them.
5) Invest early in the things that matter
By the time you realise you need something, itās often too late.
Relationships, PR, staff, funding.
Itās a lame 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. Fundingā¦ 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 brand, story, relationships, culture, processesā¦ You can speed up everything infinitely for yourself later.
Itās like compound interest. It might seem like a waste today but it sure as hell wonāt be tomorrow.
6)Bigger isnāt always better
Growth is great. As are big valuations and funding rounds.
But like anything, it depends on the situation. If you grow too fast or bite off more than you can chew, you might be in for a rude wake-up call. Whether itās 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.
Especially given how hot the market was last year. Valuations in 2021 were wild.
Now there are mass layoffs, and rumours of up to 80% valuation drops in the US. And US digital health darling Teladoc has just been hit with a class-action lawsuit by investors as the share price plummets, claiming they were misled. Wild.
Last year wasnāt ānormalā.
Money is great. But only if youāre ready for it and at the end of the day itās all about what you do with it.
7)Undervaluing Brand, Messaging & Marketing
These are some of the best tools you can have in your tool kit. But it seems to be the thing many put last. And my personal pet peeve.
I know - I used to be sceptical too.
But just thinkā¦ 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 the brand. And distribution.
People invest in, and buy from people or brands they trust. Build it and they will come is kind of BS - You know what youāre doing, but nobody else does. So how and why would others care? Thats where a strong brand, marketing & messaging can help.
8)Not tailoring your Message
Just like one size definitely doesnāt fit all, neither does one message.
Tailoring your message for your target audience, whether it is a specific customer, investor,Ā partner and even the medium - is the best way to win.
If you are everything to everyone, then you are nothing to no one.
Itās not about you - itās about the other person you are trying to reach.
Different horses for different courses. So donāt just blanket message or copy and paste. You are infinitely increasing your chances of being ignored.
9) Letās talk about D*cks baby...
Decks. Weāre talking about decks. And they are oftenā¦ a little lacking.
If the reader doesnāt get a rough idea in 1-2 minutes of reading your deck- thereās a good chance they are not going to go any further.
Coming back to less is more. And valuing, and capturing attentionā¦ Itās best to make it as easy as humanly possible to understand.
And telling a good story, sure as hell doesnāt hurt.
Communication is a superpower. While a sign of truly understanding a topic is by distilling it as simply as possible.
āBut what I do is so complicated and canāt possibly be distilledā. I know. Health and science especially are darn hard. But if you nail it - the rewards can be huge.
This could be its own little essay on howā¦ so weāll do this another time.
10) Donāt be a dick
The world is a small place. In the ānormalā business world and medicine - coldness and savage competition is often rewarded. But not really startup land.
Why am I raising this point? Because there seems to be a lot of ātraditionalā operators who enter the space and donāt seem to quite get this.
Pro tip: Give first. And youāll 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.
11) Collaboration
Basically - You need it. With industry, stakeholders, customers and patients.
Itās one of the biggest predictors of success.
To quote the cliches from our panel at the DHF
"Teamwork makes the dream work
Community is Key
And network is your net worthā
12) Underestimating Healthās āSpecialā Challenges
Things for 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.
But it seems in chats with investors, many either:
1) Ignore this
2) Think because there has been 1 chat about a deal, partnership or pilot it means it will happen
3) Claim to have a lil more traction than they do
Please lord, do not do this.
Avoiding āelephant in the roomā like obstacles does you no favours. And doesnāt instil 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 donāt be optimistic or confident youāll get there š And obviously, youāre not expected to know it all. But being aware and acknowledging the potential or current problems is a big bonus.
13) Learn about IP & Equity Early
These are two of the key fundamentals. But damn, itās tricky.
If you partner with certain players, universities, accelerators or Ventures studios - they often set many terms or may take a chunk of either. Which could even enable them to take control. So, try 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.
Thereās a heap of good resources out there to help with this - like the book Venture Deals, Accelerators, Incubators, or epic industry experts.
14) Be open and have that growth mindset
This is probably the most important trait you need in startups. And life.
Thereās a hell of a lot we all donāt know. And the more we know, the more we realise we donāt know.
We can learn something from everyone. And the only thing that is certain in this game, is that what you think will happen, almost certainly wonātā¦ at least in the way you think it will.
But being open and approaching everything as a learning opportunity is a sure-fire way to get somewhere. āØ
š TL;DR š
Money & funding isnāt everything
Itās a relationship game
Know your target audience & how the game works
Less is often more
Invest early in the things that matter
Messaging, branding and marketing are your friends
Tailor your messaging
Bigger isnāt always better
Decks, like any good first impression - matter
Donāt be a dick
Collaboration is key
Donāt overlook the elephants in the room
Know the basics before you get too far
A growth mindset is nonnegotiable
What have I missed? Disagree? Got an experience to share? Hit reply to this email or drop a comment below!
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Okie dokes, catch you soon
š Emily