Tips From a Health-Tech Entrepreneur
The fact that Washington is grappling with health care turmoil doesn’t mean that opportunities for startups in the space are flatlining. Quite the opposite in fact.
2016 was a record year for investment in health tech. Over $8 billion in venture capital poured in, fueling innovation across the board in medicine, infrastructure, and consumer-driven health.
This investment, coupled with political uncertainty and high-profile “disruptive” initiatives to cure all disease within 100 years — like the Beau Biden Cancer Moonshot and the Chan Zuckerberg Initiative — leave “little doubt from investors that the health sector is in its moment of creative destruction,” according to the latest StartUp Health Insights report.
It’s for all these reasons that serial technology entrepreneur Narayan Laksham is turning his sights on health care for his next venture, Simplify OR.
After leading several startups in the 1990s, Laksham founded Ultriva, a supply chain execution software company. Laksham sold Ultriva to a public company in 2015, and then partnered with a friend, who is a hospital executive, to build a company with the goal of streamlining orthopedic procedures.
From artificial hips to plates and screws for holding shattered bones together, operating room implants tend not to be held in hospital inventory but are consigned as needed, by vendors who are reimbursed upon device utilization by the providers. The details associated with each order are often in hard-copy form and go through as many as five touchpoints, from vendor to circulating nurse to charge nurse and so on, resulting in paperwork and process inefficiencies.
Simplify OR’s technology facilitates surgery documentation, productivity and collaboration between stakeholders to increase hospital implant cost capture, improve implant record accuracy, reduce costs and improve patient outcomes.
In the roughly 11 months since its founding, Simplify OR is already in use in one medical center, and the team is close to signing a contract with a large southern hospital system with approximately ten facilities. Laksham expects demand to grow quickly.
For entrepreneurs interested in health tech, Laksham offers these tips:
Look for opportunities to target inefficiencies, especially in high-cost areas.
Cost reduction/caps on charges for services and equipment are central to Obamacare and feature in the latest legislation. Entrepreneurs are responding by launching companies aimed at reducing health costs. Three broad categories of company types stand out:
- Those that improve emergency solutions and provide the most efficient patient care
- Those that improve the partnership between providers and their customers, a concept dubbed “patient-engaged care”
- Those with products and services aimed at improving outcomes for patients with chronic diseases
Perhaps most promising is the first, as use of emergency services is ubiquitous, especially among the uninsured (the pool of which could expand as a result of pending legislation). As the OR is the most expensive service provided by most if not all hospitals, cost savings achieved here can have a very positive impact.
In particular, OR (Operating Room) surgeries are often inescapably urgent — you can put off mending a shattered bone and routinely top $100K. With 15-20 million orthopedic surgeries performed in the United States each year, technology that improves efficiencies can produce significant savings.
Make a plan for your revenue model, but be flexible.
“Having founded and grown companies before, I knew what to expect this time around,” says Laksham. “One of the most important lessons is to remain flexible in your plans.”
For example, after extensive conversations with hospital stakeholders (like CFOs, administrators and OR directors) and initial case studies, Simplify OR adjusted its main sales strategy and pricing model. Given the shifting sands of economic and health care policy, such flexibility is a common and healthy part of the journey of a health-tech startup. “The most important thing is to listen to the customers, test, learn and adjust your models accordingly,” notes Laksham.
Carefully assess all your funding options and decisions.
Finding funding is often painted as the panacea for a business, but the truth is, it’s only the beginning. Your investors — depending on who they are and their demands — can have a very real impact on your model and the success (or failure) of your venture.
“With Simplify OR we have elected to stay self-funded,” says Laksham. “For many companies this, of course, may not be an option. But the bottom line is to be sure to do your homework during your search for funding so you understand all the ramifications attached to the money you accept.” This is especially true in health tech, an industry awash in funding options.
Compliance is critical — pay attention to it from the start.
In health care, perhaps more than in any other segment, compliance requirements are stringent and should be central to your business model from the very start — from incorporating your business and making it HIPAA-compliant, to ensuring data security.
Equip your team with trusted advisors who can help fill any holes in expertise, especially when it comes to FDA regulations. Your business should be designed and built around full compliance. Your stakeholders — including customers and investors — are going to want proof that this is the case.
Great upheaval can bring great opportunity; this is certainly true in the health care sector, where the need for disruptive innovation has never been greater.