4 tips for start-up health IT companies
Start-up health IT companies have made quite a splash this past year – with some even claiming they have the ability to change the healthcare industry as we know it. Programs have been launched to help fledgling companies grow, and now the focus has shifted onto how these organizations can increase innovation and improve health and wellness.
Lisa Suennen, managing member at venture capital firm Psilos Group and author of the blog Venture Valkyrie, outlines four basic tips for start-up health IT companies.
1. Have a business model. It sounds basic, said Suennen, but you'd be surprised how many companies fail to complete this step. "I have so many companies [who don't do that], it blows my mind," she said. "I ask how they're going to get paid, and they go, 'We're going to figure that out after the pilot.' Our reaction is 'No, that's not so good.'" She added when creating a business model, it's essential to identify who the customer is, "because you can't build a proper product without knowing your customer, and the customer is who pays you." On her blog, Suennen writes that many companies will find themselves revising their business model – something that's completely normal during their early years. "Truth of the matter is that the average start-up company typically goes through more than one attempt at the brass ring," she wrote. "Early business models often fail and entrepreneurs go back to the drawing board and reinvent their original vision."
[See also: StartUp Health Initiative launched to spur innovation .]
2. Don't depend on the consumer for your revenue. According to Suennen, during the early years of a company, the consumer shouldn't be depended on for significant revenue. "It's not yet time to depend on the consumer for your revenue model," she said. "They're just not ready, and they won't deliver the revenue to you yet. Consumer-directed health IT products are struggling and people aren't ready to pay."
3. Recognize a start-up's role in job creation. On her blog, Suennen writes that start-up companies are playing a critical role in job creation. In fact, she wrote, firms less than five years old have created about 40 million American jobs over the past three decades, accounting for almost all of the net new jobs during that period. "That's a pretty stunning fact," she wrote. "In a world where there is no way out of the healthcare crisis except through the generation of new ideas to solve our healthcare problems, young companies are the golden ticket to new employment."
4. Know the path to success isn't always straight and narrow. "To be honest, I haven't yet seen a company that had a straight, upward and to the right pointing line from start to finish," Suennen wrote. Instead, based on her experiences, Suennen said most companies leaving her firm have seen rather unconventional paths to success. "The line looks more like the path taken by a blindfolded cat chasing after a highly uncoordinated mouse – the roundabout, back and forth and a little bit spastic," she wrote. "Start-up companies are a little bit like that story about the six blind guys and the elephant: you get a different story about it, depending on when you touch it." She concluded by pointing almost all successful start-ups have seen their fair share of trying times. "I don't think I could point to a single example of a company that we count among our success and claim that it didn't try to commit suicide at least once along the way."
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