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Funding of life science companies are going through drastic changes!

Written by Anne DeGheest // 09 February 2012 // Angel funding, Entrepreneur, healthtech, mobile health, НealthTech Capital, digital health, HIT,

Today, I was on a funding panel organized by Singularity University during their FutureMed program. Traditional medical devices and biotech companies are facing a significant funding gap from the shrinking venture industry. This is due to the lack of clarity of the FDA approval process and the challenges in getting reimbursement for new products. As a result funding in traditional life science companies has decreased significantly especially for the earlier rounds. However a new sector is emerging under different names: digital health, mobile health, HIT or HealthTech. The direct to consumer applications have seen a surge of new startups in the last 12 months, followed by Angels or technology venture capitalist. There are two areas that are emerging with significant opportunities:

· Improving the productivity of the existing healthcare providers in the existing fee for services payment system and under the upcoming patient population driven by the healthcare reforms.

· Engaging the patient to take responsibility to manage their health or chronic disease conditions.

These two sectors will require new approaches in building businesses. Starting with a small amount of initial capital, these young companies need to be heavily mentored to understand the pain points of all the stakeholders in the healthcare systems, engage consumer to change behavior, leverage the new mobility and social platform.. Without requiring significant capital investment!

These are the time of defining pain points, quick prototyping, customer feedback, product iteration to understand user adoptions.....and the revenue model!

Too many entrepreneurs are developing cool apps... Without spending enough time on the business issues. Since there may be low IP protection, what are the barriers of entry on the business side? How will your acquire the customers..at an acceptable cost? How will you retain them? Who will pay..and why? What will you have to do to convince them? Do you have to interface with the existing medical information system? How scalable is you backend operation? These are questions that you first investors will ask.. If you don't have these answers you will need a clear roadmap on how to get them!



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