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Last week’s ViVE conference in Los Angeles attracted hundreds of digital health startups, many of which were on the prowl for new customers and/or financing.
That means the health system executives and venture capital investors in attendance faced their fair share of pitches from these startups. I sat down with some of these leaders during the event to learn more about what their pet peeves are when listening to startups’ pitches. Below are six of the mistakes they told me startups keep making, thereby lowering their chances of raising capital or securing a health system partnership.
Overselling
It’s a major red flag when a digital health company’s pitch is “all about making the sale and not about solving the problem,” said Rebecca Kaul, chief of digital innovation and transformation at New York-based Northwell Health.
“It’s an immediate turn-off if every conversation about how you could solve a problem leads back to ‘Buy me, pay me’ and you can tell there’s less interest in learning about the health system,” she declared.
In her view, no digital health startup is going to be able to come to Northwell with a solution that works out of the box. In order for a digital investment to be successful, Northwell needs to engage in “mutual listening and learning” with the vendor — and that learning process needs to take precedence over the startup’s desire to land a sale, Kaul explained.
If she can tell that a company is more interested in making money off a potential sale than doing the work needed to make the deployment successful, then she quickly loses interest in the solution at hand.
“There are some companies that are eager to work with your health system to the point where they’ll go at-risk because they believe in their product — I like that,” Kaul remarked.
Weak plans for IT integration
Michael Kalishman, chief venture officer at Virginia-based Sentara Health, said that “the most common mistake” digital health startups make is underestimating the complexity and resources it takes to integrate their product into a hospital’s IT systems.
Digital health companies often don’t have an IT expert on their team who can answer health systems’ specific questions about what integration would look like, which is frustrating, he noted.
“Startups come in and they really don’t understand the underlying data systems that they have to work with. They also really don’t understand the internal IT processes that a health system has to go through for approvals — whether it be architectural review, design or resource allocation. A lot of them come in thinking it’s a very easy process, and that is not the case,” Kalishman stated.
Inability to stand out from competitors
There are a few corners of the digital health market that are getting oversaturated, with various startups offering products that seem to do the same thing. Some examples of these areas within the market include clinical documentation scribes, care navigation platforms and mental health apps.
Given that the market is getting so crowded, it’s baffling how many startups are unable to answer the question “What makes you different from your competitors?” pointed out Michelle Stansbury, vice president of innovation and IT applications at Houston Methodist. In her opinion, this is a relatively basic question that all startups should be prepared to answer.
Lack of cybersecurity considerations
There is also a “high percentage” of digital health startups that can’t effectively answer questions about their products’ cybersecurity, Stansbury declared.
“I can’t tell you how many times that we’ve had to tell startups, ‘We can’t use you because you have not put any security into your product,’” she said.
This consideration is especially important given the proliferation of cyberattacks in the healthcare industry and the sector’s vulnerability to hackers, Stansbury explained.
Not enough focus on the clinical value
One of the worst slip-ups a digital health startup can make is not being able to “talk substantively” about the clinical models that are relevant to their product, according to Lynne Chou O’Keefe, founder and managing partner at Define Ventures.
“We’ve seen decks where there’s 30 pages, and there’s only one slide on the clinical model,” she stated. “That’s a red flag for us because in the end, we’re here to achieve the triple aim.”
The “triple aim” O’Keefe referred to involves strengthening population health, improving the care experience and lowering the cost of care. To her, a company’s ability to deliver clinical value is more important than its ability to grow financially or become profitable.
Lack of good utilization and engagement metrics
It’s “shocking” how many startups don’t know how to effectively highlight their utilization and engagement metrics, pointed out Cathy Gao, a partner at Sapphire Ventures.
She noted that startups are usually eager to discuss their top line growth numbers, such as their annual recurring revenue (ARR). When a company shows that its ARR is growing, savvy investors will “immediately” want to unpack those metrics, Gao said.
“If a startup is showing committed ARR or bookings, investors want to know what percentage of that is actually live. It’s one thing to say, ‘We signed this contract,’ and it’s another to say, ‘We’ve successfully implemented, and people are actually using our product,’” she explained.
Gao would also like to see startups do a better job of showing how much their customers are utilizing their products. This is particularly relevant for digital health companies selling tools for clinicians, she added.
She wants to see more data on how many clinicians use the product per week and month, how often they use it, and if they use it consistently over a long period of time.
“Some of these contracts are in the millions of dollars — if the doctors and nurses aren’t using the product, then the health system is not going to renew,” Gao declared.
Getty Images: erhui1979
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