98% of digital health startups fail — here's why

The vast majority of digital healthcare startups don't survive, often losing steam before reaching Series A funding or realizing they simply aren't profitable. However, Dave Chase, a startup veteran named one of the most influential people in digital health and a Forbes contributor, writes in a piece that there are two key reasons for these companies' failings.

Mr. Chase manages hf Quad Aim Fund, a seed-stage venture fund. He writes the most common digital healthcare startup mistake he sees is that the founders of such companies don't pay enough mind to healthcare's idiosyncrasies. He says that while those idiosyncrasies are messy and not ideal, they still play a pivotal role in the success — or failure — of a company. "Being right but too early creates the same result as being wrong," he writes.

Secondly, Mr. Chase writes that too often healthcare startup founders are too steeped in old technologies that they aren't keeping up with modern times. He calls them "healthcare veterans who are too shackled by their experience," and adds, "[t]hey have become accustomed to out-of-date technology that is built for the last war."

Relying on legacy technology means they are functioning in a previous era for technological operations, and that separation is further exacerbated in technology.   

So what is a digital healthcare startup to do? Mr. Chase offers four lessons gleaned from his experiences.

First, organizations should be creative with their to-market strategy. He cites the example of one company that approached healthcare as a distribution partner for its product, rather than a customer.

Second, Mr. Chase writes companies should be thoughtful about who their early customers are. Instead of first reaching out to major hospitals or health systems that aren't typically seeking to make significant changes, companies should focus efforts on smaller, next-generation customers. Mr. Chase offers the following analogy: "If you were selling enabling technology for retailers and wanted to understand the future of retailing, would you want to get your software running inside of Sears or Amazon?"

Third, as healthcare is transitioning to a fee-for-value model instead of fee-for-service, so should healthcare startups, according to Mr. Chase.  For example, he writes about one startup that directly contracted with a primary care provider that already functions outside the fee-for-service environment, and in doing so has shifted its business model to align with how these providers operate.

Finally, diverse, veteran leaders are key to making sure a company minimizes potential blind spots and has a comprehensive view of the industry.

More articles on startups:

How Project Include is working to attract more women, diversity to tech 
A dozen people have left Google's Verily in a year — here's why 
Y Combinator's 2016 demo day included these 14 health-related startups 

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