Things aren’t going so well for some digital health startups. Although the industry went on to raise a total of $4.5 billion in venture funding last year, not all will survive.
What’s missing from the Health IT initiatives is mainly the lack of trust that surrounds new technology. This is the main reason why digital health brands such as Lumosity (brain-training) and Theranos (blood-testing) haven’t really done too well.
According to Accenture, health IT startups will raise $6.5 billion in funding by the end of 2016. Further, the capital will be raised across the following key segments:
- Diagnosis (21%)
- Engagement (25%)
- Infrastructure (29%)
- Treatment (25%)
However, Accenture predicts that half of these digital health startups will fail. Over the last couple of years, digital health entrepreneurs have just focused on cutting costs and enhancing operations. But the main component that they’ve overlooked (so far) is building and maintaining trust.
Why is it important for digital health startups to build trust?
People, in general, are sensitive to matters concerning their health. Further, the healthcare field is highly regulated, so practitioners are cautious about who they work with. As a result, it can make drafting a clear business model and obtaining funding difficult.
Health IT has only started to blossom recently, so investors are only just starting to learn more about the industry. This creates a situation where many people may not truly understand what you’re doing. So the lack of knowledge (coupled with fast-paced growth) can essentially make a lot of investors pretty apprehensive.
So entrepreneurs in this space need to go the extra mile to prove the following to investors:
- Extensive knowledge about the market
- Their product value (they should be able to demonstarte evidence)
- Value through metrics
How do you build trust?
These days, startups need to figure if they’re going to be a business-to-business (B2B) or business-to-customer (B2C) enterprise (or both). B2B is usually based on trust and retention, but it can also come with a whole lot of overhead expenses.
If B2C sales and retention are high, so it’s safe to say that the business is starting to create value. Either way, in digital health, building trust is important to achieve your goals.
Further, with every user interaction, this trust needs to be reinforced. All it takes is one small breach and all your hard work can become meaningless (rapidly). Along with trust, entrepreneurs need to work on building credibility.
How do you build credibility?
With trust comes credibility and so far, some digital health startups have been unable to do that. Getting FDA / EU approval early can go a long way in building credibility, so that’s something to invest to pretty early.
All this takes time to develop and build on, so startups need to be ready for the long-haul. The more complicated the product, the longer it might take to obtain approval:
- USA – 9-12 months
- EU – 6-8 months
Certification and FDA approval can essentially be the bridge (that fills the gap) to help build trust between new health IT brands and medical practitioners (and patients). Further, you can go on to prove yourself via clinical trials (which can be quite time-consuming).
The healthcare industry has always been conservative, so we can’t really expect anything to change as the industry goes digital. But, if your business model places importance on building trust and credibility from the get-go, you have a better chance of surviving the cull.