What are the top healthcare startups

Medical startups often arise in a university or clinical environment.

The founders often have an excellent product idea, but only limited financial resources. But finances are just one of the hurdles that almost all medical startups fail.

A) The 6 hurdles medical startups fail

1st hurdle: Insufficient funding

Many founders of healthcare startups do not realize that they need to be particularly persistent. It often takes years for your product to overcome the regulatory hurdles and receive reimbursement.

A 2017 survey of 18 healthcare startups shows that half use their own funds and a third use state funding. Two of these 18 startups were financed by venture capital and two more by a business angel.

In the USA, the proportion of VC investments is higher. These invest up to USD 100 million in several rounds (Seed, Series A – C) [source: Angellist].

In almost half of the companies, investors invest “only” half a million USD.

Startups should not only address traditional investors, but also medical device manufacturers and potential customers (e.g. insurance companies, hospital chains, specialist societies, pharmaceutical manufacturers).

2nd hurdle: Lack of need

Not everything that is technically possible will find interested parties.

  1. Unwillingness to spend money
    Potential customers find the products “interesting”, but are not prepared to spend any money on them.
  2. Unwillingness to create conditions
    Many healthcare startups underestimate the effort it takes to establish products with customers. Processes have to be adapted, interfaces created, infrastructure and budgets made available and users trained.
  3. Unwillingness to change the familiar
    In addition, there is inertia and a lack of willingness to change familiar processes and to embrace new things.

3rd hurdle: Unproven benefit

Both the cost carriers (health insurance companies) and the licensing authorities insist on proof of benefit.

  • Medical benefit
    If the medical startups promise that their products will improve the diagnosis, treatment or monitoring of diseases, they must also provide this proof. Scientific evidence - the clinical evaluation - is necessary for this. If necessary, data must be collected in the context of clinical studies, which is time-consuming and costly.
  • Economic benefit
    The claim is quickly made that the product accelerates processes, avoids unnecessary work steps, improves communication and saves working time. Many companies fail to provide evidence. They refer to sources that are supposed to substantiate the statement. However, these claims often do not stand up to a health economic consideration (e.g. a health technology assessment).

4th hurdle: regulatory requirements

a) Medical device law

Many medical startups perceive the regulatory challenges as a very large hurdle [Hagen and Lauer].

The following table lists the tasks and hurdles that the startups have to overcome and provides assistance from the Johner Institute. Many offers are free of charge.

At its Berlin location, the Johner Institute supports numerous startups quickly and inexpensively with the "CE certification" of medical devices.

If you want to find out more, please contact us.

Contact us now without obligation and get help

b) Data protection law

The data protection requirements are particularly high when it comes to health data. Many healthcare startups do not have precise answers to questions such as:

  1. What must a declaration of consent contain? Is this enough?
  2. Can you save health data in the cloud?
  3. When do I have to delete data at the request of the patient? When is it not allowed to do that?
  4. Which technologies (e.g. for encryption) have to be selected?
  5. Which norms and laws need to be observed?

c) Further fields of law

Further hurdles lurk in other areas of law such as medical law, professional or ethical law, competition law, patent law, social law and criminal law.

5th hurdle: Insufficient reimbursement

The business models of most medical startups are based on the fact that patients or health care providers such as hospitals or general practitioners pay for the products and services.

in the first health market costs are reimbursed by the (statutory) health insurance companies. This process is very long, complex and time-consuming. Almost all healthcare startups are rightly afraid of it.

Dodging on that second health market is usually not crowned with success: Many patients with statutory health insurance expect that all costs for preventive health care and health care will be covered by the health insurers. They are only partially prepared to bear the costs of products themselves.

A third way out is with health insurance Selective contracts close. The Johner Institute observes that many health insurers are slow to get involved in new forms and offers of care. They also limit collaboration and funding to pilot projects.

It usually takes years to achieve reimbursement. Start early and get professional support! (also through us)

6th hurdle: Lack of organization and skills

Because many product ideas arise in a university and / or clinical environment, the founders often include scientists such as doctoral students, post-docs, doctors and professors. But no company can be led to success with scientific brilliance alone. Further skills are required:

  • Project management
  • Corporate management, organization, establishment of processes
  • Leadership
  • Bookkeeping, controlling
  • marketing & Distribution

In parallel to the (medical) product, the medical startup should develop into an established company. If it is not possible to get the necessary skills on board and to establish processes in good time, roles and processes are unclear. New employees don't know what to do. Many healthcare startups still feel that their work is chaotic, and it is not unjustifiably so.

Quality management is therefore not only a question of regulatory requirements, but also a prerequisite for stable growth.

Do you need assistance?

Only in exceptional cases does a founder have all of the above-mentioned competencies. That is why the Johner Institute also supports startups in building a stable company and effective management. Get in touch and find out more!

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B) Characterization of medical startups

1. Company size

As expected, most startups are small companies with 10 or fewer employees.

2. Company locations

Angellist's data for Germany are not representative; nevertheless they show the dominance of Berlin. More than half of the healthcare startups are based there. That is why the Johner Institute has another location in Berlin.

3. Products

Healthcare startups offer different products and services, e.g .:

  • Mobile medical apps
  • Hardware, wearables (glasses, clothing)
  • In-vitro diagnostics
  • Medical devices
  • Stand-alone software
  • Web-based applications such as websites and web services

4. Offers from startups

The offers of the healthcare startups cover the “patient life cycle” from diagnosis to therapy to aftercare. The range of offers is wide.

5. Technology drivers

As with other start-ups, technological progress enables new business models. The technological drivers include:

  • New chemical and laboratory diagnostic procedures
  • Thesecond and third generation of the methods forDNA sequencing enable analysis at a fraction of the cost and in a fraction of the time.
  • NewImage analysis algorithms In some areas, they already exceed human capabilities in radiological and pathological diagnostics.
  • Powerful hardware creates the possibility of collecting and evaluating huge amounts of data (→Big data).
  • These in turn help theartificial intelligence to a renaissance. IBM's Watson is an example of this.
  • The growing availability and theincreasing bandwidths of the Internet create the conditions for new business models.
Additional information

Read more about digital health here.

C) Marketplace

AIRAmed

The Tübingen startup AIRAmed from the field Software development for the quantitative evaluation of neuroradiological image data is looking for investors and cooperation partners. If you are interested in an exchange and further information, please contact us at [email protected]

First information about the company AIRAmed and your software solution can be found in the Elevator Pitch.

eCovery

The eCovery GmbH from Leipzig is a spin-off of the University of Leipzig. She is developing an intelligent therapy app that uses smart sensors and AI to close existing gaps in the supply of musculoskeletal injuries and diseases and to support therapy at home.

The start-up is looking for pre-seed investors and cooperation opportunities. If you are interested in an exchange and further information, please contact the team at [email protected] The contact person is the managing director Marcus Rehwald.