Who says tech startups are just for the techies? Doctors, especially those who are business-savvy, make great tech founders, too — once they learn how to play the game.
According to research from last fall, venture capitalists are investing 70 percent more per round in healthcare startups than they did in 2017. The $28.8 billion in 2018 healthcare investments through November indicate that people want to live healthier lives through technology, and the companies that fulfill that need will reap serious rewards. That's a number that docs looking to build wealth might bat an eye at.
Not every healthcare startup strikes gold, of course. Mental health startup Lantern (formerly ThriveOn) acquired more than $20 million in funding before closing shop due to a lack of customers. CloudMine, a health information technology startup that should have been the best of both worlds, filed for bankruptcy in November. Oh, and we'll never forget the Enron-ish story of Theranos.
But with more and more of the healthcare world getting eaten up by tech, it might be worth getting into the game.
Why doctors make great founders
Lantern and CloudMine ran into troubles they could have foreseen. Claritas Genomics, a company that specialized in pediatric genetic testing, achieved a $60 million valuation before a tough market and misalignment between investors and founders forced the business to close.
Most businesses don’t even make it that far, but those struggles are not limited to healthcare startups. Any founder who doesn’t understand the venture capital (VC) landscape could make the same mistakes.
When outsiders join the startup world, they typically run into a few common pitfalls. Many raise too much money at rich valuations from their doctor friends, which ends up hindering them later in financing. Founders need to understand the fundraising journey or else they might waste limited resources on things that aren't necessary to reach their goal.
Some doctors become too married to a solution they've identified, leading them to forget the problem they set out to solve— a common issue in all startup circles. They can also suffer from a lack of experience in product development or sales, which can hinder growth.
Despite these obstacles, though, doctors are uniquely qualified to be excellent healthcare tech founders and even operators. Entrepreneurs with medical degrees — not computer science degrees — will drive much of the healthcare innovation to come in the next few years.
While these medical practitioners might not immediately be familiar with the startup world, they bring invaluable knowledge of the complex healthcare system to the table. They know how money moves, how incentives work, and which regulations apply in which circumstances.
They also have relationships with institutions, which can help them find early customers. A deep understanding of medical problems provides them with invaluable starting points for making an impact with startups in this space.
That said, doctors cannot make the leap from caregivers to CEOs without business experience, and they need partners who know how to navigate the complex world of startup culture. By being surrounded with the right people, they can turn their ideas into realities.
Evolving from doctor to founder
Doctors looking to get involved in the meaningful (and lucrative) world of healthcare technology should take time to pursue their dreams — the right way. Here's how:
1. Identify a big problem to solve.
Start with the problem, not the solution or the product. Successful entrepreneurs tend to focus more on what people need than the best way to fulfill that need. Things change quickly in both healthcare and tech, which means no potential solution is safe from disruption. The most successful healthcare tech companies solve really big problems.