Is Your Health Start-Up Living On A Prayer?
The new year is an exciting time. After twelve months of routine, a clean slate lies in front you, brimming with opportunity and potential. If you’ve launched an innovative insurance or healthcare product recently, however, you may not be feeling so hopeful.
Entrepreneurs are in a constant race against the clock. How long will the market take to realize our product’s potential? What more can we do to get a deal across the line before funding runs out? While many believe the stagnant economy and investor hesitation are primarily to blame, there are some critical ground rules in the health space that start-ups must account for – regardless of economic factors – if they want to succeed.
I chatted with Paul Wicks, founder of Wicks Digital Health and WDH Investments, and Elizabeth Michelle Gafford, long-time leader in digital product marketing about what our clients often underestimate when developing a product or going to market. Read on to learn how to bolster your go-to-market strategy, and ensure you’re headed into 2023 on more than a wing and a prayer.
1. Your buyer is not the end user
There are multiple intermediaries before your product reaches the end user, and this is especially true for group benefits. Sadly, reducing health expenses and improving health outcomes is not enough to get you through the door with brokers or employers. Insurance has evolved from a traditional B2B transaction into a B2B2C. It is critical to understand the motivations and needs of each individual entity represented. Your product’s economic model, usability and marketing must be multifaceted to engage the Broker, the Employer and the Employee simultaneously.
If your start-up is developing a digital health product, the transaction chain above just got a bit longer as you will also need to account for motivations and needs of healthcare professionals.
2. Underestimating the relationship between an employer and their broker
You will not succeed by attempting to sell directly to employers. Please go back and read that again. Too often I have seen start-ups, frustrated with the lack of support and buy-in they receive from brokers, switch gears and attempt to go direct. The pool of employers without a broker is incredibly small…and those companies are incredibly enormous. Brokers (which include benefits consultants) are paid to be gatekeepers, among other things. If an employer doesn’t simply redirect you to their broker, they will get their broker's guidance or approval before purchasing your product. It feels like a Catch-22 to so many, and I get it. Brokers want to see a proof-of-concept functioning with a current group, yet no brokers will allow you access to their groups. Depending upon what your product or service is, there are other options available to ‘get in’ that don’t begin at the broker or employer’s front step.
3. Assuming your product sells by itself
The explosion of “Point Solutions” in the group health market today is mind-boggling. What was first an attractive alternative, carving out services and placing them with laser-focused vendors (PBMs being an obvious example), has now become a buffet of one-offs. There are Point Solutions for Physical Therapy, Fertility, Diabetes, Sleep Management and about any other condition that generates expense within a group’s health plan. Many mid- and large brokerages have been forced to create specialty groups within their organizations to manage these many vendors - more than quadrupling their RFP marketing and account management efforts with small, if any, increase in staff. This has led to what I have previously called Point Solution Fatigue, and it is real.
Aggregation is the current solution here. Evaluate whether your product or service must be sold standalone to the buyer, or whether it is actually something that can sell more effectively on a platform (such as Wellness) or as an embedded solution (see Embedded Insurance). Look for opportunities to create strategic partnerships with trusted brands in your market. You’ll gain credibility by leveraging their brand, have immediate access to their customer base, and significantly reduce your distribution costs.
4. Balancing regulations, clinical outcomes, and business metrics
What Paul Wicks refers to as the “Iron Triangle” of digital health: Good / Fast / Cheap; pick any two. You can tick the regulatory boxes without making something that matters to clinicians or patients, you can make something that makes people’s lives better but has no commercial value, and you can strike deals that reduce costs or drive revenues, but risk a compliance catastrophe (or that don’t actually help the end user). Successful start-ups look to strike a balance between these three areas encouraging dialogue and collaboration between the competing stakeholders of each, and well ahead of putting a product out to market.
5. Cultivating your product garden
Have you thought much beyond your MVP? The road to get to a minimally viable product has to be maintained along the way in order to make room for enhancements. Or, as Elizabeth Michelle Gafford says, “...you need to think about how you are going to iterate, to keep fertilizing and cutting the grass until [your product] is successful.” You also need to be able to speak to your product improvement strategy with investors and strategic partners. Pushing to get an MVP out without having some understanding of the v2.0 enhancements needed is not strategic and will leave you wide open to competition. While you do need market feedback to inform some enhancements, you should know in advance what set of enhancements your organization must be ready to deploy.
In a market like today’s, overcoming any one of these pitfalls will strengthen your value proposition and validate your viability, increasing the confidence of investors and buyers alike. If you're not sure where to start, I can help.
