Why Venture Building around Digital Health Apps is gaining popularity, and what you need to get started
by Jone Pukenaite and Sven Jungmann
Over the last few years, Health Companion Apps have emerged as a hugely disruptive segment of the healthcare market. Over 318,000 of these apps are now available worldwide, with more than 200 being added each day. By the end of 2020, global venture capital (VC) funding in Digital Health, including private equity and corporate VC, came to $14.8 billion in 637 deals, surpassing 2019’s record-setting sum of $8.9 billion.
Seems like now is the right moment to invest and create a health app, right? But how do you go about investing your time and your assets in digital health ventures? This article not only explains what all that buzz is all about, so to speak but why you should become a healthcare disruptor.
Despite the abundance of new apps entering the market, there is still space for the right product to be created, one that can truly improve the quality of medical care and benefits patients, health care providers and institutions alike. However, entering the healthcare innovation market is complicated, so before you start creating an industry-changing app, consider both the rewards and the challenges.
Benefits and Rewards: Fundamentally improving the quality of care
Digital health apps come in various forms, serve a range of patients and meet different needs for all stakeholders involved. Some applications focus on particular conditions or diseases, some act as general advisors, and others relieve healthcare workflow by digitalizing manual processes. Generally, a successful app provides significant benefits for the patient, healthcare personnel and healthcare institutions.
Top priority? The patient.
Apps that offer patients direct benefits are often called patient-companion apps. They act as data-driven virtual assistants for people with considerable health issues, empower patients to make better-informed decisions and can even prevent further illness. More than ever before, patients are taking a greater interest in their own care and are more willing to self-manage conditions. These apps learn their users and can provide personalized educational material, illness prevention tips and advice based on input data. Additionally, they provide a safe digital touchpoint with 24/7 accessible options to medical recommendations and solutions. Patients worry less knowing that they can receive healthcare on their own schedule.
This convenience, transparency and control for patients in regard to healthcare information lessens dependency on health care providers (HCPs) and creates a safe framework for proactive care, which in turn facilitates better doctor-patient relationships. Patients can use digital technology to research, share experiences and identify treatment options to discuss with their HCPs. Apps can also outfit patients with the tools to detect risk factors earlier and to make healthy lifestyle changes that reduce the risk or severity of chronic illness.
In their new book “FightBack Now” my colleagues Sven Jungmann and Felix Staeritz discuss in detail how value-based health care will transform our healthcare system. They show that it is not introducing new digital tools where ever possible but that it is more about a fundamental change in mindset and the way we run our hospitals.
Facilitating clinicians
Access to accurate health data is perhaps the most significant paradigm shifts of digital health apps. Medical records alone are not enough; data related to individual social determinants are also essential to quality care. Apps can streamline all relevant data, providing timely and precise information to help HCPs develop better treatment and prevention strategies and to avoid overtreatment. Physicians themselves attribute 20% of given medical care in the USA as unnecessary, and one of the main reasons is “difficulty accessing prior medical records,” which contain vital insights into health history as well as drug reactions/interactions.
Apps can also facilitate doctors’ work by improving productivity. Research shows that when patients go through an automated history-recounting process, doctors are provided with more comprehensive and accurate data and can spend less time asking questions and more time finding the most direct path from illness to wellness. Further, apps can enable clinicians to continuously monitor or track patients’ health status, which is critically important after hospital discharge.
Value for healthcare organizations
Digital apps enable healthcare institutions to offer quality on-demand care. Patients want healthcare on their schedule, so this serves as a win-win situation. Other benefits include substantially saving time and financial costs by optimizing staff workflow and use of resources; as we already mentioned, better-prepared patients and automated history-taking improve data collection and save time for HCPs. Another advantage, collecting vast quantities of real-world patient data with apps offers researchers means to improve treatment protocols and drug development.
These apps hold the potential to radically transform the medical experience as we know it, and the rewards for those who effectively invest in these technologies are immense.
Sounds enticing, doesn’t it? Ready to drop a few million into a digital health app?
Before you begin, be sure you have the necessary tools. Innovating at the crossroads of reimbursement requirements, necessary generation of scientific evidence and the continually rising bar for digital solutions to be adopted into clinical practice, all while establishing an operating model, is a huge challenge.
Understanding the needs of this market and having that entrepreneurial spirit are not enough, and building a healthcare digital venture requires technological, regulatory and medical expertise. Many companies struggle to make it out of what we call “the valley of death,” that period between initial investment and the creation of a commercially viable product.
To address this, we’ve honed in on five critical questions to consider before you start your venture.
Use these as a guide to focus on viability and feasibility, seeing the bigger picture first, rather than getting lost in the details or the excitement of this trend.
1) Will it integrate easily (without disruption)?
Hospitals don’t have one-size-fits-all concepts. It is essential that you understand the workflow of healthcare and its workspaces. Currently, the majority of solutions used are human-centric and non-intuitive. Hospitals also vary widely, and you will need access not only to patient/doctor workflow routines, but that of headquarters, management, finance and home care.
As an innovator, you need to find solutions that will be scalable. Products and services need to integrate into (and be compatible with) existing frameworks without being dangerously disruptive. While we value disruptive ventures to push us forward, health care is one area where we cannot disrupt workflow or the services that save lives. We must strategize innovations that push forward with the goal of seamless integration.
2) Who’s picking up the tab?
Many early-stage companies fail to understand the heterogeneity of providers, payers and insurance models. Based on experience, we can confidently advise that it’s best to centralize on reimbursement as the main strategy. If patients are your main payers, be aware that out of pocket (OOP) payments are typically their last option, and thus willingness to pay and demand is lower. When it comes to reimbursement, on the other hand, the demand for apps is increasing, especially as countries (most recently of which is Germany) begin adding digital technologies to their reimbursement systems. That being said, reimbursement procedures are convoluted and will undoubtedly impact every facet of your plans, so it’s imperative you address this early. If you would like to dive deeper into this topic, we have published a whole article about commercialising your health app here.
3) How to overcome regulatory barriers?
One of the hardest challenges to overcome will be the complicated, lengthy and expensive regulatory approval process. Generating sufficient clinical evidence to demonstrate how your app improves outcomes at lower cost/time/resources is no easy task. You need a sound plan concerning how to start generating evidence early in the process. If your digital health app is set for launch from a technical side but lacks evidence, you’ll face a long waiting period, a good chunk of frustration and significant financial setbacks.
4) Will this digital health app meet all the expectations?
Each digital solution will involve different stakeholders and ensuring that you are fulfilling all their needs can become overwhelming, so view meeting expectations as a gradual evolution, rather than a radical revolution. Start simple, with just the basic needs of future customers. This most likely includes safety, the ability to integrate data into a patient’s electronic health record, providing patients real-time access to their data, and creating sustainable medical value for stakeholders. Concentrate on these main expectations, and then begin to brainstorm later features and evolvements.
5) How do we reach users directly?
Marketing is heavily regulated in healthcare settings, which means viral marketing is not an option. You’ll need to carefully consider how you are allowed to market and whom you’re trying to reach, and factor this into your approach.
Addressing these questions first will help you deliberately go through the ideation process and troubleshoot in advance of investments. In addition to this, Co-Creation can be the game-changer for corporations to agilely navigate the complexities of healthcare innovation.
Exploring Co-Creation
As our partners Felix and Sven discuss in their book “FightBack Now”, co-Creation, also known as corporate venture building, is about creating controlled “hothouse” conditions to “grow” new digital health care ventures that have the potential to add value and support long-term planning. This involves corporate entities bringing in entrepreneurs to map market gaps, investigate potential customers needs and explore new ways to satisfy them. Rather than the measured, incremental approach of most corporate R&D units, entrepreneurial partners generate a space where unexpected ideas and business models can be conceived, researched, mocked up, dismissed, validated, or elaborated on at breakneck speeds with uninhibited creativity.
For companies in the health care sector it is important to get the external experience for this part as the common culture in health care is very safety focus, with long research cycles and procedures. However, as well suited this mentality is for incremental R&D it stands in the way of radical innovation.
After a potential venture is identified, it is built hand in hand with corporate partners in a disciplined framework that links the core business to its new endeavours. This framework also provides strategic, tactical and operational governance, guarantees two-way information flows and ensures access to appropriate funding, expertise and other corporate assets. The advantage of this model is that new digital businesses are designed around company-specific assets for similar/complementary markets and are aligned with the future of the core organization.
Now you’re ready to jump into the ecosystem of healthcare
Healthcare delivery is in the early stages of an extraordinary change as more digital apps enter the current ecosystem. These tools promise sustainable medical value, increase the efficiency of diagnosis and improve quality of care and treatment results. Capitalize on this evolution now and you’ll be able to reap rewards in investing in and deliberately formulating innovative digital solutions.
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Learn more about Co-Creation with FoundersLane
FoundersLane, the leading corporate venture builder for climate and health, was founded in 2016 by Felix Staeritz, Andreas von Oettingen, and Michael Stephanblome. Our team includes 100+ founders, specialists and entrepreneurs with expertise in the fields of medicine, health, climate and disruptive technologies, and our partners include SMEs, corporations and more than 30 Forbes-listed companies, such as Trumpf, Vattenfall, Henkel and Baloise.
In just the last three years, our teams have come up with 150 new business ideas, more than 30 of which have already formed the basis of successful digital ventures through Co-Creation. Our interdisciplinary team has already built successful patient-companions apps and is uniquely positioned to do so again. We combine experience in lean and agile early-stage digital venture development with expertise in evidence-based healthcare solutions. Our health team, consisting of experienced physicians, entrepreneurs and developers, is capable of developing MPG-compliant healthcare applications that consider the needs of patients, physicians and caregivers, and our product development process emphasizes adherence to evidence-based medicine, compliance with the highest safety standards and the use of recognized interoperability standards.
Jonė Pukėnaitė is a medical expert at FoundersLane. After her medical degree at Vilnius University, she became a Medical Manager and later a CEO at a private healthcare institution. She then co-founded a health-tech startup “VoiceMed’’ and established an educational platform “Explore Digital Health’’ for young medical professionals.
Dr Sven Jungmann is a doctor-turned-entrepreneur. He is a partner at FoundersLane and an advisor to health start-ups and investors. Handelsblatt listed him among Germany’s smartest innovators. Sven consults Wellster Healthtech, the D2C health success case in Germany and continues doing so via an advisory board role.
FoundersLane creates new, fast-growing digital companies in categories that are highly topical and current. FoundersLane counts more than 100 founders, experts and entrepreneurs with great expertise in the fields of medicine, health, climate, disruptive technologies such as IoT connectivity, AI, and machine learning. Clients and partners include SMEs and corporations as well as more than 30 Forbes listed companies, such as Trumpf, Vattenfall, Henkel and Baloise. FoundersLane is active in Europe, MENA and Asia with offices in Berlin, Cologne, Vienna and London.
