Why promising HealthTech/Medtech startups fail: TOP-3 reasons
And what to do if you have identified the current state of your project in one of these points.
Over 15 years of working with IT medical projects, I have highlighted several problems that a variety of projects regularly face as they develop. Therefore, my partners and I launched a HeFi.io project that will help not only to avoid, but solve these problems. Let us talk about them today.
Problem 1 — long cycle of bringing a product to market
Science-intensive projects can take years before they make it to the market. In such a way, for example, it happened with Botkin.AI — more than 3 years passed from the moment of creation of the company to the first sale. Investments will not be a lifeline: venture money is not “long”, it is unlikely that you will receive an amount that will be enough for 5 developments of a knowledge-intensive product, which means there is a great risk of cash deficiencies.
Investors are not ready to wait years for the completion of development, because they need rapid commercialization of the product. This problem often leads to the fact that the startup does not have time to attract a new round, and soon it ceases to exist.
Solution:
- identification and structuring of intellectual property; your IP portfolio, which is being developed during the development of an innovative product, becomes a resource for raising funds (IP Shares)
- creation of a decentralized autonomous organization (DAO) to attract investment more effectively. DAO is essentially a digital analogue of a legal entity with clearly fixed rights and obligations of shareholders and investors, which will allow you to effectively structure the financing of the company
Problem 2 — founders have to “water down” their shares
This is a consequence of the first problem. In order to ensure a long development cycle, the founders have to attract additional rounds of funding, often not at the most attractive valuation, because the company is still developing a product and there is no revenue. This leads to a loss of motivation: from the majority shareholder, the founder becomes the holder of a small share of shares after several rounds. Since key employees become holders of options in startups, the erosion of the share also affects the motivation of the entire team.
Solution: creation and structuring an IP portfolio increases the capitalization of the company, which means it reduces the “water down” of the share of the founders and the project team.
Problem 3 — no resources to find product-market fit
A scenario in which the company immediately understands which product the market needs, and in which it works to create it, is considered ideal, but very unlikely. In order to probe product-market fit, companies have to make changes to the product, which can be quite radical sometimes. This is an important process that will eventually make it possible to feel fine in the market. And the team understands that “pivot” is necessary, but there are no resources for decisive changes, because there is Problem 1 and Problem 2.
Solution: building an IP portfolio and attracting decentralized finance (IP Funding) — the team will have funds to carry out new tasks
