Ask a health care VC: How do I scale my health startup?

The potential to improve and optimize health care with health IT and tech-enabled services at scale is huge. But to solve big problems in the health care industry, entrepreneurs have to build and scale solutions that work in a highly complex, regulated and ever-shifting environment. .

But if you’re ready to take on the health care opportunity, Christiana DelloRusso, a venture partner at Providence Ventures, has some tips on overcoming those obstacles, scaling your health tech startup, and watching it thrive.

“If you want your company to become a venture growth story, then you should always be thinking about how it will scale,” DelloRusso explains. “But that doesn’t mean you try to execute on scale from the very beginning. The timing is critical.” For example, early product iterations can work really well and show early traction with end users, but lack the ability to drive broad adoption.

What does scaling mean? First, that you’ve proven your technology platform or product has great product-market fit, meaning you’ve shown that it works in a real health care setting, and that end users see value in using the product. Without proving this first, scale is not achievable, yet.

To prove product-market fit, the critical question to address is, “What is the problem that we’re trying to solve?”

“Many entrepreneurs and companies develop really amazing technology, and will pitch that amazing technology and what it can do — but it ends up being a fantastic solution to a non-problem,” DelloRusso says. Thus, one of the first steps entrepreneurs can take is studying the problems, and going really deep in defining them. Once you have a product in mind or a prototype, a good question to ask of health care providers and leaders is, “We’ve developed x product to solve y problem. Can you validate that y is really a problem in your world?” If validated, continue to dive in deeper, peeling back the layers of the onion and really understanding how your product could provide a meaningful solution.

“That involves talking to a lot of people, and having an insatiable thirst for learning,” she says. “Because if you’ve talked to one physician, or 10 physicians, it’s probably not enough. You really have to understand at a very deep level how the potential customer will realize the value of your product or service.”

That “value” depends on the problem you’re solving — it could be improving clinical quality, moving the needle on patient experience, and/or providing an economic return to the health care organization (optimally, it would solve for all three!). An important factor to bring forward is a hypothesis on the quantification of value. Real dollar-amount data in health care can be hard to find, and highly variable. Continue to probe, put real numbers behind your solution, and ask if the model you’ve developed makes sense. Focusing on the value proposition to the customer, with data, versus on how exciting or novel your technology is, will be highly advantageous later on.

The second important factor in scaling is having confidence that you can transition from pilot phase to full scale implementation. This is especially important in health care, as each health system (if that is the target customer) is different. Getting to know the right people who make purchasing decisions, have budget for new technology, and are accountable for implementation is critical. “This could be one person or multiple individuals, and isn’t necessarily the same people who were engaged in a pilot project,” DelloRusso advises.

Establishing relationships with these points of contact, and keeping them posted on your progress, will later bear fruit when you’re ready to scale, she says.

“A senior executive at a health system might not be able to help you scale at the beginning because you’re still trying to establish product-market fit,” she explains. “But when you’re ready to scale, you can come back and say, hey, we’ve figured it out. We’ve shown it works and demonstrated it with multiple different customers. I’d love to talk to you again and show you what we’ve done.”

Finally, the third important part of scaling is establishing that your company can make money. While this sounds obvious, in health care, payment systems are incredibly complex. “Many solutions seem like no-brainers when it comes to making health care better, “DelloRusso explains. “But if we circle back to what value is being provided to the customer, the next question is “Will they pay for it?” and “How much?” What’s it worth to the customer?”

This means that the solution has to solve for a critical business need, and this is where many startups get stuck. They’ve developed a product that works, they’ve proven it with a few pilot customers, but the value provided isn’t high enough that a health care executive will be willing to advocate for taking the next step and purchasing the solution. “The fundamental day-to-day challenge of health systems is providing high quality care for their patients. It’s not insignificant how hard this task is on the ground, every single day,” says DelloRusso. Thus if your solution is a nice-to-have versus a must-have, it may not make the cut.

For example, it’s been well established that early prevention can stave off some chronic disease later on. However, even though we know it works, prevention in general hasn’t historically been an activity that health care providers are reimbursed well for. The fee-for-service system rewards treatment for illness, not prevention of it, although health care is moving, albeit very slowly, towards payment for value. Thus in the midst of this shift, understanding very deeply how your technology will be paid for is critical.

So how does an entrepreneur develop must-have solutions? Go back to problem definition and figure out where your solution meets a very specific and important challenge. “It will take a lot of learning and a lot of iteration,” says DelloRusso. But hopefully, that’s the fun part.

This article originally appeared as a sponsored post by Providence St. Joseph Health on VentureBeat under the headline “Ask a health care VC: How do I scale my health startup?”

Providence Ventures

Founded in 2014, Providence Ventures manages $300 million…

Providence Ventures

Founded in 2014, Providence Ventures manages $300 million of venture capital across two funds on behalf of Providence Saint Joseph Health. PV offers investment capital, combined with health system expertise, to companies addressing existing and emerging pain points in healthcare.

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Providence Ventures

Founded in 2014, Providence Ventures manages $300 million of venture capital across two funds on behalf of Providence Saint Joseph Health. PV offers investment capital, combined with health system expertise, to companies addressing existing and emerging pain points in healthcare.