Consumers are showing an increasing interest in wearable health technology, and health tech startups offer an opportunity to cut on costs for a medical system that many would say is failing the country. Still, there are certain hurdles, both for founders and VCs, to growing a health tech startup, the participants on TechCrunch Disrupt’s health tech panel agreed.
The panelists included CellScope CEO Erik Douglas, Neurotrack CEO Elli Kaplan, Dr. Katherine Pollard of San Francisco’s Gladstone Institutes, and Halle Tecco of the health startup accelerator Rock Health.
The panel also gave viewers a look into moderator Rip Empson’s inner ear when he demoed CellScope’s diagnostic imaging software, which uses a smartphone attachment to turn the phone into a consumer otoscope. The audience reacted with a resounding “ew,” but Douglas declared Empson’s ear healthy.
The conversation turned to the current state of investing in health tech startups, an sector of startups that has seen tentative but growing interest from venture capitalists.
“Investors from the tech community as well as the life sciences are really excited about it,” Tecco said. “There was nearly 50% growth [in funding] from last year, and there’s a tremendous amount of money flowing into digital health. That said, there’s a gap between the startup and venture world. There are not a lot of angels… We see tons of companies come through, but there isn’t a lot of support between what a VC would be comfortable investing in.”
Tecco noted that 180 VCs invested in the space last year, but only around 10 of them did more than one deal. She explained that while many of these VCs are still dabbling in healthcare, powerhouses like Kleiner Perkins and Khosla are getting more comfortable and deeply involved in the space.
She said healthcare startups in particular need to give equal thought to doing good as they do to developing their business goals.
“Certainly investors are investing to make money. It’s in their business model,” Tecco said. “The best way to ensure that they’re investing in breakthrough ideas is to align margin and mission. Find a business model where the more money you make, the more good you’re doing. If you can tie those, if you can make money on improving outcomes, everybody wins.”
Many of the challenges in founding a health tech startup stem from a disconnect between founders and the medical and research community. Tecco explained that for startups, it can be difficult to find a partner within the medical system to validate the product and confirm that the product works. Managing the sales cycle is also difficult, as selling to hospitals and other clients tends to be a long and arduous process.
Tecco added that current regulations on mobile health are vague, and it’s unclear what qualifies an app as a medical device subject to those FDA requirements. Especially on small teams, it’s rare to have a team member who has expertise in that space.
Pollard explained that there is a gap between researchers and entrepreneurs, but said that two can team up to make technological breakthroughs in healthcare more accessible to the public.
“There is a lot of opportunity to partner with people in academia. We’re all really excited about what’s happening in private industries. We want to be on boards”
While scientists want their ideas to be translated into health tech products, they don’t have the sales know-how that others do. On the flip side, startups don’t know how to mine data in the same way that scientists do.
Kaplan, whose own company went through the Rock Health program, said that dedicated health tech accelerators make a particularly big difference in helping a company navigate the medical system. That said, the in-house team needs to be a mix of healthcare and tech people.
She added that movement in the area of mobile and tech-driven health has led to advancements in research on Alzheimer’s, which not seen much advancement in the last few years. By developing a computer-based visual cognitive test, Neurotrack is working to detect the disease earlier, which can in turn fuel clinical trials for Alzheimer’s drugs.
Because consumer health tech is not as well established in the startup world as other apps and electronics, there’s no existing roadmap for success, Douglas said.
“The markets we’re trying to enter are different, and [the products] we’re trying to create are different,” he said. “We’re targeting consumers and at-home users. There are not as many precedents, so we come up with it as we go. It’s about validating the product and showing people that we can get better results.”