An Open Letter to VCs: We Are Not Here Just for the Money

As I begin writing this column, Medikit, the health data interoperation company that I am proud to lead, has lost around 12% on the volume of transactions for the same accounts compared to last year, despite having net growth in 2023. How is this possible if in recent months we have seen a consolidation of the digital health market in the country? We are seeing more and more new and big initiatives led by relevant companies at the same time. After decades of stagnation, there is also a positive advance in sector regulations.

The answer: The healthtech sector was not immune to the bubble created by high capital injections by VCs in early-stage companies. These startups, like many others, tried to solve complex problems in the sector with the promise of high returns for their investors, sometimes at the cost of their profitability. Those of us who have been generating efforts toward healthcare’s digital transformation for more than a decade know that this highly fragmented industry is usually slow to adopt new technologies, normally fearful of regulation, and rarely has large IT budgets. As a result, a bunch of startups were abandoned by those VCs that just a few months earlier had announced with great fanfare their commitment with large and multiple seed rounds.

In those startups, there probably were great ideas that could easily change the way we handle treatments, or maybe innovative programs for early diagnosis. Now, we will never know. Their models had little or no chance to succeed, especially with an ever-watchful stopwatch defined by their cash runway. I want to emphasize that this is not a criticism of the startups but of the understanding that the VCs have of the industry, and the poor capacity to adapt their investment mechanisms to this sector. Of course, there are notable exceptions. Right now, a handful of VCs with extensive experience in healthtech continue to accompany their founders, preventing risks and advising promptly, even with the historic decline in VC funding. Thank you to all of them, since investment continues to be essential.

In the last 15 years in the health sector, I have had the opportunity to forge relationships with great people who today lead relevant health technology companies, and without trying to represent them in the following comment, there is a clear pattern. We are not here just for the money. There is a common denominator in the leadership of the companies that continue in the market today. The No. 1 priority of their leaders is not based on the P&L of their organization, but on the real impact that their initiatives achieve among the health professionals and patients whom they are fortunate to reach with their projects.

A magnificent example of this leadership, and which I would like to mention in this column, (but not without asking him first) is Carlos Escalante, CEO of Pen Health, a health company that incorporates technology components in most of its services to promote patient care nationwide. I remember a few months ago at a pleasant meal with other industry colleagues, Carlos made an insightful comment: "In 25 years, I have not met anyone who has become a millionaire in this industry." Although the rest of the table agreed with him, immediately we highlighted that for 25 years, Carlos' company has positively impacted the lives of no less than hundreds of thousands of patients, an indicator that he may never have the fortune to display in Pen Health’s bottom line.

To all VCs, a couple of recommendations. Take the time to understand the sector, find in the leaders of the startups this component of commitment beyond the promising cap tables that now dominate the minds of the founders, and finally, raise awareness inside your firm on the willingness to go the last mile in search of that joint goal of health transformation.

In short, if your plan is working to achieve double-digit returns in the next pandemic, it would be better to work together to prevent the next one.

In contrast to the tragic premature death of health startups, something unprecedented was achieved in the region last month: the collaboration of 12 health companies, both big and small, in a joint effort toward industry transformation. This collaboration does  not have a fundraising goal, but a clear understanding of the role of each company in the value proposition for health industry stakeholders. Although I cannot mention them at the moment, I am deeply grateful to them for abandoning business egos and contributing to an ecosystem that, although it indeed has an economic component, has a much more praiseworthy objective, which is the elimination of friction in the healthcare ecosystem.

And how do we keep moving forward? More than ever, the industry requires the collaboration and creativity of multiple teams working toward digital health. Promoting initiatives that are not aligned with collective efforts can jeopardize the achievements made in the sector. Instead, if we combine previous actions and build on them, we can give a better face to the future of digital health in Mexico.

Maybe, just maybe, the impact of the collaboration will be stronger than funds raised on the creation of value for stakeholders and, together, we could create the next regional unicorn.