Entrepreneurial Spirit: How to Succeed in the Health MarketBy Miriam Bello | Fri, 09/02/2022 - 11:21
Entrepreneurs in healthcare face unique challenges when introducing their products into the market. While it is a journey with many challenges, a strong value proposition and reliable financing can help a new product or service succeed. But finding investors can be difficult for health startups.
“At Association of Entrepreneurs of Mexico (ASEM), we have found that the main challenge that we face as health entrepreneurs is access to financing sources,” said Juana Ramírez, CEO, Grupo SOHIN. “About 37 percent of entrepreneurs in Mexico have access to some type of financing, but only 3 percent of health companies have access to these financing opportunities.”
In health, processes to get to the market and scale up solutions take longer than in many other sectors such as fintech. These longer periods can make healthcare projects less attractive to investors, which consider health startups a high-credit risk, Ramírez said.
There are also regulatory barriers. “Regulation is made to protect the patient, but there are many lags in technological understanding that delay the introduction of innovative tools such as genetic tests, telemedicine or electronic prescriptions,” said Ramírez. To accelerate development, the sector needs a faster regulator to address the value propositions that entrepreneurs have.
Healthtech entrepreneurs should also consider that it may not be possible to fully automate all processes, explained Gabriel Garza, Co-Founder and Managing Director, DocTour: “In healthcare, not everything is automatable because person-to-person services must continue to exist. Thus, there needs to be a balance between traditional in-person and digital health models.”
Mexico’s low digital maturity is also a challenge, as there are products that have no market because people are unfamiliar with them despite their ability to solve problems, said Garza. Many niche products cannot be validated in the market, which also reduces feedback, he added. “Within this scenario, educating people and financing funds would be fundamental to scale our products in the market,” said Garza.
Due to their limited knowledge of the healthcare sector, some venture capital (VC) funds might fear that projects will not be profitable and sustainable. “However, we are now seeing more specific funds that invest in health,” said Javier Esquivel, Founder and General Manager, Saftu. This is greatly benefiting entrepreneurs and the funds themselves because they understand the timelines involved and plan their financial sustainability with this in mind, said Esquivel.
“VCs must understand that in health there is no ‘fake it till you make it.’ Our solutions have to work and if they do not, there can be many legal and financial consequences,” Esquivel said. For that reason, most initial investors in health projects are often the friends and family of the entrepreneur. “Then, after you have validated your market, you can then go to specialized funds,” said Esquivel.
Globally, there has been a record in investment for entrepreneurial projects, “but this is not reflected in Mexico and even less in health,” said Juan Camilo Garay, Team Leader, TuoTempo. As uncertainty permeates numerous productive sectors, “health will continue to be seen as a stable and safe sector in which it is possible to invest. Even if it is slow, it will be safe and sustainable,” said Garay.
Technology: An Entrepreneur’s Ally
Technology is becoming increasingly critical for entrepreneurs to succeed and many are investing in the development of apps, platforms, software, devices or treatments heavily based on technology, explained Ramírez.
Entrepreneurs should not ignore the power of data. “We have to democratize and make data interoperable. It should not remain as a hidden treasure because it does not belong to companies; it belongs to the patient more than to the institution,” said Garza. Through the exchange of information, startups can support the patient’s health journey across programs.
Having hospitals invest in their own solutions would also transform the entrepreneurial ecosystem, while also greatly benefiting patients. For example, many hospitals in the US work as seedbeds for startups, explained Esquivel. This way, hospitals become investors in startups, giving the latter a place to test their products. This also facilitates access to financing, he added.
“Mexico has large hospital chains and could become a hotbed for startups. Selling to a hospital here is difficult if you are not supported by others, but when they are already in a hospital, accessing other clients will be much faster,” said Esquivel.
Diversity and Inclusion: Keys to Healthcare
“The healthcare ecosystem would not be complete without diversity,” said Andrea Arozamena, Healthcare Linkage Leader, GS1 México. Diversity comes hand in hand with inclusion. It involves gender, culture and race, among many other characteristics. It also involves diversity of ideas and behaviors. Knowing how to listen, share and integrate opinions is also essential, said Arozamena.
Tackling the barriers that exist in healthcare and getting market expertise is easier when entrepreneurs work in a truly supportive ecosystem. “One person alone is not going to change the world, but if several come together and create a collaborative health community they might be able to,” said Garay.