Startups Transforming the Healthcare Environment

The health sector is characterized by innovation but at times, equal access to this innovation can be challenging. Nevertheless, entrepreneurs in this sector have found innovative ways to innovate and reach a wider public. Healthcare startups have reached every corner of the industry with their innovation, from diagnosis to insurance, creating a new environment that utilizes technology as its cornerstone.

Entrepreneurship in Mexico

Healthcare startups aim to have the same impact as some of the most popular tech startups like Uber, Rappi or Airbnb. Mexico’s health system is a fertile soil for solutions, given the country’s excessive chronic disease incidence, lack of specialists and high out-of-pocket expenditure. Among the most common areas for entrepreneurship in healthcare are clinical intelligence and enablement, screening and diagnosis, virtual care delivery, disease management and therapeutics, administration and automation. But during 2020, trends began to shift to introduce innovation in telehealth, drug R&D, optimization of health costs, mental health and women’s health, according to CB Insights.

Consulting firm Deloitte says the startup environment in Mexico has grown stronger in the last couple of years. The Minister of Economy counts around 35,000 SMEs and startups created per month. Health is among the main areas of focus for these new companies, only after finance which represents 23 percent of the SMEs and startups in the country. After that sector come health (11 percent), tech and communication (8 percent) and education (8 percent).

A study made by Contxto describes Mexico as one of the strongest venture capital ecosystems for startups. In 2017, investment in these companies quadrupled, making Mexico the second-largest favorable ecosystem for startups. MBN has interviewed several startup leaders undertaking a development in health who throughout their journey have faced diverse challenges and opportunities to thrive in the sector.

Building on Industry Experience

Gerardo Jiménez-Sánchez, Founder of Genómica Médica and former head of INMEGEN, related to MBN his journey as an entrepreneur when he founded what was then a startup. Genómica Médica is a leading laboratory focused on personalized medicine in Mexico, with saliva-based DNA tests for risk assessment of common diseases, prediction of responses to common medications and diagnosis of genetic diseases. “It has been a very long road from professional to entrepreneur, 18 years of training to be precise. We participated in an innovation and development program at MassChallenge, where 730 companies initially participated and 39 moved on to the next stages. We progressed and eventually won.”

Responding to Long-Time Systematic Problems

Nubix, another one of MBN’s featured companies, is an app targeting to solve one of Mexico’s largest gaps in health coverage: radiology specialist and infrastructure availability. Through the app, healthcare institutions can request a radiologist for a test interpretation regardless of geographic barriers, while also eliminating waiting times. “Despite the small number of radiologists in Mexico, we can, through Nubix, maximize the diagnostics capacity of existing professionals and cover places that were previously inaccessible due to their geographical location,” shared Amiel Rosales, Co-Founder of Nubix during an interview with MBN. Moreover, his development is built to respond to fragmented health systems, like the one in Mexico. “Nubix is designed to work in highly fragmented health systems because it enables better and greater connections with those patients who are far away and in greatest need,” explained Rosales. Moreover, Nubix’s costs are flexible. “We can cover the needs and budgets of a laboratory or hospital in the center of Mexico City and those of a laboratory in the Oaxaca mountain range.”

Offering Second Chances

An innovative startup is Roki Robotics, a Mexican company that manufactures exoskeletons to provide improved mobility to those with spinal lesions. So far, the company has three products. The first is Roki Wheels, an exoskeleton that allows people with spinal cord injuries to get up and move around on wheels. “It is a more practical option since it is all-terrain and allows the patient to change positions, which helps strengthen bones, digestion and joints,” explained Norberto Velázquez, Founder of Roki Robotics, to MBN. The second product is Roki Clinics, an exoskeleton that adjusts in just five minutes to the height of any person. The last solution is Roki Pro, a personalized option. The latter uses fewer pieces than the others and, therefore, cannot be adjusted. “It is lighter, easier to make and cheaper,” said Velázquez.

Addressing Out-of-Pocket-Expenditure

Propelled by technology, Emmanuelle Brunet, CEO of Kalmy, shared with MBN how her platform seeks to offer an affordable and complete health insurance that protects and rewards healthy lifestyle behavior. “It works as a digital insurance broker specialized in health insurance and medical expenses, allowing clients to search and compare insurance products for medical expenses from different insurers and take advantage of discounts.”

Brunet explained that Kalmy is based on behavioral habits of the user so the app can offer rewards to incentivize the user to follow a healthier lifestyle. The company tried to innovate and cover real needs, according to Brunet. The insurance model does cover diseases but it mostly tries to cover accidents as the response from our app is immediate.”

Common Challenges and Opportunities

Jimenez-Sánchez explains that finding support to finance his project was a challenge. However, after MassChallenge, the company’s acceleration processes have changed the product and how the company gets closer to our customers, which is key to Genómica Médica’s success, he said. “Raising capital has undoubtedly been one of the greatest challenges,” added Velázquez. He stressed that long-term business involve a high risk for investors. “We need confidence that in the long term, projects like this will be profitable and will be among the first in Mexico and Latin America to succeed and break new ground,” he said. However, Velázquez explains that realistically, entrepreneurs need to look directly for investment in the US.

During an MBN interview, Camila Lecaros, Managing Director of MassChallenge Mexico, exposed that the health sector is unique because there is a lot of regulation. “To sell a product or service, you need a lot of permits and acquiring these is a lengthy and tedious process. With medical trials, it can take four to five years before you see whether you have something valuable for the market.” This is a barrier for investors to support health startups. “I do not think Mexico has the ecosystem yet for health startups. There are relatively few funds. Those in the health area that do have investors tend to have only a few,” she said.

On a different note, Santiago Yeomans, Health Research and Innovation Director at the CHRISTUS Excellence and Innovation Center, said to MBN that regulation is a priority and that we should not blame it for challenges in the innovation sector. All actors of the industry must continue working to develop projects, while the regulatory environment is updated. According to Yeomans, if the regulatory authorities see the sector is thriving and see the impact that the solutions are having on the health system, “regulations will follow.”

In this sector, regulatory filters are first sanitary and then technological. However, technological regulations in Mexico tend to fall shot when it comes to addressing the needs of patients, companies and entrepreneurs. Christian López-Silva Partner, Head of Healthcare and Life Sciences at Baker McKenzie, wrote on an MBN article that the interaction of health and technology requires intense collaboration. “(Collaboration needs to be) so intense that some have identified a new form of systemic and strategic collaboration called hyper-hybridity.” According to López-Silva, the Mexican law and regulation still have a long way to go to support health innovations. He highlighted the critical points to be followed by COFEPRIS in order to improve regulation:

1. Addressing the aforementioned innovations in the field of digital health.
2. Regulating medical apps, from the incorporation of the concept of Software as Medical Device (SaMD) to the new Draft Technical Standard PROY-NOM-241 on Good Manufacturing Practices for Medical Devices.
3. New codes of conduct that include provisions that foresee the new digital reality in the regulation and their interaction with Health Care Professionals (HCP).

As for investment, Victor Sánchez, President of Red OTT México, exposed in an article for MBN a new financing model that could boost R&D financing in the country. “Corporate venture capital, or corporate venturing, is the framework for collaboration among established companies and innovative startups, in which the established company decides to explore working with a startup through the use of different methodological frameworks.” His article explains that with the help of the established company, the startup can introduce new products, services or business models to the market, accelerating its internal innovation processes through financing, incubation, acquisition, resource exchange or mentoring. Global companies such as Google, Intel, Merck, Ely Lilly and Walmart offer consolidated examples of corporate venturing. In Mexico, Grupo Bimbo, FEMSA, CEMEX, América Móvil and Grupo Televisa are a few successful examples.

Gender inequality is another barrier for entrepreneurship. According to the OECD, in Mexico, 60 percent of women entrepreneurs operate in the informal sector, in businesses created out of necessity and not on a voluntary basis. Meanwhile, only 48 percent of men are in this situation. In addition, the low level of education is another major obstacle for the development of women's businesses, since only 15 out of every 100 women entrepreneurs in the country have completed higher education, while for men the figure rises to 21 out of every 100. When it comes to business financing, Mexico has one of the lowest levels of access to training and credit for women entrepreneurs among OECD countries. Only 17.2 percent of women say they would have access to credit to start a business if they needed it and 16.5 percent would have access to training for women entrepreneurs.

A key to improve this scenario is in the pitching process with venture capital (VC) funds. During presentations, men are often asked more questions oriented toward potential gains, while women get more questions focused on potential losses and risk mitigation. VCs, by taking a more data-driven approach to assessing a startup's potential and profitability, can generate a portfolio that is more successful and includes more women-founded businesses, according to research by Harvard Business Review. It is at this early stage of the process that studies have shown the greatest gender bias. This, therefore, affects the amount of funding women receive.