What are Investors Looking for?

By Anne Blackwood, Chief Executive at Health Enterprise East

HealthTech innovators, driven by a steadfast belief in their ideas and a sincere commitment to enhancing patient outcomes, often face significant challenges when navigating the complexities of introducing new technologies into the highly regulated and fragmented marketplace. Here are five pieces of advice to consider, that are essential for innovators when looking to raise external investment to scale their businesses.

Grow Your Market Understanding

Many start-ups start with a bright idea and spend much of the early phase of their business focussing on the technology development programme. It is important early on however to fully understand the market size and dynamics of the sector you are serving. What is the significant unmet need you are trying to solve and how many people have this problem? Investors will want to see evidence of a large and growing market opportunity, but it is also important to be realistic about your numbers. If your technology platform has more than one use case, remember to segment the market numbers accordingly and indicate which markets you will target first.
Research in depth what the NHS or other healthcare providers currently do to solve the problem you are tackling. What will budget holders be willing or able to pay for such a solution? Conduct a robust competitor analysis, clearly outlining the benefits of your solution and why it has an advantage over your competitors.
A more difficult question to answer is whether the market is truly ready for your innovation; any evidence of commercial traction you can show to investors will build confidence in market uptake once your solution is launched. Having conversations with end users (e.g. clinicians and patients), payers (budget holders) and reimbursement teams early on and demonstrate good customer feedback and engagement.

Protect The Technology

While the temptation is not to release product until you have perfected the approach and explored all the potential value-add features of your technology, pace and scale are important in a rapidly evolving sector such as healthcare. Are there any alternative technical approaches, including any potential strategic collaborations, that could be explored in parallel with your own development programme, especially if they help you get to market quicker?

What is the patent landscape like in the area of your technology, do you have freedom to operate or will you require licenses to other IP in order to reach market. What intellectual property (IP) rights can you secure for your innovation? There are a wide range of options available including patents, design rights, copyright and know-how. Develop and document a portfolio of registered and unregistered IP rights. Explain how you can prevent competitors copying or catching up with you without significant investment of time and resource.

Build a Strong Team

Once you have developed a great idea and identified a large and growing market opportunity you will need to assemble a skilled team to deliver on the vision. Hiring and engaging a credible, experienced team with diverse talents should be at the top of every CEO’s ‘to do list’. You’ll need skilled people in technical, commercial, sales and marketing, quality and regulatory functions at a minimum. You will likely start lean and outsource some key functions in the early days, but you’ll need a scale-up plan and all the associated internal processes at some point (don’t underestimate the effort these require).
Think also about building out your clinical advisory networks, so you can keep abreast of the latest developments regarding clinical and user preferences and customer requirements. If the environment into which you intend to launch your innovation changes, then you need to know as far in advance as possible and be ready to respond.

Refine Your Business Plan

Outline your unique value proposition. Be realistic about the timelines and technical challenges to be overcome while emphasizing the significant upside that justifies the investment risk.
Build strategic partnerships to help you get to market quicker.
You will need a scale-up plan for manufacturing as well as building your team, as you go from small batch scale manufacturing to large scale. Identify the key risks associated with scale up and how you will mitigate them?
A key element of any business plan is the financial forecasts. Realistic sales forecasts, costs of goods and expenses budget, cashflow statement, balance sheet and a profit and loss statement will be required by any serious investor.
Investors need to make a return on their investment. While you don’t need to settle on one specific exit plan in the early stages of your business, highlight the opportunities in terms of potential acquirers and exit values achieved by companies in similar segments of the market to demonstrate commercial awareness.

Create Your go to Market Strategy

Identify key target markets early on. Outline the timelines, regulatory and reimbursement strategies required for each potential market and discuss with your investors.

Understand the Clinical Workflow and Pinpoint the Optimal Entry-point of your Product.
Use of healthcare technologies occurs within care pathways, which are either prescribed as standards of care by a governing body or practices which have been taught at medical college or recommended as due process in a healthcare setting. Your innovation may need to slot into these established pathways as disrupting established care pathways tends to take longer to achieve and may not be a successful strategy for success in the healthcare industry.

For each target market, clearly demonstrate the clinical and economic value your product brings. While you as an innovator certainly believe in your product, this leap of faith is not something you can reasonably expect a clinical decision maker or even a budget holder of a collectively financed healthcare system to make. Stakeholders in healthcare require solid evidence to be convinced.
Ensure that you have an evidence generation strategy alongside your product development plan that goes beyond just the next milestone. Start conversations with all the relevant stakeholders early to understand what sort of data or evidence they would need to see. Economic models are often required to demonstrate the cost-saving and/or health-saving potential your innovation can potentially bring. You will also need to demonstrate compliance with key regulatory, compliance and quality standards as well as a sustainability strategy if selling to the NHS.

When approaching investors make sure your sector focus and stage of development are aligned with your potential investor’s thesis. Securing initial meetings with investors is relatively straightforward, but you must make the most of your opportunity to pitch and getting to a term sheet can take a lot more time and skill. Investing effort in the five essential elements above will pay dividends when you do come to pitch and will help you to navigate the process more effectively.