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NYVCA & CTA 2016 Keynote: Surprising Fundraising Lessons Healthcare Startups Fail to Learn

NYVCA & CTA 2016 Keynote: Surprising Fundraising Lessons Healthcare Startups Fail to Learn

This talk was given to a number of digital health startup entrepreneurs looking to raise capital and sell their wares into the USA market. It answers questions like:

* What are the most common fundraising mistakes most make again and again and how can you avoid them?
* What kinds of BS can healthcare investor and customers detect?
* What innovations can you help customers deploy?
* Where are the major opportunities to grow your business?

Key takeaways include:
* Go narrow, specialize, dive deep – talk about what’s important to your customers.
* Understand PBU: Payer vs. Benefiter vs. User
* Understand why healthcare businesses buy stuff so you can serve them in ways they find you indispensable
* The key issues/problems you’ll need to address that most fail to understand or prepare for.

Shahid N. Shah

March 21, 2016
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  1. Surprising Fundraising Lessons Most
    Companies Fail to Learn
    Avoiding Key Fundraising Blunders
    Shahid N. Shah, CEO

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  2. www.netspective.com 2
    This and many of my other presentations are available at
    http://www.SpeakerDeck.com/shah
    @ShahidNShah
    [email protected]

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  3. @ShahidNShah
    www.netspective.com www.ShahidShah.com 3
    Who is Shahid?
    • Serial entrepreneur with multiple externally funded
    startups including exits.
    • Angel investor, board member, in several digital
    health and Internet startups.
    • 20+ years of software engineering and multi-site
    healthcare system deployment experience in
    Fortune 50 and Government sectors.
    • 12+ years of healthcare IT and medical devices
    experience (blog at http://healthcareguy.com)
    • 15+ years of technology management experience
    (government, non-profit, commercial)
    • 10+ years as architect, engineer, and
    implementation manager on various EMR and EHR
    initiatives (commercial and non-profit)
    Entrepreneur, investor,
    contributing author, blogger,
    engineer, and healthcare
    futurist

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  4. 4
    @ShahidNShah
    www.netspective.com www.ShahidShah.com
    What’s this talk about?
    Questions answered
    • What are the most common
    fundraising mistakes most make
    again and again and how can
    you avoid them?
    • What kinds of BS can healthcare
    investor and customers detect?
    • What innovations can you help
    customers deploy?
    • Where are the major
    opportunities to grow your
    business?
    Key takeaways
    • Go narrow, specialize, dive deep – talk
    about what’s important to your
    customers.
    – Revenue, profit, and growth matters to
    them too
    • Understand PBU: Payer vs. Benefiter
    vs. User
    • Understand why healthcare businesses
    buy stuff so you can serve them in
    ways they find you indispensable
    • The key issues/problems you’ll need to
    address that most fail to understand or
    prepare for.

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  5. Healthcare investors have great BS
    detectors
    The opportunities are real and achievable but…

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  6. 6
    @ShahidNShah
    www.netspective.com www.ShahidShah.com
    Investors are getting better
    Many more have done 2 or more deals

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  7. @ShahidNShah
    www.netspective.com www.ShahidShah.com 7
    Investors are gaining experience

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  8. @ShahidNShah
    www.netspective.com www.ShahidShah.com 8
    Rounds got bigger & riskier

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  9. @ShahidNShah
    www.netspective.com www.ShahidShah.com 9
    No, you will not disrupt healthcare…
    This is $1 Trillion and the
    Healthcare Market is about
    $3 Trillion
    This is $1 Billion

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  10. www.netspective.com 10

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  11. @ShahidNShah
    www.netspective.com www.ShahidShah.com 11
    Because path to payment is not easy

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  12. www.netspective.com 12
    Nothing you do matters to the
    healthcare “industry”.
    But a lot of what you do
    could matter to specific
    stakeholders

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  13. www.netspective.com 13
    No, your big data, telehealth, or
    mobile ideas will not change
    healthcare.
    But if you can use them to add or extract value
    from the existing system, you’ll do just fine.

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  14. www.netspective.com 14
    No, your EHR/PHR or app will not
    be used by enough doctors or
    patients to matter.
    But if you can get even a fraction of them
    to use your software, you’ll do just fine.

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  15. www.netspective.com 15
    No, your new genomics, diagnostics,
    or medications will not easily be
    accepted by permissions-oriented
    “eminence driven” institutions.
    Find customers with a problem-solving culture
    willing to share risks and reward failures.

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  16. www.netspective.com 16
    No, your offerings will not be
    easily integrated into regulated
    device-focused clinical workflows.
    Incumbent vendors will not entertain the potential of
    new legal liabilities without someone to share it with or
    new competition without direct compensation.

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  17. www.netspective.com 17
    No, your projection of the Total
    Addressable Market (TAM) is not
    really the market you can reach.
    Complexity of the industry means that total spending of
    a TAM is not really something you can achieve even at
    scale. Focus on total reachable market (TRM) instead.

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  18. www.netspective.com 18
    No, I do not believe you when
    you say you have no competition.
    Staying with the “status quo” or indirect competition
    from entrenched workflows and slow-changing business
    models are huge competitors.

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  19. 19
    @ShahidNShah
    www.netspective.com www.ShahidShah.com
    You have made the job of
    identifying, diagnosing,
    treating, or curing
    diseases demonstrably
    faster, better, or cheaper
    for clinicians through the
    use of technology or
    business models.
    You have made the job of
    self-diagnosing, self-
    treating, or preventing
    diseases and improving
    overall wellness of
    patients through the use
    of new incentives,
    business models, or tech.
    You must be selling “actionable innovation”
    You can help your customers achieve practical, relevant, actionable solutions

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  20. @ShahidNShah
    www.netspective.com www.ShahidShah.com 20
    The fundraising environment

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  21. @ShahidNShah
    www.netspective.com www.ShahidShah.com 21
    The fundraising environment

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  22. Understand how investors evaluate risk
    To succeed in healthcare fund raising you need to…

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  23. @ShahidNShah
    www.netspective.com www.ShahidShah.com 23
    Venture phases are de-risking gates
    Ideation Risk
    Who’s the payer & what
    problem are you solving
    for them?
    Who are the users and
    what JTBDs are you
    helping them with?
    Can you properly
    describe the solution for
    each kind of user
    persona?
    Can you build the
    solution?
    Product Risk (Seed)
    Is the payer real and are
    you solving the right
    problems?
    Do the users really have
    JTBDs that need your
    solution?
    Can you enhance and
    pilot the solution you’ve
    built?
    Are there regulatory
    risks to consider?
    What liability risks will
    arise through use of
    solution?
    Market Fit Risk (Angel)
    Are there enough other
    payers that have the
    same problems?
    Do other buyers’ users
    have same JTBDs?
    What marketing plan is
    in place to generate
    demand?
    How well have the users’
    pilots gone?
    Can you deploy the
    current solution into
    production usage?
    Is there a path to
    profitability?
    Sales Risk (Series A+)
    Can you sell the same
    solution to multiple
    payers?
    Can you adapt and
    enhance the solution for
    new users with different
    JTBDs quickly enough to
    sustain growth?
    Is there evidence for a
    single or multiple paths
    to profitability?
    Can you scale sales into
    profitability?
    Is there buzz and are
    influencers promoting
    you?
    Question: will I get nX return within y months with this team and their idea that I have some passion around?
    Example: will I get 10X return in 5 years with Shahid’s team and this imaging analytics idea?

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  24. @ShahidNShah
    www.netspective.com www.ShahidShah.com 24
    Traction proof is not easy

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  25. 25
    @ShahidNShah
    www.netspective.com www.ShahidShah.com
    PIBU: Payer vs. Influencer vs. Benefiter vs. User
    Payer
    Benefiter
    Influencer
    User
    If you don’t understand the exact interplay between PIBU your sale will fail
    The payer is the
    person/entity
    that writes the
    check for your
    product.
    The person or group
    that benefits most
    from the use of the
    product.
    Or the person or
    group who
    influences the users.
    The person or group that
    actually uses the product.

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  26. 26
    @ShahidNShah
    www.netspective.com www.ShahidShah.com
    Why selling into healthcare is hard
    Easy sell (e.g. iPhones, tablets, pagers)
    Physician Pays
    Physician
    Benefits
    Physician
    Uses
    Hard sell (e.g. medical devices / EHRs)
    Institution
    Pays
    Gov’t
    Benefits
    Physician
    Uses

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  27. 27
    @ShahidNShah
    www.netspective.com www.ShahidShah.com
    What kinds of customers are your buyers targeting?
    You need to know not just your own segments but your buyers’ customer segments
    • Obesity Management
    • Wellness Management
    • Assessment – HRA
    • Stratification
    • Dietary
    • Physical Activity
    • Physician Coordination
    • Social Network
    • Behavior Modification
    • Education
    • Health Promotions
    • Healthy Lifestyle Choices
    • Health Risk Assessment
    • Diabetes
    • COPD
    • CHF
    • Stratification & Enrollment
    • Disease Management
    • Care Coordination
    • MD Pay-for-Performance
    • Patient Coaching
    • Physicians Office
    • Hospital
    • Other sites
    • Pharmacology
    • Catastrophic Case
    Management
    • Utilization Management
    • Care Coordination
    • Co-morbidities
    Prevention Management
    26% of Population
    4% of Costs
    35% of Population
    22% of Costs
    35% of Population
    37% of Costs
    4% of Population
    36% of Costs
    Source: Amir Jafri, PrescribeWell

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  28. @ShahidNShah
    www.netspective.com www.ShahidShah.com 28
    How will you choose to compete?
    Share risk with
    buyers
    Promise top-line
    revenue growth
    Improve free cash
    flow
    Promise Bottom-line
    or margins
    enhancement
    Promise cost
    containment
    Provide enhanced
    technology not
    available elsewhere
    Create MSPs to take
    over management
    of multiple JTBDs

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  29. 29
    @ShahidNShah
    www.netspective.com www.ShahidShah.com
    The best ways to share risk
    1. Top-line revenue growth: companies
    that help grow revenue for their clients
    are always welcome. There are fewer
    competitors when you’re selling solutions
    that grow revenue.
    2. Free cash flow improvement: if you can
    help healthcare companies improve cash
    flows, you’re going to have a much easier
    time than companies that don’t.
    3. Bottom-line or margins enhancement:
    companies that can show how they can
    grow their customers’ margins will skip to
    the front of the line when setting
    appointments with their clients.
    4. Cost containment: if a solutions provider
    can clearly show how they can help
    contain costs, they will see many
    competitors but will still have a good
    story that can help differentiate them.
    5. Managed services: taking over major
    areas of your customers’ workloads
    makes sense
    6. Technology: being “just” a tech partner is
    now table stakes, and it will be very
    difficult to compete.

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  30. 30
    @ShahidNShah
    www.netspective.com www.ShahidShah.com
    The business needs
    • Quality and performance
    metrics
    • Patient stratification
    • Care coordination
    • Population management
    • Surveys and other direct-
    from-patient data collection
    • Evidence-based surveillance
    The technology strategy
    • Aggregated patient registries
    • Data warehouse / repository
    • Rules engines
    • Expert systems
    • Reporting tools
    • Dashboarding engines
    • Remote monitoring
    • Social engagement portal for
    patient/family
    Do you have ideas in payment design?
    Payment models going fee for service to outcomes-driven care

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  31. 31
    @ShahidNShah
    www.netspective.com www.ShahidShah.com
    How will your customers get paid for your stuff?
    Direct Payment
    • Your best option
    • Very few truly disruptive
    technologies can be
    directly paid for by
    providers within the USA
    • Limited adoption of
    ‘traditional’ pay for service
    reimbursement for next
    generation technology
    Direct Reimbursement
    • Second best option
    • Improvements in
    technology are outpacing
    payer adoption
    • Reimbursement will come
    but its time consuming and
    difficult
    Indirect Reimbursement
    • Emerging option
    • Payer requirements for
    improved quality and
    efficiency are creating
    indirect incentives to adopt
    innovative solutions
    • Solutions targeting new
    value-based
    reimbursement incentives
    are highly useful to medical
    providers
    If you haven’t figured it out for them, customers will not figure it out for themselves

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  32. Act like a regulated entity, narrow your
    focus, and concentrate on workflows
    To succeed in healthcare you need to…

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  33. @ShahidNShah
    www.netspective.com www.ShahidShah.com 33
    Your customers’ innovation fit determines your opportunities
    Therapies
    Therapeutic
    Tools
    Diagnostic
    Tools
    Patient
    Administration
    Patient
    Education
    Most Regulation
    Least Regulation
    Be aware of regulations, don’t fear them, use them as
    a competitive advantage

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  34. 34
    @ShahidNShah
    www.netspective.com www.ShahidShah.com
    How to best identify your buyers (not users)
    FFS vs. VBC?
    Target health
    sector?
    Number of
    employees?
    Annual sales
    volume?
    Geography?
    Number of
    hospital beds?
    Number of
    patients?
    Type of
    patients?
    The list goes on
    and on…be
    specific!
    Help them stay away from market segmentation, focus on identifying PBU particpants
    Identifying your
    customers will depend
    on helping your
    customers identify theirs

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  35. 35
    @ShahidNShah
    www.netspective.com www.ShahidShah.com
    Problems your customers looking to solve
    Improve
    medical
    science?
    Improve access
    to care?
    Reduce costs?
    Improve
    therapies?
    Improve
    diagnostics?
    Improve drug
    design?
    Improve drug
    delivery?
    Create better
    payment
    models?
    Focus on jobs that customers need to be done, not what you want to build

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  36. Thank You
    Visit
    http://www.netspective.com
    http://www.healthcareguy.com
    E-mail [email protected]
    Follow @ShahidNShah
    Call 202-713-5409

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