10 thoughts that could kill your idea

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I’ve seen hundreds of healthcare ideas in the last years. I keep a database with all of them. I’ve been going though it this weekend, and while doing so this decalogue came to my mind. These are mistakes healthcare entrepreneurs make very often. Hope it helps!

#1 If my idea is great, I will find money very quickly
False, your idea is worth nothing… if you execute it, it may be worth a lot, but its value comes from its execution. Without an outstanding team to execute it you won’t get very far, even if your idea is a phenomenal breakthrough.

#2 Scientific founders should continue as CEOs forever
False, healthcare entrepreneurs with a scientific background should be aware at some point in the future it is in their best interest to bring experienced management to the company.

#3 Dilution is a bad thing
False, it is indeed better to have 20% of a company that has €10m profits than 95% of a company that is still losing money. Growth needs capital. Success comes in hand with great investors and shareholders. You need to be prepared to dilute in order to grow.

#4 My success in the market is totally based upon the quality of my product/service
False, false, false… there are many other issues around. Is there a market in the first place?

#5 Everybody will love me when coming to the marketplace
False, some incumbents will try to crush you totally, you better be prepared. There is no such thing as a “neutral” arrival to the marketplace. You need to know who will be your friend, who will be your enemy. Study the healthcare value chain very thoroughly.

#6 I will be all things to all people
False, a big niche, does not mean a greater chance of dominance. Quite on the contrary, a small niche is usually synonymous of success.

#7 It is not the right time to launch my start-up
False, there is never a perfect timing to launch. You don’t need the perfect product or service to start… Every idea has a window of opportunity, waiting for too long could kill your idea.

#8 It is important not to tell my idea to anyone, they could copy it
False, there is much more to gain—feedback, connections, opened doors—by freely discussing your idea than there is to lose. If simply discussing your idea makes it indefensible, you don’t have much of an idea in the first place. No matter what you think, don't be paranoid, trust me on that one.

#9 I will negotiate an “I win, you lose” deal with VCs
Wrong. Negotiation with VCs is always a cooperative negotiation, never a competitive one. You will have them around for a long time, you better have a great relationship with them and allow them to help you.

#10 if I build it, they will come
False. Never bring to the marketplace a solution in search of a problem. The best start-ups I know are always built by entrepreneurs that identified first the problem and then offered a solution to it

+1 (extra one) I prefer to aim low, I am afraid to fail
That's the worst one... Wrong, wrong, wrong. You can always learn from your failure and finally succeed if you persist. We tend to stigmatize mistakes. Most potential healthcare entrepreneurs are too frightened of being wrong. And if they are not prepared to be wrong, they will never come up with anything original. I like people that aim high and miss, they usually learn and succeed. Aim high!

Point-of-care testing

A friend just sent me the last European Healthcare Investment report, and it clearly highlights an exciting scenario for innovation in medical devices and services. According to this report, the pharma industry is in deep trouble, and faces tough years ahead.

We all know that big and old pharma companies are facing a tough future, with weak pipelines, patent challenges from generics companies and a hostile regulatory environment. They will be forced to adapt to and accommodate generics companies and cutting edge biological treatment developers. Biotech start-ups are on the rise, and they are the ones innovating.

What interested me the most in reading the report is how it predicts the proliferation of point-of-care testing. I couldn’t agree more with it. I am not at liberty of discussing the start-ups that we are monitoring, but I can tell you point-of-care testing is gaining momentum. Fast and convenient diagnostics outside hospital premises will definitely be one of the important trends for the next years.

The development of miniaturisation means that point-of-care testing for virtually any measure or condition is now available. The whole healthcare is being reorganised to put patients first. And what could be more aligned with this than lab results “on-the-fly”, even as "do-it-yourself kits" to allow patients to monitor their health?

In the future, more care will be delivered in the primary care environment, and this will need point-of-care testing. These new technologies will have a great impact on the application of efficient diagnostics and, more importantly, on patient outcomes.

Healthcare business models 101

Defining your business model is one of the most important decisions of any healthcare start-up. To define a business model means knowing “by heart” (1) who has the money in their pocket, and (2) how are you going to get it in your pocket. The first question defines your customer and the pain that he feels. The second question tries to make sure you can obtain revenues that are higher than your costs. It is as simple as that.

A business model should be defined in ten words or less. If you can’t describe it in ten words or less, you don’t have a business model (i.e. if you have designed a new endoscope, a business model could be as simple as we want to give away the endoscope and charge for the consumables). In healthcare, money usually is in the pockets of the administration, hospital CEOs, healthcare professionals, or the patients. The more precisely you can define your customer, the better. Starting with a clear and small niche (segment) is usually perfect. You can always make it larger in the future, encompassing other segments as you grow. I never saw a healthcare start-up willing to sell everything to everyone become successful.

Innovation is important for any healthcare start-up, but I would not recommend to mess around trying to invent an innovative business model. Smart people have already invented every business model that makes sense. This is not to say that it is impossible to come up with a new and successful business model that no one has ever tried, but in my opinion this is very unlikely (and dangerous). Try to keep the way you are going to get your client’s money into your pocket in an already successful and understood way.

I love the way Guy Kawasaki defines what a business model is, you can find more on this in his book "The art of the start".

The war for talent

We live in an era of physician shortage, and talent will be more and more important in the next decades. Excellence will no longer be enough. Hospitals will differentiate themselves from its competitors through innovation.

Hospitals need to attract smart and innovative physicians. Creative physicians come in many different forms. Some are looking for radical big ideas, some others are improvers. Some are great at teamwork, others are “prima donnas” needing space and individualism.

But all of them have in common a strong desire for workplaces that let them be creative. Hospitals seeing this trend, eager to value healthcare professionals ideas, able to challenge them and ready to be proactive to make these ideas happen will no doubt have an edge in attracting, managing and motivating creative talent. This flow of innovation will provide competitive advantage to those hospitals.

Chief innovation officer will be the key position for the hospital of the future.

The story of your idea

Innovation and entrepreneurship in healthcare demands great effort. No pain, no gain. It is often a very chaotic process, although we can identify some steps in it. Knowing the “general” story of one idea, from its conception to its arrival to the marketplace can help wanna-be entrepreneurs “see” the path ahead and better planify what to do.

Step 1: Having the idea. Where does the idea come from? Learn to identify when and why you are angry. Behind an angry physician or patient lies an opportunity waiting to be discovered. Find needs and provide solutions.

Step 2: Is it just a good idea, or is it an opportunity? An opportunity means you will capture value from it. Is it economically viable? Can you secure strong intellectual protection? Has it got a big market size? Can you find a great team to execute it?, Is there a clear path to market? Can you build a profitable business model around it?

Step 3: Write a business plan. The purpose of a business plan is to tell a story, the story of your idea. The plan must establish there is an opportunity worth exploiting and must describe the details of how this will be accomplished. Some entrepreneurs see the business plan primarily as a tool to raise capital. Well, it indeed is necessary to raise capital, but its primary purpose is to help entrepreneurs gain a deeper understanding of the opportunity they are envisioning. It helps entrepreneurs to shape their original vision into a better opportunity by raising and answering questions.

Step 4: Protect your idea. Intellectual property is a very important asset in healthcare, especially in life sciences or medical devices. Protecting your idea will generate barriers of entry and can represent a source of revenue to your start-up.

Step 5: Prototyping. At some point you will need to test your product or service with a “mock-up” or a rough prototype, it will help you attracting capital, clients or employees.

Step 6: Choosing a future. Once you have a patent, you can choose to sell it or license it. You may want to find an ally in the sector to help you bringing the product to the marketplace or, maybe, you will create your own start-up.

Step 7. Build your team. Remember no investor will invest money in your idea, but in the execution of your idea. An idea is worth nothing, its value comes from its execution, and therefore the team that is going to push it forward is essential.

Step 8. Raise capital. Your idea may be able to raise government capital in from of grants (if that’s the case you probably have raised capital before step 4, no need to wait that long). At some point you may want to raise private capital from business angels or venture capital.

Step 9. Go! As a friend of mine once told me, once you get here you have already 90% of the job done… now you just need to do the other 90%... entrepreneurship is a never ending task.

Obviously, depending on the nature of the innovation you are bringing to the market, you will need to prove it “useful” and “safe”. Healthcare is a heavily regulated market. More on clinical trials in a future post.

A stroke of genius

Every now and then I hear a lecture that really makes a difference, that changes my perceptions on things. It happens as well with books (I have a special shelf at my place with the books that “changed my life”, just seven books so far, still looks empty, maybe I will comment more on those books in another post…).

Well, it happened again. This is a must see. Those who know me well, know about my passion for neurosurgery and the brain (half of my life so far) and my passion for innovation, entrepreneurship and financing of healthcare start-ups (the other half). Jill Bolte is a neuroscientist. She had an opportunity few brain scientists would wish for: one morning, she realized she was having a massive stroke. As it happened, as she felt her brain functions slip away one by one, speech, movement, understanding, she studied and remembered every moment. Her recall of what happened is priceless. As I said, this is a not to be missed presentation.

I will quote here several moments of her speech, although I came to realize it is not what she says, it is the energy she invests in it and how persuasive she is what makes this a very innovative lecture.

Here it goes:

“And in that moment my right arm went totally paralyzed by my side. And I realized, Oh my gosh! I'm having a stroke! I'm having a stroke! And the next thing my brain says to me is, Wow! This is so cool. This is so cool. How many brain scientists have the opportunity to study their own brain from the inside out?"

How amazing is that? She was having a stroke, and her “scientist inside” was looking forward to analyze it.

“But it was beautiful there. Imagine what it would be like to be totally disconnected from your brain chatter that connects you to the external world. So here I am in this space and any stress related to my job, it was gone. And I felt lighter in my body. And imagine all of the relationships in the external world and the many stressors related to any of those, they were gone. I felt a sense of peacefulness. And imagine what it would feel like to lose 37 years of emotional baggage! I felt euphoria. Euphoria was beautiful -- and then my left hemisphere comes online and it says "Hey! you've got to pay attention, we've got to get help," and I'm thinking, "I got to get help, I gotta focus.”

Best recall of a disconnection between left and right hemispheres that I have ever heard.

“Eventually the whole number gets dialed, and I'm listening to the phone, and my colleague picks up the phone and he says to me, "Whoo woo wooo woo woo." [laughter] And I think to myself, "Oh my gosh, he sounds like a golden retriever!" And so I say to him, clear in my mind I say to him. "This is Jill! I need help!" And what comes out of my voice is, "Whoo woo wooo woo woo." I'm thinking, "Oh my gosh, I sound like a golden retriever." So I couldn't know, I didn't know that I couldn't speak or understand language until I tried.”

Amazing story, watch the whole of it here. It is a combination between “how the brain works” + “stapple yourself to a patient to innovate better”. Being a patient can help you understand the needs of healthcare as well. A very innovative speech indeed.

Medical devices rule!

(Source: the economist)

I’ve just received the last quarter results of venture capital healthcare investments, and I really love what I see (venture deal reports). Medical device companies received the most funding out of the four sectors (medical devices, services, biotech and pharma), edging out biotechnology. Minimally invasive procedures and implantable diagnostic sensors were particularly attractive to venture medical-device investors during the last year.

Medical devices are becoming more and more interesting for investors, as they deliver real value, real soon (time to market is significantly closer than in biotech investments). But this is not only about today. The long term trends look promising as well, as the confluence of genomics, nanotechnology and high-speed computing will make possible more elaborate devices. In an ageing population, the demand for medical technology will grow relentlessly.

Now we just have to solve the underlying problem. The emergence, adoption and widespread diffusion of new medical technologies accounts for a great deal of healthcare increasing costs. Who is going to pay for this in the future?

The economics of creativity

Our economies produce goods, but it seems clear to everybody that countries will excel economically on the long run if they have the ability to produce ideas, not just physical goods. We are not used of thinking about ideas as economic goods, but they are surely the most significant ones that we produce.

An idea is not like other goods, let’s say machines, oil, etc. which deplete or wear out with use. An idea can be used over and over again and in fact grows in value the more it is used. And an idea can be built upon. It can be combined with other ideas to create new forms, and this is especially true in science and healthcare. Today we clearly value creativity as a source of economic value.

Some countries have already understood that the ultimate intellectual property, the one that will replace land, labor and capital as the most valuable economic resource, is the human creative faculty. Again, western economies are missing the point. While we fight cheaper labor and goods production overseas, some emerging economies invest in creativity. I learned yesterday about several china initiatives in the biotech and the medical devices sector. And I was deeply impressed. In a world where creativity matters, we better invest in biotech or we will end producing their t-shirts ourselves.

Biotech - pharma relationship in 3D

The ongoing relationship between young biotech start-ups and big pharma companies has been evolving in many ways in the last years. It is important to understand those changes with a little bit of perspective.

First, the number of alliances between pharma and biotech has been growing steadily. The market for “know-how” has become much larger. This can be explained because the number of biotech companies is obviously on the rise, but because the appetite for buying “know-how” (targets, technologies, molecules, proteins..) has grown a lot as well. As I mentioned in a previous post, Research and Acquisition (R+A) is the new Research and Development (R+D).

Second, the nature of alliances being signed has evolved as well, specifically the stage at which collaboration begins. In the last 10 years, deals struck at the discovery stage (the earliest time) account more or less for only 50% of all alliances. More and more biotech start-ups are holding nowadays a little bit longer, as their projects make their way through the development process. Therefore, if at the early beginnings of the biotech industry almost all deals were at discovery, now half of the deals are occurring later on the development process, let’s say in the lead molecule, preclinical, phase 1, phase 2, phase 3, or even market approval phases.

Third, the nature of the relationship between biotech and pharma has evolved as well. At the beginning of the industry, relationships were short-termed, with very little organizational, financial or operational integration. There was a contract (usually licenses or fee for service arrangements) and each party remained independent, being the only concern whether the terms of the trade were met. But now we are seeing more and more “intimate” alliances, involving significant organizational, financial and operational integrations. Most of this “new era” deals involve equity investments by the pharma company into the biotech start-up (along with representation on the board of directors), agreeing on long-term collaboration, even through several projects.

Having all this in mind, the future of biotech looks a bit different now: we will see a large market for “know-how”, with more alliances taking place later on the development process, and more long-term relationships involving equity investments.

Remixing healthcare

Everywhere we look, our culture has been digitized, resequenced, and reassembled. Our culture is being remixed. We live in the age of mash-ups. Digital media allows itself to cutting, pasting, sampling, and compositing, and the urge to “mix” things to create something of greater value has driven the internet industry forward. An entrepreneur, for example, takes some google maps, adds some flickr photos, then adds some GPS tracking, shakes everything, and voilà, he can offer a new website offering pictures around the earth. The healthcare information technology industry will profit as well from this trend. First initiatives are being created now.

For example, Who is sick is a public health mashup remixing “social networking health information" plus "Google maps". Just imagine the public health possibilities. You post sickness information onto the map (completely anonymous), then you can search and filter for sickness by location, time, symptoms, etc… You can see sickness trends and current outbreaks. You have to see it to believe it, give it a try.

Patients rating their doctors in a social networking tool (RateMD), social sites helping patients locate friends with the same disease, (Patientslikeme),… you name it. The trend is definitely coming to healthcare.

And yes, reckless as it may seem, how about remixing social networking (facebook) with understanding one's genome (23andme) in the future? (see as well my previous post on 23andme). Maybe people would use the web to share their genomic information in meaningful ways. Maybe people would be interested in mashing-up genetic profiles of “great” tennis players to characterise common characteristics of being a great tennis player. Society would get attracted to genomics, get passionate about it, and this would change many things for sure.

The revolution will be downloaded (II)

Sounds like we’ll finally get a look at Google’s much-discussed-but-as-yet-unseen plans to get into the health records business. Last week the company pulled the curtain back on its new online service. And they are not the only ones coming to healthcare.

Google, Microsoft, Revolution Health... Why are 3 of the largest companies in IT getting into the healthcare market? Well, there is a lot of value there. More and more people are looking to the web for health information, and having a safe place for them to store their medical records will drive more people to that particular site. With healthcare companies (pharma, private practices, retail healthcare, suppliers etc.) being big advertisers on the web…it’s all about getting the eyeballs (and about transforming those eyeballs into money later).

Microsoft just did the same last year, when it launched a service called HealthVault, and AOL co-founder Steve Case is backing Revolution Health, which offers similar online tools.

So, Google is launching a new Internet service that stores personal medical information, The platform will be called Google Health and will allow users to manage their own records, such as medical test results and prescriptions. It will be accessed on any computer with an Internet connection. Patients will be able to enter basic medical data into an online repository, and invite their doctors to electronically submit information as well. More interestingly, Google is saying it will be an open system where third parties can build direct-to-consumer services like medication tables or immunization reminders. Google intends to profit by increasing traffic to its search site.

They are already testing the service with 1.300 volunteers at the Cleveland Clinic, a nonprofit medical center. No one knows when it will be deployed worldwide, but I guess it will be soon. It will probably be available first in the United States and then expand abroad.

The whole thing makes a lot of sense, but I’m not sure we are ready for it. Until patients are real “consumers” of healthcare it is unlikely this effort will work. This needs citizens pull-in. Maybe there are early adopters ready for the challenge, but we are so used to spending “other people’s money” and taking healthcare for granted that we do not want any further responsibilities for our care. So long at it is delivered and we do not pay, we are just fine. Vested interests of companies in the healthcare value chain do not want consumers in control. We’ll need to fight that.

If we want sustainability, let's just stop protecting the status quo

“There is nothing more difficult to carry out
nor more doubtful of success
nor more dangerous to handle
than to initiate a new order of things.”
Machiavelli, The Prince

Healthcare today is undergoing a period of transition, in which, whether we like it or not, the objective is initiating a new order of things. We should not be surprised about the difficulties involved.

We are witnessing an acceleration of demand and technology at a rate that I think we have never seen before. This is not sustainable. In less than ten years, we have seen the advent of truly wonderful applications in the fields of life sciences and medical devices, costs rising above unthinkable levels, patients becoming the gravity center of healthcare, globalisation,… As we expand the horizon of what is possible (stem cells, cloning, personalized medicine…) we will face a social debate, and citizens will have their say in it. Consumers will be the true pilots of our future healthcare system.

Expectations – both about health and about the services provided – are on the rise as well, and need to be managed. We need to look at the long-term sustainability of present healthcare systems. And here’s the catch, it is my contention that this sustainability won’t come just by better managing healthcare. Doing more with less is becoming an impossible task. Sustainability needs to embrace innovation. We need to do more in a different way. Let’s just stop protecting the status quo, let's bring more choice and competition to healthcare and let the innovators and entrepreneurs flourish. We need more entrepreneurial culture.

Freeconomics

Will “low-cost” ever come to healthcare? You bet it will. Free is what citizens want — and free, increasingly, is what they are going to get.

The idea that you can make money by giving something away (or by selling it at an incredible low cost) is no longer radical. We live in the age of “free”. Cheap travel, cheap entertainment, cheap car rentals… cheap everything. But until recently, in healthcare practically everything "free" was really just the result of what economists would call a cross-subsidy: you can get for free any product that forces you to pay for something else, as for example, when a private healthcare chain offers a free first visit and makes the money when patients need to be operated. The one is giving away the good for free is making the money in “capturing” the client and charging him/her for different things.

But the model can (and will) get more deeply into the system. Healthcare doesn't feel free when you're paying for the infrastructure that it needs (ask the governments). Yet if you look at it from the side of the patients, the economics change. Those expensive resources (fixed costs) can serve tens of thousands of users (marginal costs). Healthcare, when looked from the point of view of entrepreneurs, is all about scale, finding ways to attract the most users for centralized resources, spreading those costs over larger and larger demand as the technology gets more and more capable.

Basic economics tells us that in a competitive market, price falls to the marginal cost. Healthcare has the potential to become a very competitive market in the XXIst century. After all, we all need it, demand is huge. The opportunities to adopt a free business model of some sort have never been greater. Expect it to come to healthcare in the next years.