Reflecting on 2023

Now that a new year is upon us, it is a good time to sit back and reflect a bit on the year that passed and what we learned from it. So I wanted to take the opportunity to do that from the perspective of early stage investment and venture building within digital health and healthtech and at the same time breathe some life into this blog again (more on that and plans for 2024 at the end of this post, ed.).

In 2023 I not only got the opportunity to help introduce Cortrium to their new CEO. I also got an opportunity to focus my energy on the healthcare space on behalf of People Ventures with the objective of positioning us as a leading early stage VC in this space within the Nordic region while also sharpening our decision making on what investible startup cases in this space really look like.

It has been a both interesting and exciting experience, and I have learned a lot that have given me the opportunity to reflect on where I think we are right now, and – more importantly – where I see us heading going forward. Plus, most important, what we need to do to get there.

The challenges

Starting from the top there is no doubt that the space is challenged from a funding perspective. I think the reason is obvious; a lot of investors have found themselves burnt from having over-invested during the 2021 boom year. Since then funding for digital health and healthtech has dropped to roughly half.

It is really bad timing for founders. Especially since I have found from countless meetings with founders listening to their pitches that the level of professionalism and ‘survival instinct’, if you can call it that, are actually going up and up. So while the cases by and large are getting better and more fundable on the merits of what’s on the table, funding is getting harder to get. Tough luck.

Having said that another thing has also struck me: The lack of truly great VC cases within more specialized areas of medicine like fx cardiology or neurology is worrying. But I think there is a very clear and problematic reason for it: Many specialized areas of medicine are simply considered to be too small market opportunities for classic venture returns. That is something that needs to be addressed, and I have a suggestion, I will get back to.

The final thing that struck me and made me more sad than surprised was to see how many founders within digital health and healthtech who still vastly underestimate the importance of working on market access and the commercial plan from day one. I would go as far as to say that those cases – where product is everything and sales is an afterthought, we will get to eventually – are borderline unfundable.

The opportunities

Having said all of the above, and before we get to the things we should be working to fix going forward, I was also amazed at all the great stuff that is going on within innovation and solving real problems within digital health and healthtech.

I know and appreciate that there are many regulatory constraints and requirements on clinical evidence and such, but I actually think it is a strenght. When you get it right it says something about the endurance and viability of the business, you are trying to build, and I would personally love to see the same kind of scrutiny applied to other industries as well. I think we would experience far fever non-starters and downright duds as a result from it.

And then it is just impossible not to be in awe, when you meet great people applying their talent, skills and experience towards solving real painful problems for other people and ‘make a dent in the universe’. Many of them leave safe positions and good paychecks to go and pursue the dream, and I think they deserve all the praise, we can lavish on them for having the guts to go where all the rest of us wouldn’t in reality even dream of going ourselves.

The work ahead

Reflection on the above observations, I think there are some clear indications for where we need to apply our focus for the coming year(s). Or I at the very least have a – I think – well thought through suggestion on what should be top of mind. Both structurally speaking and from within the individual startups themselves.

First of all I think we need to revisit how we fund startups in this industry to help make sure they make it across the dreaded Abyss of Death. Structurally, there are still too many startups who raise to little from too small investors and risk ending up in the classic Catch 22 situation:

Being to expensive for their original smaller backers. And not having proven enough to attract new funding from the bigger players.

In Denmark founders were lucky to have the BioInnovation Institute thanks to generous frants from the Novo Nordisk Foundation. They have the ability to help and fund startups and founders, who have capital requirements that exceeds the normal willingness, ability and risk profile of early stage investors, and they do a stellar job. But it is also a challenge that we have in essence become overly dependent on one big player.

We need – founders need – to have more and better options in play in order to give them the ressources they need to succeed and be more investable for ‘normal’ investors. I don’t claim to have the answers as to what those options could be and how they could materialize, but I think it would be wise to have the conversation and come up with solutions that would help us build on the great talent and momentum, we have here.

Founders themselves also have a great part to play in making themselves more attractive to investors. They need to spend a lot more time on the commercial aspects of their startups from two different angles:

First they need to build their business cares in more expansive ways, so they not only focus on the core problem their solution addresses but also on meaningful adjacent market opportunities. In so many words they need to bake a bigger cake and get past the point, where their TAM is so small it struggles to be a VC case, even if you assumed they would be able to capture a sizable share of the market.

And then they need to treat commercialization as one of the top two priorities (together with R&D) from day one of the life of their startups. There just isn’t any way around it: The life for a healthtech or digital health startup ebbs and flows with the ability to get viable commercial traction within a somewhat limited time horizon.

If you as a founder can prove through your actions and the plans, you put forward, that you have a clear path to payer and understand how to get there in the most efficient way within a reasonable time frame, you will be able to attract the funding you need to succeed with your efforts. I am very confident about that.

Another thing that I am confident about is that with this post, I will be resuming regular blogging on this site. I have to admit that as an ‘old’ journalist, I have missed writing more, and I look forward to sharing my thoughts and perspectives about early stage investing and venture building with an emphasis on healthtech and digital health.

I hope you will find it worth following, and I would love for you to take part in the conversation and knowledge sharing. After all, that’s how we all learn and grow.

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