10 Key Conversations Every Health Innovator Must Have
Cambia Grove honors our role as a platform for the innovation community to amplify their perspectives on topics applicable to the larger health care ecosystem. This guest post from Dr. Will Canestaro, Managing Director, Washington Research Foundation, explores 10 key conversations facing health innovators and follows up to a conversation he lead with Life Science Washington Institute earlier this year.
The views expressed in this article are solely those of the author and do not necessarily reflect the opinions or positions of Cambia, Cambia Grove, or any other entity or organization.
Health innovation is driven by regular people making the decision to step away from their day job to start something new. Innovative small companies are the engines of our economy and lure many people with the Siren’s Song of greater professional control, the chance to make more money, and hopefully improvements for patients.
Nonetheless, launching a company can be a tremendously risky process. This is true now more than ever during the age of COVID-19. Although the widely-shared statistics that suggest 90% of companies fail have been debunked, there’s still a greater chance than not that a new venture won’t make it. Now take into consideration that in order to launch a company, the founders often have to step away from their day jobs that are much more secure and potentially more lucrative and invest their time and often their own personal wealth to get it off the ground.
An ordered process can help weigh these potential risks and benefits for yourself. Despite all of the unknowns, there are certain conversations that you should have to determine whether starting a company is the right decision for you.
Start with these ten conversations:
1) Support network
Nobody builds a company completely alone.
To successfully launch a company, you will need substantial support from your significant other, your family, your close friends, and your community.
Late nights, last-minute phone calls, weekends spent answering emails instead of enjoying a leisurely brunch: It will wear not just on you, but it will wear on those around you. If you’re married or in a partnered relationship, and particularly if you have children at home, you must accept that this business venture will affect your entire household.
Starting a company is incredibly stressful, and it should come as no surprise that many relationships don’t survive this stress. Working early on to address this and begin to mitigate the stress of your venture in your household is essential to building a thriving company. This begins with:
Who will walk alongside you as you launch this new venture? Do you have their full support? What are their questions, and can you answer them well?
What is your plan for remaining grounded in these relationships as you enter this new and exciting phase of your life? Ask these hard questions and listen carefully to the answers you receive. Okta’s CEO famously made his wife a pitch deck before leaving his position at Salesforce.
2) A successful entrepreneur in your field
You will not be the first person to launch a new venture in your field and those that have done it before learned a lot along the way. These former and current entrepreneurs can be some of the best resources for you in validating your idea and go-to market strategy.
Believers in the network theory of innovation know successful ideas build on one another incrementally, and slowly, until what was once considered impossible becomes the obvious next step.
There are people who have tried an idea similar to yours before. The entrepreneur in your field will know where your predecessors struggled. Why is now the right time for this company? Why are you the right person to lead it? Other entrepreneurs can judge whether your responses to these questions stand up to scrutiny.
While you should always be concerned with IP and over-disclosure to competitors, in my experience far more ideas have died from being held too close than being discussed and improved with thoughtful feedback.
3) Regulatory Consultant
Regulators and the FDA specifically aren’t mindless bureaucrats; they are unsung heroes. They work tirelessly for far less than they could make in industry to ensure that products that we use to diagnose, treat, and prevent diseases are safe and effective. They also ensure that companies selling those products don’t market beyond the evidence. They have been so successful that we take it for granted that the products used in health care have been studied and have been shown to be safe and effective. While no system is perfect, regulators provide a necessary check on businesses for the safety of patients and the consumer.
All that being said, health care is a highly regulated space and the regulators are on the other side of the table. You need someone advising you who can help you understand how to approach and handle these important interactions from the very start.
If you’re in a regulated space and you cannot get a product approved, generally speaking, you don’t survive. Any investor is going to know this and will not tolerate anything but a precise regulatory strategy. Find a consultant, roll the cost of their services into your projected financials, and take the time to understand the regulatory considerations of what it is you are trying to do. This will never be time spent foolishly.
4) IP Lawyer
Whether you are launching a software company or a new biotech venture, your new company will depend on some form of intellectual property (trade secret, copyright, or patents) and it’s critical that you protect it from the very beginning. Most IP lawyers offer a free one-hour up-front assessment and this can be a critical way to get some feedback without using any resources. That being said, the cost of a patent-heavy company can become burdensome quickly and so it's important to ensure that when you do file you’re thoughtful in how you approach it and you know the kinds of resources you will need.
5) Corporate Lawyer
If you’re going to be asking for money from investors or customers you need to make sure that you have good corporate governance in place from the very beginning. And this isn’t just to show investors that you have things under control or win potential customers. You also are going to want to limit personal liability should the company you are launching fail.
But this step isn’t overly complicated or expensive. The creation of a new company is a fairly simple process--it is the running of the company where you run into trouble--and law firms will often have company startup packages in the hundreds of dollars. Law firms generally want to make it easy for you to start a company; after all, this hopefully creates a customer for the firm and lowers your risk of governance problems down the road.
Finally, a corporate lawyer often won’t be the world’s leading authority in your exact area. But if you pick a credible and experienced lawyer they will have seen hundreds of companies start and a lot of companies fail, too. They can advise you on tough topics like how to ensure ownership and control of the company. Listen to them and heed their advice from the beginning.
6) The wallet: Who pays?
Health care is the only market where those consuming (patient), deciding (provider), and paying (payers/insurance) are separated. We almost take it for granted but this creates huge barriers and misaligned incentives throughout the health care system.
Do products in your area go on a formulary? If so, what’s the process for that and have previous companies similar to yours been successful? Businesses that can’t get paid don’t last very long and yet it is amazing how infrequently this is addressed up front.
Also, it's important to consider that often what you are competing with is ‘nothing’. There may not already be a specific product or service that offers exactly what you could. This means that you’re asking a payer to adopt something new and pay for it. You’ve got to make the case about why this makes sense. If you’re making arguments about cost offsets you’ve got to be conservative and realistic or risk a quick dismissal.
7) The gatekeeper: Who decides who gets the product?
The gatekeeper often isn’t the patient and may have very different considerations when deciding whether your solution will be used. Which people have to agree for your project to be brought on board: hospital administration, office managers, physicians, some combination of these? Oftentimes your early advocates for adoption like the health care provider won’t have the final say over whether something gets adopted. How do you translate this early excitement into a returning customer relationship? Look for examples of how this has been done before and learn from their best practices. If your solution generates costs without reimbursement or dramatically alters the workflow, your company will be facing an uphill battle. Also consider how the gatekeepers will make decisions and what evidence they will need in order to make them. In your space do you need clinical evidence? Do you need an economic case? Do you need an efficiency argument? Do you need all three? You have to be able to answer these questions in granular detail.
8) The consumer/patient
The third point of the triangle is the patient. How does your solution impact them? If your product touches or is used by a patient you should have an intimate understanding of their experience and what they value. Even if you are a data solution operating completely behind the scenes, your solution will have ripple effects that reach the patient and so they have to be considered.
Note: It can be impossible to please all three groups mentioned here. However, at a minimum, two of the groups should benefit from your service while the other remains largely unaffected. If you can’t at least balance two of these stakeholder groups it’s not a good sign for the feasibility of your venture.
9) Your financial planner
If you are stepping away from a traditional 9-5 job, it could be a big decision for your financial well-being. Can you withstand a small bump in the road should this venture go south? Can you support yourself for a few months while looking for work? How long can you go without drawing a salary?
Beyond just the opportunity cost of not drawing a salary you may also devote some of your own savings to the venture. For some companies, if you don’t have at least a prototype you are unlikely to get outside investment. For many founders this means committing their own money to get things off the ground. Some have suggested that a company is unfundable without the co-founders putting some skin in the game financially. With this reality, you should enter into the new company fully understanding your risk tolerance and knowing what thresholds you have set for yourself that you can’t cross. When do you need to draw a salary from the venture before you have to walk away? How much money can you personally commit?
People with good ideas rarely have just one and if the current idea that you’re trying isn’t working it’s important to know when to stop and try the next one. Deciding on that limit earlier is best.
This point is intentionally last.
While some investors may operate more as co-founders and help you even at the whiteboard stage, they are definitely an exception. By getting feedback from all of these different stakeholders you make your idea stronger so that you have a better chance of success when you do go in front of investors. Also, many of the people you will have already spoken to can help connect you to the right investors for your project. You shouldn’t feel afraid to cold email an investor, but a warm introduction makes life a lot easier and has a much greater chance of success.
About Dr. William Canestaro
Dr. Will Canestaro is focused on investments in biotechnology and engineering, as well as supporting Washington Research Foundation’s grant-making activities. His portfolio includes companies across sectors. Currently, he manages WRF’s investments in life science and engineering focused companies. His professional background includes health economic and outcomes consulting for organizations including the National Pharmaceutical Council, Genentech and AstraZeneca. He has extensive experience with comparative effectiveness research and program development through roles with Generation Health and Correlagen in the Boston area. Dr. Canestaro earned his doctorate from the University of Washington’s School of Pharmacy Pharmaceutical Outcomes Research and Policy Program. He received an M.Sc. in medical anthropology from Oxford University and an A.B. in medical sociology from Dartmouth College.