There is more to HealthTech than digitising bricks and mortar healthcare.

By Vishal Gulati, Venture Partner at Draper Esprit

“Pharma companies are using the paper version of computers to manage clinical trials”. A few months ago I was speaking to Pablo Graiver, CEO of Antidote.me (FKA TrialReach), a company raising the profile of experimental treatment options and clinical trials. I found his comment both hilarious and poignant. The approach to managing clinical trial information misses the point- these companies were failing to take advantage of the power of digital platforms. Rather than prioritising behavioural transformation, they are merely making marginal gains in efficiency by simply translating the paper process to the online arena. Startups do not have the luxury of doing the same.

I see hundreds of companies every year, most of them claiming to be doing ‘digital health’ but it is not uncommon for me to meet companies that are not pushing the envelope far enough to maximise the power of digital technology. They are merely ‘digitising’ an existing bricks and mortar process. The objective of sharing this experience is to expose what I think is a great opportunity for a startup to try and leapfrog beyond the slow movers.

Let me give you an example. Online pharmacies are not new. They have been around since 2000 but if you have used any of these ‘digital’ pharmacies, you will realise that they are not a lot more than a digital order taking system which posts a package to me. It has no interest or curiosity in my health condition and as a result, fails to give me the additional value of checking if the medicine that is prescribed to me is right for me.

On the other hand, look at the company Echo, it is leveraging the true power of digital technology by integrating it with your experience at the GP; taking the data of what is in your prescription, setting up reminders and checking in to see if patients are taking their medicines in the future. It isn’t merely finding a single pain point in an experience, rather it is reinventing that experience in the first place.

When I first started to look at telemedicine companies in the UK, the market was littered with tiny ‘telemedicine’ companies where you could request a ‘skype’ consultation with a doctor then they would call you and get you to switch on your skype and discuss your medical condition. Push Doctor (one of my own portfolio companies) led the second generation of direct to patient telemedicine wave with booking, membership, payment, prescriptions, reviews, access to medical notes. Everyday the company continues to push boundaries to make its service more user friendly and to be able to address a longer list of needs.

The key to winning in this sector is to go beyond equivalence with the bricks and mortar offering. There are technical as well mind set challenges that play a role in why it has taken digital health companies longer to get to this point.

Technical: Many digital health companies have lagged behind, in some cases it was lack of imagination and others just the inability to attract or fund top class developer resource.

Funding: It is still not widely understood in the sector that scaling up a digital health product takes several million pounds of investment and raising small amount of money will not get you there.To build a sustainable digital health business it is very important to take advantage of all the sensor universe available to you. There has been a lot of change on that front. Ambitions have grown, so has the interest among investors, number of companies funded, size of rounds — everything is pointing upwards.

Mindset: Many outside the industry find it amusing that non-inferiority trials exist in healthcare. These are trials which are done in order to compare a novel treatment with a view of demonstrating that it’s not clinically worse with regards to the endpoint. Often the objective for new innovation has merely been to show that new innovation is just as good as a well established “gold standard.” Traditionally progress in healthcare has been so slow that incremental small changes set the bar. Mindset change is a different order of problem because invariably this problem will be invisible to most people inside the organisation and as a result it may never be addressed.

When, last year the CEO of one of the biggest health software company in the UK asked me what advice I had for them to get into digital health business, I suggested that they should hire someone from outside of healthcare industry to lead it. Results of this project are yet to be seen but a new leader from an adjacent industry is in place and is asking all the questions that no one from healthcare industry would normally ask.

Based on hundreds of digital health companies I have a few tips for digital health companies early in their journey to help evolve their product which is medically as well as digitally fit for purpose:

1. Be Bold: Don’t be shy to admit that your tool is not able to serve the same range of people or conditions as the bricks and mortar version. Focus on things your product can do better. If your product can improve convenience or access a group of patients that traditional health systems find hard to access, then you should sharpen your proposition around those values.

2. Be User Focused Not Payer Focused: This should be obvious to most but often it isn’t. Don’t think like a doctor trying to provide a service, think like a user trying to use the service. This is often true even if your product is B2B.

3. Don’t Save Costs, Improve Quality: Health systems are cash starved, there is temptation to focus on providing the cheapest possible. Try and communicate the value of your service not just how cheap it is. You will struggle to improve quality if your company is all about saving money.

4. Get the funding right: For the right team and the right idea, there is plenty of funding available. Don’t start by limiting your ambitions because you are fearful that you may not be able to raise the money needed to make a great product.

5. Look for the X Factor: The holy grail for any company in this sector is being able to create value which was not even anticipated. Ieso Digitial Health (portfolio company) which provides digital CBT for mental health conditions uses their algorithm to identify best therapist for each patient. This is something that is not even possible to do in real life CBT. This makes their product unique, it doesn’t just transfer a physical process onto a digital screen. It reinvents the experience of the patient in the first place.

Vishal Gulati, Venture Partner at Draper Esprit

Dr. Vishal Gulati is one of the Europe’s leading digital healthcare investors. Vishal is a qualified physician and chairman of the Digital Health Forum. Over the last decade he has championed deals across areas including diagnostics, devices & biotech. He is currently on the boards of Horizon Discovery PLC and EcoEos. His investments include Napo Pharmaceuticals, Glenmark, Renovo, Phagenesis. He has also held board positions at Psynova Neurotech, Bioscale and Enigma Diagnostics. Previously, Vishal worked at Atlas Venture, The Wellcome Trust and Radiant Capital.

Portfolio Companies: Horizon Discovery, Lifesum, Push Doctor

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Draper Esprit was founded in 2006 with a mission to back Europe’s most ambitious entrepreneurs. We invest into visionary and growing companies and also have the ability to do direct secondary deals into late stage tech companies as well as buying entire venture capital portfolios. We raise funds from a variety sources and always are able to source capital for the best opportunities through our partnerships. Leading institutional LPs have committed more than $1 billion to our funds historically, and we are one of the largest and most active VC firms in Europe. In 2016 we moved our Primary funds into a listed PLC model to allow us to take a longer term, multi-stage, patient capital approach. Please see our Investors section for more information. In 2012, we launched our first angel EIS co-investment fund to enable founders, tech executives and HNW’s to invest alongside us to help build bigger networks for our portfolio companies. Through our angel EIS co-investment funds, we have successfully deployed capital on behalf of over a hundred personal investors into some of Europe’s fastest growing companies alongside our leading institutional investors. For more information contact Richard Marsh. Draper Esprit has also been the most active secondary tech investor in Europe having acquired ten VC portfolios to date as well as direct stakes into later stage companies.