By: Nina Mermelstein
Taking the Leap: Part One of an Ongoing Series
Since joining the Aequitas Partners team last December, I’ve immersed myself in the healthcare technology space through interactions with clients and absorbing all the information I find about industry trends and the large financial investment going into this sector. The industry’s growth has captured my curiosity and I now find myself looking for additional answers to a different set of questions. Who are the entrepreneurs who are driving innovation in this space? What motivates founders of health-tech startups to make the precarious journey from a promising idea to a full-fledged business? Who are their role models, what are their influences, and what have they learned from past failures?
Given our team’s focus on talent, I figured that the best way to get into the entrepreneurial mindset is to do what I do best – interview executives. Over the course of a year, I am meeting with digital health company founders and CEOs to get the inside scoop on what it takes to build a company from the ground up in this industry. These leaders differ in age, gender, and professional backgrounds. Their companies are focused on different facets of the health tech industry, spanning from disease management to care coordination.
My candid coffee chats have already brought to light a number of trends that I’m excited to share with our newsletter readers through a series of articles. For this first installment, I focus on the initial phase in various entrepreneurs’ journeys—the point in time when they realized that it was time to build their companies, and how their professional backgrounds have prepared them to take that leap.
Learning on the Job
Since the majority of people I’ve spoken with are first-time startup founders, I was extremely curious about how they’ve applied their previous work experiences in various fields such as Finance, Marketing, or Social Impact in their current roles. To my surprise, my question, “How has your professional background as an Investment Analyst prepared you to build your business?” for example, was often first met with a very candid chuckle. I soon learned that while many founders agree that their professional backgrounds provided them with a unique set of skills and knowledge that they apply in their day-to-day startup operations, they felt that there was nothing that could have adequately prepared them to build a company from scratch.
One founder elaborated that while her experience in the venture capital space offered her key case studies of the successes and failures of other healthcare startups, she still felt that there were a lot of things that she could only learn on the job. As a first-time CEO and founder, she has gained a new set of instrumental skills by focusing on growing and coaching her own team of experts.
In my conversations with entrepreneurs who have previously built other startups, I learned that they were able to draw upon previous experiences for some of the early questions that other first-time founders often encounter such as which HR systems to use, the best process for onboarding consultants, and how to engage with investors. A second-time entrepreneur noted that while he had some of the answers from his previous experience as a founder, his new leadership role with a different growth-stage business came with its own unique set of obstacles that required him to continue learning and evolving his leadership style.
Bringing in the Clinical Experts
The depth of previous healthcare industry knowledge each founder had before launching his or her business varied, which surfaced a unique set of challenges. While some had a tremendous amount of healthcare industry knowledge, as trained clinicians or having worked at health systems, payers, and pharmaceutical companies; others lacked that previous insider industry experience.
One founder, whose startup sells into large payers, had previously spent a significant number of years as a high-powered executive in the payer space. She highlighted how her payer experience was instrumental in understanding the ins and outs of her current customer base. She can now accurately pinpoint the decision-makers within the complex payer structure, improving the sales cycle for her company.
Another healthcare industry veteran stressed how his healthcare MBA, and work on the provider and pharmaceutical sectors, was vital to understanding the nuances of the healthcare market. He felt that in order to be successful in healthcare, you really need 10+ years experience in the space.
On the other end of the spectrum, many of the founders who had less healthcare industry familiarity decided to bring in clinical executives early on, either by working with a physician co-founder, hiring skilled chief clinical executives, or stacking their advisory boards with knowledgeable clinical experts.
Finding a Better Way
As a result of these conversations, I find myself amazed by the number of entrepreneurs who have quit their high-paid positions to take limited salaries while dedicating all of their time towards building their businesses. During a recent coffee chat, one founder said, “it takes a personality defect to be an entrepreneur because you have to be willing to give up everything.” I needed to get to the bottom of what could possibly inspire these skilled professionals, often with families and secure careers, to take on that level of risk.
When I asked the founders about what motivated them to first launch their healthcare start-up, they all responded with a version of the same line: “There has to be a better way.” Each of the founders recognized flaws in their respective sectors of the market and decided to tackle these issues themselves since nobody else was effectively solving the problem.
Various entrepreneurs expressed that their personal frustration and experiences with broken aspects of the healthcare system have become the ignition and continued fuel propelling their businesses forward. A clinician, and now startup CEO, expressed how his 20+ years of first-hand experience interacting with patients helped him really understand the pain points in the system and inspired him to build a business that would empower both the patient and clinician. Another founder described how his father’s negative medical experience prompted his foray into the healthcare space and his determination to build a solution that would improve the lives of many patients.
One founder described his inherent entrepreneurial nature, beginning with his childhood lawn mowing business and his radio sales startup in college. He has always gone through life asking “why?” and constantly looking for better ways of doing things. A younger founder explained that his innate entrepreneurial nature involves a bit of “punk rock” since he often finds himself breaking rules and questioning the status quo. He further summed it up by quoting the founder of the outdoor clothing company, Patagonia: “If you want to understand the entrepreneur, study the juvenile delinquent. The delinquent is saying with his actions, ‘This sucks. I’m going to do my own thing.’”
Throughout my coffee chats with a diverse group of founders, I learned that while direct industry experience may offer perspective and help prepare solutions for pain-points, the perceived chasm of a lack of industry experience is not so wide as to hinder budding entrepreneurs from making the leap into startup-life. Several of the founders I spoke with did just that – albeit with slight adjustments to their approach and leadership style, as well as a steadfast determination to bring in the right people as early in the process as possible, in order to offset their lack of industry expertise.
When it comes to why one might launch a startup in the first place, the motivation amongst all of these founders comes from an ambition to fix a problem he or she has personally encountered in the industry. All of the founders offer a brand new solution or better alternative to the current resolution. Each of our founders expressed this simple yet elegant ideal: to solve a problem they were amazed to find was not being properly addressed.
My coffee chats have highlighted that, while past choices will inform one’s path, they don’t define it. Determination, commitment, and the steadfast desire to realize a better solution are the core ingredients necessary in launching a business. I’m looking forward to sharing more as the year progresses!