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Will Digital Health succeed? Any lessons from the Dot Com eHealth failures?

Written by Anne DeGheest // 02 February 2014 // digital health,

 HealthTech and Digital Health investment doubled in 2013 to over $2 Billion. However, over 73% went to seed and series A investments, with still a flat amount of deals funded by venture capitalists at the series B and C stages. Are we going to see a growing funding crunch for all these young companies or will we see increasing VC investments?

Will the Digital Health movement succeed? Any lessons from the Dot Com eHealth failures?

With new digital health accelerators opening doors weekly across the country, are we running the risk of another Dot Com like “Bubble”, when too many companies got started with poorly defined business models and an over exuberance of early seed capital that led to a terrible funding crash that killed most of them, including several very good ones?

What is different now?

During the Dot Com era, entrepreneurs were trying to change healthcare from the outside in and met, not only enormous resistance to change by the healthcare providers, but also got under crushing attacks by the existing healthcare vendors.  The good news is that the healthcare care industry is fundamentally changing from within this time, being driven by the at risk payment changes from Medicare and self-insured employers.There is a tidal wave of opportunities to develop innovative tools and delivery services that will enable the existing healthcare players to survive and adapt to the new value based payment system. Consumers will be paying an increasing share of the cost with higher deductible and copays and will (finally) have to take charge of their health, opening up large consumer driven new markets.

However, entrepreneurs need to remember that the Dot Com survivors were the ones that focused on building self-sustaining revenue models by solving large pain points with validated impact metrics… and building behind them barriers of entry through their network effect or new creative business models. David Shaywitz wrote an excellent article in Forbes on “Healthcare Entrepreneurs Learn Important Lesson From The Valley: Your Solution Is Not My Problem”.

Digital health entrepreneurs are focusing too much in building Product DEMO and not enough time defining the PAIN POINTS.

They are repeating the same mistakes of the DOT come area.By understanding customers’ pain points, it forces entrepreneurs to see where their product will fit in the customer workflows, who the stakeholders are and what are their drivers to change behaviors… Which can be conflicted in healthcare. Successful entrepreneurs understand they have to build a value proposition that is a Win/win for all the users/buyers/payers/stakeholders in healthcare.

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