Everything You Should Know About Healthcare Venture Capital
If you’re getting the feeling that we’re on the cusp of major changes in healthcare, you may be right. Decision makers are trending toward solutions that put more financial responsibility on consumers, but this also creates a marketplace dynamic where consumers have control. And venture capitalists are investing carefully.
If you’re just starting a business, seeking venture capital is a great way to fund the seemingly immeasurable startup costs. And in the medical field, where the ROI is typically good, your chances of getting funding may be greater than in other industries. But there are a few things you should know first.
Preparing Your Business Plan
Before you can even think about asking for investments, you’ll need a business plan to outline your business’s risks and potential profits. This should include all the basics of your standard business plan, including an executive summary, product or technology description, markets, and marketing, manufacturing and financials. But there’s an important section that you cannot skip in the field of healthcare, and that includes clinical and regulatory information.
For the clinical/regulatory section, outline your strategy for getting marketing approval from the FDA. This is an important step that shows potential investors that your product or technology is viable. You’ll need to note whether 510K approval is feasible or if you’ll need more work to get a premarket approval. If your product is a drug, you’ll need to note whether you’ll be pursuing an Abbreviated New Drug Application (ANDA) or a full New Drug Application (NDA). And for any biological products, you’ll file for marketing approval of a Product License application (PLA).
Here is also where you’ll outline the details of any clinical trials you have planned. Again, potential investors are looking for product viability, so provide as many details as you possibly can. It’s important to show that you have thought the product through from every possible angle.
What to Expect from Healthcare Investing in 2017
We’ve seen great fluctuations in healthcare investing in the past ten years, but the market is very much alive and open for business. Investors are expected to be more cautious in 2017, but the capital won’t stop flowing to new investments. And this is good news for the industry because with new investments come game-changing innovations.
Be Cautious About Valuations
No one values a business or product quite like its founder. Keep this in mind when planning your approach to fundraising. If you’re lucky, you may be able to dazzle investors and raise massive rounds of capital at an insane valuation. While this can be exciting, it does have a dark side. Healthcare companies that have approached fundraising conservatively are in a better position today than most of those who grandstanded in the early rounds. It’s always better to exceed expectations than it is to fall short.
Political Changes and Healthcare
In the early stages of this presidency, venture capitalists and health care industry entrepreneurs will stay glued to the headlines to see how healthcare may change in the coming years. Will we repeal and replace? If so, how will current programs be affected? And what does that mean for innovations that are currently in progress? Times are somewhat uncertain, but analysts can help us predict investments that are safe and those that are risky. Most agree that data and consumer-oriented companies will remain in favor for venture capitalists for the near future.
What is Consumer-Driven Healthcare?
In previous years, we’ve seen a shift towards consumer-driven healthcare offerings and we expect this will continue. These offerings include things like telemedicine, house-call services, and retail clinics. Consumer-driven healthcare puts more power into the hands of the consumer. These services allow anyone to take control of how and when they access healthcare. As the world becomes increasingly connected and consumer oriented, this shift in healthcare makes perfect sense. Venture capitalists are seeing what we all recognize. There’s a need to change the archaic system where we take an afternoon off and wait an hour or more to see a doctor. But the consumer-driven trend isn’t limited to patient care. Consumers are also taking control of their health and receiving medical advice through wearable technology.
What This All Means for You
The healthcare industry has been slow to adopt technological advances, but we may be headed toward a more rapid movement than we’ve seen in previous years. However, with newfound uncertainties, healthcare venture capital is flowing more cautiously than in recent years. Venture capitalists are investing, but they are choosing investments wisely. This doesn’t mean you should wait on launching that startup. It simply means that it’s more important than ever to do your homework.