Tech For Health: How Health Tech Startups Can Attract The Right Investors

Considering the radical transformations in the sector, health tech startups can attract the right investors using appropriate strategies. This segment is undergoing shifts in how healthcare reaches patients, and the key triggers are technological advancements and the pandemic.

The fallouts of the COVID are still evident, and there are several gaps in the availability of labor and resources. These shortages lead to high costs, which is why innovators must come up with solutions to streamline healthcare processes.

Investors are well aware of the incredible potential of technology to transform this segment. They are open to backing startups and early-stage companies with disruptive concepts and methodologies. AI is the most hyped technology, and founders are looking into applications as possible solutions.

Artificial Intelligence can infuse efficiency and accuracy when managing organizations of every size and scope. Starting from administrative tasks to operations and ensuring uninterrupted supply chains, AI can assist at every stage.

Delivering health care using data or equipment and running diagnostics is easily done with AI-driven instruments and tools. Most importantly, the stress is entirely on sustainability and organizations need to not only comply with regulatory requirements. But also cater to customer demand.

Providing care remotely and holistically that goes beyond physical well-being is also increasing in demand. For a founder, developing solutions to these challenges and building health tech startups can attract the right investors.

Prospects of the Health Tech Industry

If you’re considering building a health tech venture, the future of the vertical looks promising. Experts estimate the industry will grow at a compounded annual growth rate (CAGR) of 10.77% from 2022 to 2027. The expected size is $277.21B.

Investors are eager to offer capital and resources to new and upcoming founders. Statistics indicate that venture capitalists invested capital worth $170.6B in the healthcare sector in 2023. In the aftermath of the pandemic, VC funding rose in 2021 and 2022 and has been higher than in 2023.

Although global recession has taken a toll on funding, the lending market is expected to rally in 2024. Entrepreneurs hoping to attract funding for their startups can look into areas that are most likely to interest investors. For instance, deploying artificial intelligence (AI) models for efficient care.

Any innovations that can lower the costs of drugs, customer-facing care, diagnostics, and logistics can get VC backing. Medical tourism is another fast-upcoming aspect of the healthcare sector. By 2025, the market will have grown to $131.35B; by 2027, it will have touched $31.2B.

Deploying Artificial Intelligence to Transform Health Care

AI and other technologies have the potential to transform the healthcare vertical entirely. AI has demonstrated that it can help professionals and technicians free up valuable time. They can focus on more complex procedures that need a human touch.

Some of the areas where AI can assist include optimizing sleep monitoring and performing testing and diagnostics more accurately. AI is also more efficient in predicting clinical outcomes, making the apps invaluable for developing advanced medicines, drugs, and procedures.

AI-driven knee replacement surgery is only one example of how machines can raise the number of treated patients. Costs are lower, and recovery times are faster, requiring less aftercare, making the entire treatment more economical.

Any health tech startup can attract the right investors if they can demonstrate their capabilities to deliver such technologies. Using AI to predict patient volumes helps hospitals estimate the staff and resources they need in the future.

AI can analyze data to balance costs and expenses so hospitals can maximize profits but not at the cost of patient care. That’s a facet that investors would want to back. Improved patient care is just one of the several financial and non-financial advantages.

Also, think higher customer satisfaction thanks to enhanced health care services and lower insurance claims transforming the entire facility. AI assistance can improve success rates in drug development. This is why investors who were formerly hesitant to support biotech are now open to funding it.

Supplementing Care Using Technology to Lower Pressure on Healthcare Workers

The number of trained medical professionals and healthcare workers will fall short of the demand by 10 million by 2030. In contrast, the demand for medical treatment will rise and reach 80 million by the same time. This shortage is crucial, and innovators must come up with solutions to resolve the issue.

One of the most worrying issues that arose during the pandemic was burnout, with healthcare workers unwilling to continue. Changes in population demographics, low availability of skilled talent, and rising medical training costs have added to the problem.

Efforts are underway to improve working conditions, understand the challenges they face, and raise compensation packages. Ensuring that workers have a say in the management is also an effective measure to lower employee attrition. And maximize patient care.

But a bigger solution is to develop technological innovations to lower dependence on manual labor to accomplish menial tasks. AI can deal with tasks like maintaining records and databases, pre- and post-op workflows, creating discharge sheets, and working out post-hospitalization care.

Considering that insurance claims take up maximum time and effort, automating them can also free up time and effort. Healthcare startups can attract the right investors if they can develop these tech solutions for hospitals and medical facilities.

Technology and automation can also assist with tasks like evaluating resumes, recruiting and hiring personnel, and retaining them. VCs, angels, and other investors understand the potential of platforms that can streamline administrative and management tasks. So, accessing funding should be easy.

Startups that can demonstrate they have market-ready products to address the gap can navigate the pitch quickly and impress investors.

Due Diligence – Examining the Company’s Cybersecurity Infrastructure

A well-defined cybersecurity infrastructure has become a prerequisite for any organization operating in the IT sector. And that also applies to health tech. Expect investors to have IT teams on board to examine your startup’s security measures.

This due diligence applies to all kinds of organizations, such as biotech startups, digital health techs, and medical equipment manufacturers. The health tech sector is capital-intensive, and cash-strapped startups tend to divert resources toward R&D and developing their core business.

However, entrepreneurs should view cybersecurity as an essential asset and a strategy to assure future growth. That’s how they can stay compliant with cybersecurity laws and secure their IP and IA. These concerns are crucial for investors who need assurance that the startup’s assets are secure.

Typically, an IP-driven startup’s valuation is reliant on the intellectual property it owns and has the potential to develop. Evaluating these intangible assets is the first step in working out the company’s profitability and future revenues. Based on these criteria, investors may offer capital.

Keep in mind that in fundraising, storytelling is everything. In this regard, for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

Scrutinizing Ongoing Partnerships and Collaborations

Small health tech companies and startups don’t always have in-house teams to manage their IT tasks and may outsource them. Before offering you funding, investors will likely examine the partnerships and contracts you have with third-party service providers.

They will need assurance that the providers are competent and will provide only top-notch services to maintain the company’s systems. Without high-grade IT procurement and deployment partners, your startup’s capacity to scale can be limited.

Since health tech companies have IT as their core driver, an underperforming infrastructure can be detrimental to growth. Without its support, the company will fail eventually.

Investors will waste time, money, and resources, and the startup faces low productivity levels and high employee attrition rates.

Investors take a holistic overview of the startup, assessing its IT capabilities, before offering capital.

How Health Tech Startups Can Attract Investors – Effective Strategies

Invest in an Enterprise Resource Planning Platform

When evaluating a health tech startup as a potential investment option, investors delve into its innovation capabilities. They’ll also examine the IP it has created and the skill sets and talent pool making up the team.

Above all, they’ll check for the Enterprise Resource Planning (ERP) platform the startup uses. This platform allows for complete transparency in the company’s database. IT investigators auditing the company during the due diligence will appreciate the data visibility.

The ERP platform can speed up due diligence and have money in the bank quickly. This asset can be particularly handy when you’re trying to attract foreign investment. Or if you’re negotiating an M&A deal with cross-border companies or firms from different geographical locations.

Having and displaying trustworthy and credible data makes it easier for dealmakers to ensure compliance with local laws and regulations. Calculating taxes in different currencies or evaluating the target company’s financials is also more streamlined.

A reputable ERP, customized for your company, is an asset that investors appreciate when you pitch for funding.

Sign Up with the Small and Large Advisory Board

Startups should take advantage of the open exchange by joining the small and large market advisory board (SMBAB). This board provides a forum for startups to connect with potential investors and other stakeholders in the industry.

By listing their projects and explaining how they will move the company forward, startups can attract the attention of investors. These entities may be potentially interested in learning more about their business.

Joining the SMBAB is a great way for startups to get their foot in the door. And, start building robust, long-term relationships with investors.

Build Up a Highly-Skilled Team

Assembling a strong team is vital for any startup. But it is especially important for health tech startups that want to attract the right investors. Investors are always searching for talented leaders who are passionate about making a positive impact on the healthcare industry.

One of the best ways to demonstrate your team’s talent is by networking at industry events and online. Consider attending conferences and meetups where other healthcare professionals and investors gather. It’s a great way to meet potential investors and get your name out there.

You can also connect with investors on social media and LinkedIn. When you’re networking, be sure to highlight the unique skills and experience of your team members. Talk about their success stories and accomplishments and how they’re making a difference in the healthcare industry.

A great team is a valuable asset since it can help your startup scale by developing intellectual property. So much so that many startups enter into acquihire M&A transactions, where the buyer takes on the team. They are open to paying premium prices for top-notch talent.

Irrespective of the vertical where you work, you should know what startup investors look for in entrepreneurs before investing. Check out this video where I have explained in detail.

Demonstrate Your Edge Over the Competition

Standing out from the competition is crucial for any business, and it’s how health tech startups can attract the right investors. These entities are always scouting around for the vertical’s most innovative technologies and solutions.

In order to stay ahead of the competition, you’ll need to focus on developing disruptive solutions that address the most pressing needs in the healthcare industry. You also need to be able to demonstrate the effectiveness of these solutions through data and evidence.

In addition to developing tech, you’ll focus on the company’s unique value proposition. What makes your product or service different from the competition? What are the key benefits that your customers will experience?

By clearly communicating the unique value proposition, health tech startups can position themselves as a better choice for investors than their competitors.

Demonstrate Agility and Adaptability

The health tech sector is consistently evolving, with new innovations mushrooming quickly. As a new startup, you’ll indicate to investors that you can adapt to changing market conditions and customer demand.

Talk about how you and your team work to reevaluate the company’s growth strategies and ensure that they align well. Considering that technology can quickly become redundant, you’ll need to demonstrate agility and the ability to pivot when needed.

In Conclusion

Health tech startups can attract the right investors by developing solutions that address the ongoing challenges in the sector. These solutions can include using AI to enhance efficiency and accuracy. You’ll also demonstrate cost efficiency and the potential for providing remote, out-of-hospital care.

Understand that investors are looking for strong cybersecurity and robust collaborations that strengthen the company. And propel it toward long-term growth and success.

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