The year 2024 saw a lot of brand name digital health and healthcare services companies stumble and fail.
And, yet, healthcare continues to be an area of intensive focus and investment.
As the year comes to a close, I share some thoughts on the highly competitive world of healthcare entrepreneurship that in 2024 strangely resembled the acclaimed Netflix Series Squid Game.
1) The Power Of Patience And Persistence
Almost anything worth doing in healthcare is hard and will take twice as long as you think it will when you set out to do it. It is easy for a startup or first-time founder to under-estimate the power of incumbency; the massive friction generated by government and para-government regulation; and the prolonged time it takes to scale a business, much less achieve profitability. There are a handful of companies that make it. But the denominator is far larger than anyone really talks about and true success—measured by patient impact and sustained profitability—is rare. The analogy to Squid Game (for those of you who may have just binged Season 2) is real.
2) You May Have No Idea What Really Happened
If it looks too good to be true, it almost always is. Sometimes if you’re in the right information flows, you’ll hear the real story. More often than not, you won’t. I received a call recently congratulating me on the “success” of a healthcare angel investment I had made years ago. I kept my mouth shut because I didn’t know the person very well. What I wanted to say is that my “successful” healthcare investment was now worth pennies on the dollar. Much of what is marketed to others as success isn’t really. All that glitters isn’t gold.
3) Fraud Is Normalized And Masked
Some healthcare venture darlings are actually get rich quick schemes with unsound fundamental economics. The greater the hype, the bigger the fall. The real word for it—fraud—is rarely uttered. There may be unsound valuation practices at play or, worse, unsound accounting practices. Companies raise capital on numbers that were falsified. Or companies whose bookings were represented as revenue. No one blows the whistle on these executives or companies because no one close to the unsavory truth—not the management, the employees, or the investors—benefits when it is revealed. Not to mention those tight nondisclosure agreements (NDAs). And so everyone goes on to live another day…and, yes, start their next company. I hear Elizabeth Holmes is raising for her next healthcare company. I’m kidding. Or am I?
4) Some “Experts” Aren’t Experts
Beware expert bias. Fancy names or fancy firms attached to something often doesn’t mean very much. They are often easier and cheaper to get than you think. It’s easy to get lazy when you hear that a marquee company has invested in something and believe that the company has a working product and sound fundamentals. But if you don’t see it for yourself, simply don’t believe it. And if you are even mildly suspicious, chase down your suspicions with Olivia Benson, Law and Order: SVU-like persistence. You
5) Failing And Winning
Some founders succeed financially despite their companies ultimately failing. Subsequent financing rounds enable founders to “take money off the table.” This now commonplace trend represents an insidious distortion of the venture model and is enabled by investors who want to reward and motivate a founder for a great early start. However, some of what makes venture work is the fact that someone is literally betting their career on going the distance with an idea. When the wrong founder is rewarded early, there is no “distance” because even a mid-term financial outcome may be life-changing.
6) So What Exactly Is It That You Do?
If after hearing about a company for a long time, you still have no idea what they do, listen to your gut…and run. These “all things to all people” companies are a type that should be avoided. Depth—doing a narrow set of things well—almost always beats breadth. Wanting to do all things for all people often reflects a lack of management maturity (and proper board governance) rather than breadth and expansiveness of vision. Sorry, my apologies, no, your app, device, AI tool, or clinic can’t solve every healthcare industry problem for every sector of healthcare all at once.
7) McDonalds or McDowells?
Lots of so-called innovative companies are companies are replicas of previous companies that operated in different markets or at a different time. Said more simply: copycats. Healthcare entrepreneurship has a short memory and little appreciation for industry history. Why bother with history when we can re-sell the same story not once, but twice? And the second time for lots more money than the last? Fans of Coming to America will recall the proud and robust innovation of one Cleo McDowell (RIP John Amos).
8) Beware The Arrogant Outsider
Healthcare is complex. And experience matters. Being new to healthcare just means you are likely to spend a lot of time making mistakes others have already made. Beware the shiny arrogant outsider. Arrogant outsiders—with glossy resumes from other industries—can be compelling figures who promise to bring outside-in thinking. But few of these folks are successful because they lack the humility and patience to truly succeed in healthcare’s multi-matrixed environment.
9) Not My Problem Anymore
Large incumbent companies and leaders often make ill-considered big strategic acquisitions that subsequent leaders who survive them then spend years struggling to make work. Big media splashes don’t often translate into big success but there is seldom any accounting for those failures. Call it too big to fail or muddying the waters. That bold “acquisition case” more often than not fails to materialize and leads to lots of after-the-fact finger-pointing. Until there is a new overpriced acquisition to distract focus from the last one. Fun.
10) I Have No Idea What You’re Selling, But I Like You
Every big new trend (AI, anyone?) will attract a lot of new players, making it very hard for the average buyer of new technology or services to make good choices. Industry relationships will almost always drive buying decisions more than fundamental differences between offerings. That overpriced steak dinner and bottle of wine and Super Bowl tickets weren’t such a bad investment after all, were they?
Ah, the sordid business of healthcare. Where it’s all about the patients.
Or say they say…
So, will 2025 be any different than 2024? More likely than not it will be an acceleration of a game that is already fully in motion.
Cue the eerie soundtrack.
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