How to Start a Healthcare Startup: a Complete Guide
How to Start a Healthcare Startup: a Complete Guide
Healthcare is one of the most critical industries in the world, and the demand for innovation in this sector is continuously growing. This is where healthcare startups come in, offering a wide range of solutions to transform the way healthcare is delivered to patients. Healthcare startups are companies that aim to disrupt the healthcare industry by introducing innovative solutions, products, and services. In recent years, many successful medical startups have emerged that have developed innovative solutions to improve health care. Solutions like Babylon Health, AliveCor, and Zocdoc not only help make patients’ lives easier but also make doctors more efficient and reduce treatment costs.
Newly established healthcare businesses can focus on a variety of areas, such as telemedicine, digital health, medical devices, and more. They often have a strong emphasis on data analytics, artificial intelligence, and machine learning, using these technologies to analyze patient data and deliver personalized healthcare solutions.
Let’s take a closer look at how to build a healthcare startup company, explore its concept, how they operate, and the impact they are having on the healthcare industry. We’ll also examine some of the key challenges such startups face and how they are addressing them.
Choose Your Healthcare Technology Sector
When starting a healthcare startup, one of the most important decisions you will make is selecting the technology field to focus on. The healthcare industry is vast, and there are many areas that can be improved with technology. Here are some in-demand healthcare technology sectors to consider.
Telemedicine is the use of technology to provide remote healthcare services, such as video consultations and virtual visits. With the rise of telemedicine, patients can receive care from the comfort of their homes, and medical providers can reach a broader patient base.
If you’re planning to create a healthcare insurance company, you can apply to a credible software development provider to order solutions streamlining the insurance claims process, reducing fraud, and providing better coverage options for patients. By doing this, your startup will quickly gain credibility and a devoted user base.
Physician and Patient Portals
This option implies the creation of a digital platform that allows patients to schedule appointments, view their medical records, and communicate with their healthcare providers. These portals can improve patient engagement, reduce administrative burdens on healthcare providers, and improve patient outcomes.
This is a multidisciplinary field that combines engineering, medicine, and biology to develop solutions to medical problems. Biomedical engineering market participants develop medical devices, prosthetics, and other products that can enhance the treatment quality.
Internet of Medical Things (IoMT)
IoMT refers to the connection of medical devices and wearables to the internet. IoMT products offer special solutions useful to collect and analyze patient data, improve medical device connectivity, and enhance patient outcomes.
Medical Inventory Management
Medical inventory management has become an essential part of healthcare operations. In this sector, digital solutions optimize inventory healthcare management procedures, cut down waste, and skyrocket supply chain operations.
Companies in this tech field aim to create solutions that help to automate repetitive tasks, perform surgeries, and improve patient outcomes. However, it is important to ensure that these technologies are safe, reliable, and properly regulated to avoid any potential risks or adverse effects on patients.
When identifying how to start a healthcare startup, consider your focus, expertise, and market opportunity. Conduct research to determine the size of the market, the competition, and the potential for growth. Once you have chosen your healthcare technology sector, focus on developing a unique value proposition and creating a minimum viable product (MVP) to test your idea in the market.
Study the Market
The following step after conducting market research would be to identify the gap in the market and determine the problem that your startup is going to solve. This involves analyzing the current healthcare system, identifying areas where patients and providers face challenges, and coming up with innovative solutions to address these challenges. Thus, you can ensure that your startup has a unique selling point and can effectively compete in the market. According to recent insights, the global healthcare market size was valued at USD 74,476.4 million in 2019 and is projected to reach USD $2,30,640.4 million by 2027 at a CAGR of 14.5% during the forecast period. This growth is attributed to the rising prevalence of chronic diseases, increasing demand for personalized and advanced healthcare services, and technological advancements in the healthcare industry.
In terms of segmentation, the healthcare market is divided into various sub-sectors, such as pharmaceuticals, medical devices, healthcare services, and others. The pharmaceuticals segment is expected to dominate the market due to the increasing demand for drugs and vaccines for various diseases.
Nonetheless, the medical devices segment is also projected to witness significant growth due to the rising demand for innovative and advanced healthcare equipment.
Considering how to start a healthcare business, it is also essential to develop a business plan that outlines the goals, strategies, and financial projections of your idea. This plan should include details on how you plan to fund your startup, your target market, and your marketing strategy. Additionally, you should consider partnering with healthcare providers and organizations to gain credibility and increase your chances of success.
Prior to starting a healthcare startup, you should essentially identify your target audience. This process covers understanding the needs, preferences, and pain points of the stakeholders in the healthcare industry, such as patients, healthcare providers, clinics, and other parties involved in medical procedures. Conducting market research and engaging with potential customers can help you better understand your target audience and develop solutions that meet their needs.
State of the market
Assessing healthcare market conditions for startups requires a thorough understanding of the market dynamics, trends, and key players. Here are some steps that can be followed to assess the healthcare market conditions for startups. For this, you should carry out the following procedures:
- Conduct the overall market research;
- Understand the size and growth potential of the healthcare market;
- Identify the major players and their market share;
- Define the current trends in the market;
- Analyze the regulatory environment;
- Explore reimbursement policies;
- Determine competitive landscape;
- Identify the target customer as well as their needs, preferences, and challenges;
- Determine the potential demand for the product and the willingness to pay for it.
The healthcare industry is highly competitive, with established players dominating the market. Startups need to differentiate themselves by offering innovative solutions, leveraging technology, and providing high-quality services. It’s essential to conduct a competitive analysis and understand the strengths and weaknesses of your competitors’ solutions. This can help you identify areas where you can outperform them and develop strategies to be outstanding. The strengths, weaknesses, opportunities, and threats (SWOT) analysis is a great way to do that. Explore the competitive landscape and identify the strengths, weaknesses, opportunities, and SWOT of the competitors. Detect the differentiation strategy to gain a competitive advantage. Additionally, you should consider partnering with healthcare providers and organizations to gain credibility and increase your chances of success.
Starting a healthcare startup requires careful planning, market research, and a deep understanding of the healthcare industry. By executing these steps, you can develop solutions that meet the needs of patients and providers and stand out in a highly competitive market.
It is obligatory to meet healthcare guidelines and regulations when starting a healthcare startup. The healthcare industry is highly regulated, and its businesses must comply with various laws and regulations to operate legally and provide safe and effective healthcare services.
Failing to comply with healthcare regulations can result in significant penalties, fines, and legal consequences. It can also damage the reputation of the startup and erode the trust of patients and healthcare providers.
Companies in this domain that successfully meet guidelines and regulations gain credibility and establish trust with patients and healthcare providers. Reflecting the requirements of such a standard demonstrates a commitment to patient safety, quality of care, and compliance with ethical and legal standards.
Thus, healthcare startups must prioritize compliance with healthcare guidelines and regulations to provide legal operations, guarantee patient protection and privacy, and build trust with customers and medical vendors.
In answering how to start a healthcare business, it’s important to include a list of the major healthcare regulations that exist.
Health Insurance Portability and Accountability Act (HIPAA)
HIPAA is a law that protects the privacy and security of patient’s health information (PHI). It includes requirements for healthcare providers to secure patient data and provide patients with access to their medical records. The law sets national standards for the privacy and security of PHI and outlines the requirements for how healthcare providers, health plans, and other covered entities must protect the confidentiality and integrity of PHI. HIPAA also gives individuals certain rights with respect to their PHI, such as the right to access and obtain copies of their health records. The law has significant implications for the healthcare industry and is enforced by the US Department of Health and Human Services.
The General Data Protection Regulation (GDPR) is a data protection guideline that operates the assembly, usage, and distribution of personal data of EU residents. The GDPR provides individuals with enhanced rights over their personal data, such as the right to access their data, the right to be forgotten, and the right to data portability. A company that processes the personal data of European Union residents, regardless of where the company is located, falls under the category that must comply with GDPR.
SOC 2 (System and Organization Controls 2) is a security framework created by the American Institute of CPAs (AICPA) to evaluate a service organization’s controls related to security, availability, processing integrity, confidentiality, and privacy. SOC 2 compliance ensures that a service provider’s systems are secure and that it has policies and procedures in place to safeguard sensitive customer data. This regulation is often required by companies that handle sensitive customer data, such as financial institutions and healthcare providers.
The California Consumer Privacy Act (CCPA) is a data privacy law that gives California residents the right to know what personal information is being collected about them by companies, the right to request that their data be deleted, and the right to opt out of the sale of their personal information. The CCPA applies to any company that does business in California and meets certain revenue or data processing thresholds. Companies that violate the CCPA may face significant fines and legal action.
This is an international standard that outlines best practices for information security management. This guideline provides a systematic approach to managing sensitive company information and helps organizations identify, manage, and reduce risks to their information security. ISO 27001 is used by organizations of all sizes and industries and is often required by government agencies, financial institutions, and healthcare organizations.
The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards created by major credit card establishments to ensure that merchants who accept credit card payments maintain a secure environment. The PCI DSS includes requirements for network security, access control, and encryption, and it applies to any company that processes, stores, or transmits credit card data. Compliance with PCI DSS is mandatory for merchants that accept credit card payments, and failure to comply can result in fines, penalties, and the loss of the ability to process credit card payments.
There are many more healthcare regulations that exist at the federal and state levels. Healthcare startups and providers must comply with these regulations to ensure patient safety, protect patient privacy, and provide high-quality care.
Choose a Revenue Model
A revenue model is a framework that outlines how a business generates profit from its products or services. Within the healthcare startup, the revenue model determines how the new project will generate revenue from its idea and within which features this value stream will be implemented.
Let’s delve into the common revenue models for healthcare startups:
Under the subscription model, the healthcare startup charges customers a subscription fee for access to its healthcare products or services. This model is commonly used, for example, by telemedicine companies, where patients pay a monthly or annual fee for access to virtual healthcare services.
The fee-for-service model involves a business charging customers a fee for each healthcare service or procedure that they provide. Healthcare providers such as doctors, hospitals, and diagnostic centers often opt for this monetization model within their medical software and digital services delivery.
Commission implies that the company takes a percentage of the revenue generated by healthcare providers using its platform. It is often applied, for example, by healthcare marketplaces and platforms that connect patients with healthcare providers.
Its name speaks for itself; medical startups generate revenue by displaying advertisements to their customers. Lots of websites and mobile apps in healthcare have such a way of monetization.
Within this option, the business sells medical products or services directly to consumers. This model is commonly used by healthcare product manufacturers and retail pharmacies.
Choosing the right revenue model is critical to the success of a healthcare startup. The revenue model should align with the startup’s goals, target market, and competitive landscape. Your choice should also be sustainable and scalable to support the growth of the startup over time.
Plan Your Budget
Raising sufficient capital is essential in order to launch and grow a healthcare startup. There are various funding options available for healthcare startups. Here’s a brief overview of each of the popular ways to get funded.
Venture capital firms invest in early-stage startups that have a high potential for growth. They provide funding in exchange for equity in the company and typically seek a return on their investment within a specified timeframe.
Private investors refer to high-net-worth individuals or family offices who invest in startups. Such parties provide funding in exchange for equity in the company and may also offer mentorship and guidance.
The funding provided by the government, such as grants, loans, or tax incentives, is considered to be public. These funding options are often competitive and require a detailed application process.
Accelerators provide startups with funding, mentorship, and resources in exchange for equity in the company. A big portion of them typically has a structured program that lasts several months and culminates in a demo day.
They are high-net-worth individuals who invest in startups. Angel investors provide funding in exchange for equity in the company and may also offer mentorship and guidance.
Grants are non-repayable funds provided by organizations such as government agencies, non-profits, and foundations. This option is available to medical projects that are working on innovative solutions addressing the main healthcare challenges.
The funding strategy should be chosen to meet your startup’s aim, the market sector you strive to occupy, and the expansion potential.
Create a Business Plan
The following step is the business plan creation, which is a written document that defines your startup’s goals, strategies, and stages required to achieve those objectives. It serves as a roadmap for every healthcare startup and is essential for securing funding and attracting investors.
Here are some key components of creating a business plan for a healthcare startup:
- Executive summary. This is a brief overview of the healthcare startup’s business plan. It should include a summary of the company’s mission, products or services, target market, and financial projections.
- Company overview. It’s a section that provides a detailed description of the healthcare startup, including its history, legal structure, management team, and ownership structure.
- Market analysis. This part analyzes the healthcare market, including market size, trends, competition, and potential customers. A competitive analysis that identifies the strengths and weaknesses of competitors, conducted during the steps mentioned above, should also be included.
- Product or service description. Here, you should mention the project’s products or services and how they will benefit customers. Don’t forget to add information on how the products or services will be delivered to customers.
- Marketing strategy. This section outlines the healthcare startup’s marketing plan, including how it will reach and attract customers. It’s also important to add a description of the target market, pricing strategy, and promotional activities.
- Financial projections. You should ensure a comprehensive analysis of the healthcare startup’s financial projections
Starting a healthcare business while planning its strategy helps to identify potential challenges and opportunities and ensures that the project is prepared for the road ahead. By creating a detailed and comprehensive business plan, healthcare startups can increase their chances of success and obtain their goals.
Hire an advisory board
An advisory board relates to a group of experienced individuals who provide guidance and support to the startup. They offer strategic advice on various aspects of the business, including operations, marketing, finance, and legal matters.
Here are some key benefits of hiring an advisory board for a healthcare startup:
- Expertise. Extensive experience in healthcare fields, valuable insights, and recommendations to the healthcare startup.
- Networking. A broad network of contacts in the healthcare industry can be valuable in helping healthcare startups establish partnerships and collaborations.
- Credibility. The presence of respected and experienced advisory board members can help to increase the healthcare startup’s credibility and attract new/more investors.
- Accountability. Holding the healthcare startup accountable and ensuring that it is following best practices and making informed decisions. This helps you launch a successful low-cost healthcare startup company successfully and quickly.
Such specialists should have the ability to provide strategic guidance and support that is relevant to the healthcare startup’s goals and mission. The advisory board can provide valuable expertise, networking opportunities, and accountability, all of which can help to increase the healthcare startup’s chances of success.
Hire a Tech Vendor
An IT services provider refers to a software development company that ensures technology-related products or services to the healthcare startup. As a medical startup, they can help you to develop and maintain technology solutions that are essential for the competitiveness and demand of your project. Which opportunities and advantages do tech vendors bring to startups, and why are they valued?
- Expertise. Software development vendors have specialized expertise in implementing technology solutions for businesses in this industry. They can provide valuable insights and advice on how to optimize the healthcare startup’s technology infrastructure since they are acquainted with the domain-specific requirements and peculiarities.
- Cost savings. A remote technical partner is the ultimate way to reduce the healthcare startup’s costs by eliminating the need to hire an in-house tech team. Applying to such a company, you will be able to substantially optimize the medical project implementation, which can result in cost savings in the long run.
- Scalability. Healthcare startups can scale up and down their technology solutions as the business expands. This is due to tech partners that provide flexible and customizable solutions. Thus, the product can adapt to the medical startup’s changing needs.
- Security. With IT providers, it becomes so much easier to become and stay compliant with industry regulations. Your technical team can provide regular updates and maintenance to prevent security breaches and protect sensitive data. By doing this, businesses keep operating on a legal level, enhance their reputation, avoid legislation issues, and can be sure that they meet the required standards.
To find healthcare software developers for a startup, you should consider the company’s expertise, experience, and reputation. Aside from that, your tech partner should have a track record of creating and deploying digital solutions for medical businesses and should be familiar with industry regulations and compliance requirements.
Together with the chosen IT firm, you continue the project implementation and execute the following steps. They are involved in the process of creating and delivering a medical product or service to the market.
Create an Outline
The first step is to create an outline of the healthcare product or service that the startup will offer. This includes identifying the purposes and challenges your solution will solve, defining the features and benefits of the product or service, and drawing a rough roadmap, also known as the healthcare software development lifecycle.
Once the outline is complete, the next step is to design the product or service your startup will deliver. It implies creating a detailed plan for the solution, including its features, user interface, and functionality.
After the design is complete, it’s time to implode a prototype of the product. During this stage, your IT vendor is working on the model of the product or service that can be tested and refined.
Having a complete prototype, you are ready to get the final fully functioning version done. Your technical team builds the code, develops the user interface, and integrates all of the necessary functionality parts.
The next stage is to test the product. Within this process, your Quality Assurance engineers conduct various continuous testing to ensure that the product or service functions as expected and is free from bugs or other issues.
Here, you are ready to deliver the solution to the market. To attract and retain users, you should develop a marketing plan, launch your product, and make it available to customers.
The final step is to maintain and support the solution. This process covers providing customer assistance, fixing any bugs or issues that arise, and updating the product as needed.
Create an MVP
Developing a Minimum Viable Product (MVP) is an indispensable stage on the path to build your healthcare startup. An MVP is a version of your product or service that includes only the essential features needed to test and validate your business idea with potential customers.
Let’s list some critical reasons why creating an MVP is vital.
Validate your idea
An MVP allows you to test your product or service with a small group of users before investing significant resources in developing the full product. This helps you to validate your idea and ensure that there is demand for your project.
Save time and money
By creating an MVP, you can decrease time and finances by focusing only on the essential features of your product or service. Therefore, you can launch your product quickly and with minimal resources, reducing the risk of failure.
An MVP creation is a perfect way to gather feedback from users, which you can use to enhance your product or service before investing in the full development and making it more competitive. With this feedback, you can easily identify issues or areas for improvement and refine your solution to better meet the needs of your customers.
Engaging the investors in your project becomes much more fruitful when demonstrating an MVP. This means you have a viable business idea that has been validated by the target audience. Investors are more likely to contribute to a startup that has already proven demand for its product or service.
Starting an MVP for a healthcare startup, you should primarily concentrate on the essential features that address the key pain points of your target audience. Needless to say, you shouldn’t neglect factors such as data protection and meeting the required guidelines, regulations, and legislative acts.
To become a well-established market player, you should be aware of the common mistakes due to which a substantial part of startups fails:
Lack of market understanding
The first reason that won’t allow you to build your healthcare startup successfully is not having a full understanding of the market you are trying to enter. Businesses may not have a clear vision of their target audience or may not be offering a product or service that meets their needs. According to a report by Forbes, 42% of startups fail because there is no market need for their product.
Lack of budget is another popular reason that may interfere with the newly set project to success. Many entrepreneurs start a healthcare company but underestimate the amount of funding they need to bring their product or service to market, or they may not have access to sufficient funding sources. A report by CB Insights found that 29% of startups fail because they run out of cash.
Regulatory and compliance issues
It’s obligatory for health startups to comply with numerous regulations and guidelines, and failure to do so can lead to fines or legal issues. Many new market players struggle to navigate the complex regulatory landscape, which can lead to delays and increased costs. A study by PwC found that 29% of healthcare startups fail due to regulatory issues.
Poor management and leadership
This implies that founders may lack experience or may not have the necessary skills to manage a growing business, especially in such a complex domain as healthcare. This can lead to poor decision-making and a lack of strategic direction. A study by CB Insights defined that 23% of new businesses don’t reach success due to the lack of the right team.
Medical startups face stiff competition from established companies and other startups. They may struggle to differentiate themselves from competitors or may not have a unique value proposition, which makes their startups irrelevant and not in demand. Due to the Startup Genome research, 19% of startups fail due to the high competitiveness level.
How PLANEKS can help you
As a tech vendor, PLANEKS understands the unique challenges faced by healthcare startups. We specialize in implementing and providing customized solutions tailored to meet the specific requirements of your medical business.
Our team of Python experts has extensive experience working with healthcare startups, and we are passionate about helping you achieve your goals and renovate the whole healthcare market. The PLANEKS tech agency offers you to take advantage of a range of services covering software development, prototyping, testing, and maintenance, all designed to help you bring your unique product to market quickly and efficiently.
We take into account your original idea, as every medical startup is different and requires an individual professional approach. That’s why we delve deeply into every project of our healthcare partners. Let’s analyze your unique requirements and develop a solution that meets your market sector as well as demands.
Whether you’re looking to order consulting services, create an MVP, develop a full-scale product, or simply need help with support and maintenance, PLANEKS is here to assist you. Having extensive experience in the medical domain, we will eagerly help you navigate the challenges of starting a healthcare startup and obtain all of your set goals.
We also offer guidance and support to help you succeed. Our team of domain specialists can provide a comprehensive consultation on everything from project planning to deployment, helping you avoid the common issues new market players may face.
At PLANEKS, we are committed to helping your medical business prosper. If you’re looking for a tech vendor that can help you achieve your goals, look no further than PLANEKS. Contact us today to learn more about our services and how we can help you bring your start a medical business.