5 tips for building a digital health business in a turbulent digital health world


Digital healthcare innovation in the US has reached a critical turning point. Disillusioned investors struggle with a difficult public market reception, while Covid-focused startups struggle. All the while, the fundamental challenges facing the healthcare system remain.

The total life expectancy in the US is downare the rates of preventable chronic diseases upwardsand 43% of nurses on the front lines of this crisis say they are “burnt out”. Add to that the list of racial and social inequalities in health care, which is as long as it persists.

The system is in dire need of change, but the digital transformation we are seeing in banking and retail has yet to be fully realized in healthcare.

Insiders are well aware of the challenges ahead. The constant stream of news about promising companies going bankrupt and being sold for components and a decrease 0f 48% in venture capital investments – from $29.3 billion in 2021 to $15.3 billion in 2022. We’ve also seen a range of digital health companies tumbled after the IPO, leading to a frozen IPO market, with digital health stocks trading close to 2023 50% lower than two years ago.

Companies relying solely on Covid testing found that government funding continued once the crisis passed. Those who relied on quick and easy consumer adoption after the Covid pandemic were unprepared for the sticky inflation and rising costs that weakened the direct-to-consumer business model.

Nothing is quick or easy in healthcare. As we landed our Series D, an investor told me, “Today the rules have changed. In the past, when we researched companies, we tested their projections at 50% uptake. Today their business must make sense and be profitable at 5%.

Therefore, entrepreneurs interested in building their business in the post-Covid period should keep the following points in mind.


1. Solve the problems of health workers

The true leaders in our field are not VC investors, CEOs, or generative AI code developers. They are doctors, nurses and scientists. Digital health solutions are just one step in the healthcare chain they manage. We cannot and will not replace them. A modest approach is always healthy for entrepreneurs, but for the first time in a decade, selling the ‘unicorn dream’ is officially out of fashion. As a recent financing analysis shows, digital healthcare investors identify areas of greater clinical value for physicians than areas of higher return on investment. Delivery and navigation technology companies received 44% of all funding in the first quarter of 2023, diagnostic technology received 20% and wellness technology received the lowest – just 5%.

2. Provide FDA-approved technology or be replaced by AI

A recent survey shows that most digital health companies have a low level of “clinical care”. robustness“that is, they have not gone through clinical trials or regulatory processes. The fact that nearly half of digital health companies do not have clinical validation is unfortunate for health systems as the clinical needs are immense. It is also risky for the business model because the rise of AI in healthcare will eventually replace and die out many of the analytical technologies we use today Gaining FDA approval is by far the most difficult route to manage, but it is the most valuable to physicians and the technologies which it is the hardest to replace.

3. Build technology that saves money

Health care spending in the United States is unsustainable. CMS recently published predictions that it will rise to 20% of the nation’s GDP in less than a decade. In this reality, to capture the attention of potential partners, you must be able to demonstrate that your technology delivers real, tangible cost-saving benefits.

4. Maintain focus and discipline

When you work in a complex and fragmented environment, such as healthcare systems, there is a lingering temptation – and you will most likely be asked – to solve more than one problem. That may seem smart at first; after all, you are trying to grow your business. But this too leads many companies to total failure. Before you go beyond your core mission, make sure your technology solves what you’re committed to. The implementation complications in healthcare are always unknown at first, but when you encounter them, you don’t want to be at the end of your runway. Embrace that “no”. Usually, creative partnerships can take you further than if you had gone it alone.

5. Always prioritize building trust

Creating trust is paramount. There’s no need to look solely at the Theranos scandal, which has left scars on so many of us who built our businesses back then. Digital health is not like any other industry, and overpromising in health outcomes or clinical trials will always have consequences. Be open and honest with your clinical partners and early stage investors to support your innovation journey and deal with the early failures you will encounter along the way. This will help you iterate and grow in a field heavily guarded by ethics and science.

We are entering a defining moment in digital health. It is up to us to deliver on the promise so many patients are waiting for. Building businesses and products that can both serve the population and adapt to turbulent times is the first step.