Any project, including a startup in the field of health, might be evaluated in a playful way because this simplifies the understanding of a number of points. If we compare the launch of a startup with a video game, then the stage of attracting investments is quite consistent with the “boss battle”. So, despite the fact that almost all startups designate this goal as an ordinary one, only a few achieve it. Statistics say that only 0.05% can boast of successfully attracting venture capital.
But if you look at the numbers, the picture is not so depressing: in 2019, about 10,400 US companies raised more than $133 billion to finance their projects.
If you are an owner of a healthcare startup, it is important to understand the stages of the startup life cycle and be able to determine which one yours is in to be more effective in attracting investments. The information below is about this.
At this stage, the project is just beginning to develop, and there is no need to talk about attracting customers. To test assumptions, test products are created. On average, injections of one investor at this stage are less than 150 thousand dollars. In fact, it is impossible to prove your competitiveness and prospects of your own concept at this stage, except for MVP. But if there are no funds even for this task, the only investors might be:
If the MVP is developed, then you can try to get investments from other sources.
Incubators are joint programs aimed at the enhanced development of projects. The incubator employs investors and mentors who help in the early stages to turn a business with the prospect of monetization. Incubators are not only tangible financial assistance but also an opportunity to receive mentoring, specific knowledge, and support. To increase your chances of investing, look for more incubators to apply for.
Business angels. Business angels are wealthy investors. They give a certain amount to develop a startup, exchanging it for convertible debt or equity. This terminology is used because of the high credit of trust in you as the owner of a startup, as well as mentoring, and valuable advice for their wards. Frankly speaking, even business angels do not always invest at the pre-seed stage, so you will have to work with special lists — Angellist, and Investor Hunt.
How else to look for business angels? Follow the news in the world of startups and note for yourself who is most often seen investing in the preliminary stage. After you have selected a list of such investors, send them letters by e-mail or write to them on LinkedIn. To interest an investor, analyze the activities of his wards, highlight the points that could be of interest to a business angel, and try to highlight similar points in your company.
As a rule, the amount of investments is limited to 500 thousand dollars, but you should be prepared for the possibility of a decrease in capital.
A venture capitalist is one who injects into startups and business ventures in return for an equity stake. At the same time, the project should show good development prospects.
Actually, investments from venture capitalists are a certain amount of money given out by several investors. Due to the large size of investments, some time ago, the probability of investing at the pre-seed stage was minuscule, but today the situation is changing. And first of all, it goes about micro-venture funds. The best way to get in touch with venture capital companies is through contact persons or via the website.
At this stage, the business idea becomes a full-fledged business, and an influx of customers is planned. This is possible after completion of initial preparations and execution of the demanded offer.
What problems do startups face at this stage?
Read also: Best Pitch Deck for Healthtech Startup: Examples
It is easier to get investments at this stage, in contrast to the pre-seed stage, and applications for investments from most companies are recorded at this stage. Who can become investors in health startups?
Angel investors can provide up to $1 million as an investment. The procedure for communication and registration of an application here is similar to that performed at the pre-seed stage. But since the odds are higher and the choice of investors is wider, as a startup, you can study potential financial backers in more detail.
Venture capital is an option for projects that need large financial injections (more than $1 million).
Startup accelerators (they are also called business accelerators) contribute to more rapid development of the project, providing a structured distribution, mentoring, and access to investors. Experienced leaders in their niche will help you:
To receive funding from accelerators, you need to apply. The document is checked, and candidates for receipt are determined after the analysis of the documents. Typically, accelerators fund up to 3% of applications by investing in batches. Before applying, we recommend establishing contacts with mentors: this way there are more chances to receive the necessary financial injection.
At the growth stage, investments can be provided by:
In general, the same steps are taken to find venture capitalists, but additional steps are needed to be taken to attract large corporations. Attracting giants like Facebook or Amazon requires a carefully planned go-to-market strategy, and entering corporations must begin with finding common contacts.
There are a lot of investors for startups in the healthcare industry, establish a relationship with them. Here are just a few of them:
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