“How are things with COVID-19 where you’re at? Hope your family is safe and sound!? Baked any sourdough bread yet?” Raise your hand if pretty much all your meetings have started like this over the past few weeks. I know mine have! It’s been quite a ride and a lot has changed. Often it seems like everything has changed and it’s overwhelming and weirdly exciting at the same time, and then in a way it’s all the same as I curate newsletters, write emails and articles and spend way too much time on Zoom.
People like innovation, but they don’t want to change.
After the past couple of weeks of working from home, I’m exhausted. Really, really exhausted. But I also feel like this crisis has brought a lot of us closer together, and has inspired lots of conversations that maybe wouldn’t have happened under different circumstances. It has re-energized a lot of us working in digital health, as those forward-thinking models we’ve been developing and promoting, are finally put to the test on a bigger scale. People like innovation, but they don’t want to change. This crisis however has forced many of us to change and to adjust our behavior due to our circumstances. The healthcare consumer is no exception.
Yes, consumers have discovered healthtech. According to a recent survey done by PwC’s Health Research Institute, American consumer sentiment before and during the pandemic reveals that people are accessing health information in new ways. Their trust has shifted as well.
The delivery of care may look very different after the pandemic, HRI found. Much has been reported about the explosion of telehealth since the crisis began. HRI’s consumer survey found that new telehealth users include generally healthy people looking for a quick sick-care visit and, critically, people with more complex medical conditions who need to manage their health.Source: https://femtechinsider.com/surveycovid-19-consumer-health-behavior-changes-pwc/
We’re entering a new era of healthcare delivery and in my opinion, there’s no going back. I believe that telehealth, remote monitoring and at-home testing are here to stay and will be part of “the new normal” we keep hearing about.
The new normal. This new normal has been my silver lining and my reminder that the situation we are in right now is not permanent, and that change is constant and sometimes for the better. It is exciting to think about this new normal and I believe that many in our community will turn this change in consumer health behavior into great opportunities. However, I also believe that there is a real risk that some might not make it this far.
Over the past few weeks I have spoken to many VCs and startup founders and would like to offer some thoughts and observations today about the state of the early-stage femtech ecosystem during “these trying times”.
On “Business as Usual”
Let’s start with the evergreen topic, the lifeline of the startup world.. Let’s talk funding.
When following VC twitter these days (Yes, I DO love me some VC Brags…), it is full of affirmations. Affirmations to founders, journalists (and each other), that nothing has changed and it’s business as usual. And I believe that in a way that’s true, but it’s also not. While the intention is to keep operating as per uuuush, there is an additional influx of information now due to COVID-19 (regulations, market changes, trends, etc.), that firms and individuals need to process. And processing new information takes time and energy that would otherwise be spent on day-to-day operations.
Generalizations are usually not my thing, as there’s always outliers and exceptions (and there ARE outliers and exceptions), but overall funding is going to 3 types of early-stage companies right now:
1 . Current Portfolio Companies & Existing Networks
During my time as a retention-focused PM, I remember constantly preaching how it is more expensive to acquire a new customer, than to retain an existing one. And in a way, this applies to venture capital right now. When it comes to investments, many look inwards – at their existing portfolio companies (Series A and beyond) and their existing pipeline (early stage). Focus is on helping their portfolio companies make it through the crisis and helping them adapt to the new situation.
With regards to scouting, we see a lot of activity in existing networks. VCs are reaching out to founders and individuals, they’ve been in contact with before, which can be a challenge for those starting to fundraise. There is, however, a rising number of Office Hours, which present a great opportunity to get on their radar.
2 . “Validated by Accelerator”
Yes, a lot (the good, the bad, the ugly) can be said about accelerators, but those who’ve been through the intense period of focus, that is part of the accelerator experience for most, are in high demand. Accelerator graduates are a somewhat safe bet, as they have been vetted and have spent time setting up their companies for of growth.
If you are thinking about joining an accelerator program now, be very clear what your goals are. Most programs are online now and it will be hard to replicate the on-site experience and networking in a virtual environment. Whether or not 7% of equity are worth a virtual accelerator experience is really a decision each founding team will have to make for themselves considering the stage and financial situation their company is in.
3 . Brave New World
The “Brave New World” investments are somewhat unique to the digital health space (and a few others like remote, edutech etc.). As mentioned earlier, digital health has made a big jump up when it comes to consumer awareness and acceptance, and unsurprisingly we see lots of investments in this space.
Regulations have changed and have largely been loosened (especially in the US) to address care needs during COVID-19. Whether or not these regulatory changes are here to stay remains to be seen. I believe that the hyper-growth we’ve seen over the past few weeks in certain areas (e.g. telehealth) will slow down a little, once the pandemic is over, but the trend to more digital health will continue.
Are You Investment Ready?
While many startups are looking to fundraise right now, there’s others who are just getting started and are wondering what the next steps for them could be. Talking to investors, their advice really falls into 1 of the 3 categories below
1 . The Power of Zero
No employees, no customers? Now is your time! But not necessarily your time to fundraise. Embrace the power of zero and keep building your product, keep working on showing traction. How can you monetize right now? Can you keep working on your project for a few more months without raising money, keeping in mind that fundraising takes a few months anyways? Can you lower your burn rate? If you can afford to boot-strap a little longer, chances are that it will help increase your traction and valuation a few months down the road.
2 . Get a Grant!
If bootstrapping is not an option, is there free-ish money or support available to you right now? Are there grants in your field or area? Accelerators, maybe? How can you extend your runway and get help growing your company without giving up too much equity right now? While grants may not be the ultimate answer, they can buy you some time to continue working on your idea and product and get some initial traction.
3 . “The Dating Phase”
No matter what stage you’re in, whether you’re looking to fundraise immediately or in a few months, use this time to get to know investors who are interested in your field. As mentioned office hours are a great opportunity, but also don’t stop outreach. Yes, times are busy, but dealflow still matters. Just like during any other time, it is unlikely that someone will write you a check after a first meeting, so use this time to network, get feedback and optimize your pitch. Essentially: Keep going. It may be a little harder and might take a little longer, but I can only encourage you to start building those relationships.
New Funds, New Opportunities?
Despite news of startup layoffs and difficulties fundraising virtually, there’s also some good news. Especially for startups in the digital health space. Not only are established investors starting to look towards those building the future of healthcare, there’s also a number of new groups who are investing, new funds or a new focus on healthtech. It is likely that those funds are currently looking to build up their pipeline and without a lot of existing investments to manage, they might be very willing to take a meeting with you.
Curating the Femtech Insider Newsletter over the past few weeks has left me feeling cautiously optimistic. We’ve seen significant investments despite the crisis, more overall interest in healthcare companies from investors, quite a few new funds and hyper-growth among digital health companies due to COVID-19.
Sounds promising, right?! Well. Somewhat. The truth is that not every company will make it through this crisis. Those that do, however, will be in a great place to capitalize on the opportunities this new era of digital health will unquestionable bring. Personally I can’t wait to see which femtech companies will be among them and what they will build to take women’s health to a new level.