Web-based healthtech startups have invention risk. Surprise!

As readers of this blog know, I am interested in the potential of novel social networking and other internet-age techniques to transform our creaky healthcare system. A particularly intriguing class of startups is using these social techniques to change the behavior of patients in ways that lead to better health. For example, helping people to eat less, or avoid pre-diabetes, or manage their medication better, or avoid hospital readmission by taking better care of their heart disease.

The exciting thing about these web-based startups is that they use Lean startup methodology, have low capital requirements, and are staffed with young, energetic, change-the-world types.

And, putting on my investor hat, they have market risk perhaps, but no invention risk, because all this internet stuff is engineering right?

So, I was quite surprised recently, when I had reason to think more carefully about this class of companies, to realize that I think they do indeed have a pretty substantial invention risk. And interestingly, most of the ones I have looked at don’t realize they have invention risk, and are not managing their businesses as if they have invention risk. That is a worry. [Read more…]

Invention risk makes lean science startups different

A hallmark of new ventures that are based on scientific advances in fields like medical devices, health tech, or cleantech is that they often have invention risk. Frequently they also have market risk.

InventionAnd while the standard venture capital reaction to startups with both market and invention risk is “come back when one of the risks has been eliminated”, I find them exciting, have been involved with quite a few of them over the years, and am always looking for ways to optimize the rate of risk reduction per dollar invested.

For the last 18 months I have been trying to apply / modify the principles of lean startup and customer development to a handful of companies I have been helping, each of which has a healthy amount of invention risk as well as a dollop of market risk. I have gained some insights that I have not seen discussed elsewhere, and thought I would share them.

And lest you think invention risk only applies to hardcore science projects, one of the most counter-intuitive things I have come to realize (here) is that many of the new, web-based healthtech startups that aim to change patient behavior, and thereby improve healthcare, have a very high degree of invention risk (as I define the term).  [Read more…]

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