by Jim Evans
April 2016 – One of the mostly broadly used and ill-defined terms in healthcare is the word “startup.” It could be a guy developing an app in his basement or a company valued at millions of dollars with good technology but little or no market penetration.
A while ago, we shared a little bit about what it was like to be a pre-market healthcare startup – the frustration of raising capital, the elation of solving problems, and the challenge of creating interest in the very crowded and noisy health analytics space. Now that we are a couple of years old, but still very much a startup, we’d like to share what we’ve learned, sometimes the hard way.
If anything has proven true, it is that in healthcare no company’s experience is normative. We’ve all read the article or book that claims to be a manual for success. This is not that article. In fact, we began with a start-up manual, but many of the things that were guaranteed to work didn’t work for us.
It’s been a mix of failure and success, and we hope you benefit from our experience and discoveries.
Discovery 1: When you have limited resources, everything is a balancing act.
Growth is a dance between product, sales, and delivery. You can’t sell without a product; if you sell, you must be able to deliver; and you can’t fund product or delivery without sales. We still struggle with this balance. For example, we established a distribution agreement with a business partner and immediately started hiring to accommodate the imminent sales. The sales never materialized, but the costs associated with the team did and unraveling it was painful.
Discovery 2: Cash is a precious commodity.
Cash is central to success. It is hard not to envy well-capitalized, highly valued companies. It seemed every time we were struggling to make payroll, some healthcare company was announcing it had just raised another $40 million. But for every well-funded company, there are 10 that should be the “next big thing” but instead are teetering on the edge of insolvency. That’s hardly comforting.
We discovered that having money in the bank is a double-edged sword. It gives you a sense of accomplishment but it also provides a false sense of security. As a result, we’ve learned to only spend money when we absolutely need to, and it is one of the key reasons we are still around today.
Discovery 3: Hospital organizations seem designed to confuse, heightening the value of relationship-based sales.
Sales 101 says, “You need to know who your buyer is.” I’ve worked in automotive, pharmaceuticals, banking, government, and payer health IT. In all of those verticals, the org charts are similar and it is pretty clear who owns the budget to buy services. By contrast, it seems that every hospital is organized randomly and that the buying responsibilities vary from facility to facility. Do they have a CMIO? Does the CMO have operational responsibility or is she an administrative function? Does performance analytics report to the COO? Or the CFO? Or the CMO? Or none of the above?
Perhaps in no other market is an influential, connected, relationship driven sales team more important. Yet investing in that sales team, while seeking funding and preserving cash, becomes a another balancing act.
Discovery 4: Conviction matters; persistence matters more.
We started this venture thinking that we had something the market needed – a way to engage physicians to reduce costs in clinical operations without harming quality. But a funny thing happened on the way to transforming healthcare: almost 20 million people got insurance and hospitals shifted their focus from efficiency to capturing that revenue.
We were forced to constantly check our conviction – were we providing a service that the market needed? Over and over we came back to yes. So, it became a matter of sticking around until cost containment returned to the priority list.
So many healthcare companies don’t get a chance to fulfill their vision because they run out of money or quit too soon. We are fortunate to still be able to pursue ours.
Discovery 5: There is still room in healthcare for new ideas.
When I entered healthcare over a decade ago, I naively rejected the premise that healthcare was different. I was wrong – healthcare is unique. In no other market is the primary consumer of services so shielded from the economic impact of the service. In no other market is variability so pervasive and so difficult to root out.
Also, I believe the massive investment in EMRs over the past decade has actually made data more difficult to access, has done little to improve data transparency or transportability, and has not improved clinical workflow or quality.
This is not cause for despair. Rather, it should be a call to action because there is still so much opportunity. Patients deserve to know the cost of their care and the quality of their physicians. Physicians shouldn’t just have terabytes of data gathered about them; we need to share it with them so they can better care for patients. Data should move easily and seamlessly with patients. Clinical operations should be transparent so that costly increases in drugs or devices that yield no clinical improvement can be avoided. Care transitions, handoffs, recommendations, and the data to support these transitions should be seamless.
If anything has been clear from being a little entity in this big thing we call healthcare, it is that innovators are as important today as ever.
We have done a lot of things wrong, but we did get a few things right. We were founded on sound principles by a brilliant doctor whose vision still resonates, and we’ve been right to stick with his vision. We’ve had great people on our team and we’ve let them use their strengths and display their gifts. We’ve gotten solid feedback from our customers and partners and let them, not our notions, shape our product. Finally, we’ve had a few generous investors who have believed in what we are doing. We are motivated to reward their faith, while striving to make healthcare better. We are happy to still be one of the little guys trying to do big things.
About the Author
Jim Evans is the CEO of Socrates Analytics, a Cleveland-based healthcare analytics venture.
Prior to joining Socrates, Jim was instrumental in developing businesses in healthcare information technology for payer and provider markets with McKesson Health Solutions. Jim received a B.S. in Mechanical Engineering from The George Washington University and his M.B.A. from the Kellogg School of Management at Northwestern University.