Annual Review of Healthcare Startups 2024: Was It a Game of Squids?
The year 2024 was a turbulent time for well-known digital health and medical services companies, many of which encountered difficulties and ultimately folded.
However, health care remains a field of significant interest and financial investment. As the year draws to a close, I'd like to share some insights on the cutthroat world of healthcare entrepreneurship, which in 2024 seemed eerily similar to the critically acclaimed Netflix series Squid Game.
1. The Power of Perseverance and Patience
Virtually anything worthy in health care is challenging, and it'll take twice as long as you anticipate when you first embark on it.** The underdog startup or first-time entrepreneur may be inclined to overlook the strength of established enterprises, the intense friction caused by government and affiliated regulations, and the lengthy process of expanding a business—let alone achieving profitability. A select few manage to break through. However, the true success rate—measured by patient impact and sustained profitability—is infrequent. The correlation to Squid Game (for those in the know, who've just finished watching Season 2) is apparent.
2. The Uncertainty of Reality
If it seems too good to be true, it usually is. You might occasionally gain access to the real story if you're in the right information circles. More often than not, you'll be left wondering. Recently, I received a congratulatory call about the "success" of an early healthcare investment I'd made years before. Tempted to share the truth, I remained silent due to unfamiliarity with the caller. In reality, my "successful" healthcare investment now fetches mere pennies.
3. The Acceptance and Camouflage of Fraud
Some celebrated health care venture investments are indeed get-rich-quick schemes with unsustainable economic foundations. The magnitude of the fall is directly proportional to the hype. The term "fraud" remains unspoken. Questionable evaluations might be at play or, worse, misleading accounting practices. Companies secure funding based on inflated figures or deceitful bookings. No one speaks up against these executives or businesses for fear of repercussions—not the management, employees, or investors, bound by the secrecy of non-disclosure agreements (NDAs). The cycle continues, and yes, some of these individuals set their sights on new ventures. I've heard rumors that Elizabeth Holmes is launching a new healthcare company. I admit, I'm unsure—or am I?
4. The Warning of Expert Bias
Exercise caution when confronted with the authority of an "expert." A fancy name or affiliation attached to something might not mean much. It's simple to become careless when you learn that a reputable company has invested in a project and assume that the company has a functional product and sound fundamentals. But if you don't examine it firsthand, don't believe it. And if you harbor doubts, chase them with the tenacity of Olivia Benson, from Law and Order: SVU.
5. The Triumph of Failure
Some founders prosper financially despite their businesses ultimately crumbling. Subsequent funding rounds permit founders to cash out. This trend, where founders cash out early, represents a dangerous distortion of the venture model. Investors, seeking to reward and encourage ambitious beginnings, often enable this trend. Nevertheless, some of what makes venture capital work is the fact that someone puts their career on the line to see a concept through to completion. Prematurely praising the wrong individual can hinder progress—a mid-term financial outcome might be life-changing.
6. The Enigma of Purpose
If, after hearing about a company for a prolonged period, you still can't comprehend its purpose, trust your intuition...and steer clear. Such "jack-of-all-trades" companies should be avoided. Mastery—specializing in a specific area and excelling at it—generally triumphs over breadth. Aiming to cater to everyone's needs often signifies a lack of leadership maturity and responsible board governance, rather than ambition and a broad vision. I apologize, but your app, device, AI tool, or clinic cannot tackle every problem within the healthcare industry simultaneously.
7. The Challenge of Imitation
Many companies that claim to be innovative are, in fact, replications of past businesses operating in different markets or at different times. In other words, they're mere copies. Healthcare entrepreneurship suffers from short-term memory and a limited appreciation for industry history. Why bother with history when you can resell the same story—and earn more the second time around?
8. The Danger of Overconfidence
Health care is complex. Experience matters. Approaching health care for the first time can lead to numerous mistakes, which experienced individuals have already encountered. Be wary of the overconfident newcomer with an impressive resume from other industries. While they might appear compelling and promise to introduce fresh perspectives, few of them understand how to succeed in healthcare's multi-faceted landscape due to a lack of humility and patience.
9. The Forgetfulness of Lessons Learned
Healthcare companies are often ignorant of the lessons from the past, which can lead to repeating the mistakes of those who came before them. Similarly, the healthcare establishment is slow to embrace change, which can leave opportunities untapped. Thus, both newcomers and seasoned professionals can benefit from a fresh perspective and the shared wisdom from other industries. It's essential to strike a balance between sticking to the tried-and-true methods and embracing innovation.
Large established corporations and their heads frequently engage in hasty, poorly thought-out large-scale acquisitions. These decisions often burden succeeding leaders for years, attempting to make sense of the mess. Although these high-profile acquisitions receive ample media attention, they rarely lead to significant success. An explanation for these failures is rarely provided. This situation can be attributed to the 'too big to fail' concept or simply muddying the waters. More often than not, these grand plans fail to materialize, resulting in subsequent blame games. Until a new overpriced acquisition grabs attention, diverting focus from the previous one. Quite the intrigue, isn't it?
The influx of new players in every emerging trend (AI, for instance) makes it challenging for consumers to distinguish between genuine value and a marketing gimmick. Established relationships within the industry significantly impact purchasing decisions over the technical merits of the product or service. That expensive dinner, bottle of wine, and Super Bowl tickets were definitely worth every penny, wasn't it?
The sordid world of healthcare, where the patient is supposedly the priority.
Or so they claim...
Chances are, 2025 will mirror the events of 2024. Likely, an escalation of the already ongoing game.
Enter the suspenseful music.
- Despite the challenges facing healthcare entrepreneurship, with private equity firms continuing to invest heavily in the sector, some enterprising individuals are focusing on niche areas of healthcare, aiming to avoid the pitfalls of the past and bring innovation to the table by the year 2024.
- In the constantly shifting landscape of healthcare, companies that have weathered the storm of uncertainty, such as those enduring the trials of 2024, will likely turn their attention to sectors like private equity investment, seeking to bolster their financial stability and ensure the long-term success of their ventures.
