The challenges of start-ups in the growing health-tech market

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Health-tech start-ups have exponentially grown since 2016, though statistically most are still destined to fail within their first few years. Why does this happen?

The annual value of health-tech start-ups in Europe increased from €7 billion to €38 billion between 2016 and 2021.

At a panel for EIT Health InnoStars – a business creation programme to support start-ups in the biotech, digital health, med tech and therapeutics fields in Europe – stakeholders discussed how to bridge the trust and credibility gap that separates these two worlds.

A start-up in which the roles, and in particular a key leadership figure, are well defined is on average more likely to win funding, they stated.

The analysis of business histories also shows that many companies do not have the same CEO from start to finish.

“For this reason, when evaluating a project,” said Carlo Sanfilippo, senior investment manager at Indaco Venture Partners, during the panel, “we ask startuppers whether they are willing to accept that in the future of the company, they might have to relinquish their role”.

Innovation through health technology assessment

The focus of large corporations on capturing large market shares delegates the innovation mandate to start-ups. This is especially true in health care.

“Much more than the promise to cure millions of patients, it is more effective for a start-up to show itself capable of improving a specific part of the patient care process,” explained Balazs Furjes, InnoStars managing director, at the event which was held in Milan between 7-8 November.

This is done through health technology assessment, a process of evaluating health technologies for specific types of interventions based on scientific evidence from studies.

Drugs, medical devices and procedures that prove they can have a major impact on patients, public health or healthcare systems are funded until, in the most fortunate cases, they become a practice.

For this process to work, the role of hospitals, which more than anyone else knows the needs of the healthcare system, and universities, which are able to validate new ideas with their studies, is essential.

Large companies and funds such as Horizon and EIT Health InnoStars enable start-ups to actually realise innovation. “But to do this we have to teach start-ups to speak the same language as big companies,” said Furjes.

Learning to speak the same language

“Even companies have their limitations,” Furjes continued. “They are sometimes very cautious about investing in new ideas.”

However, a value-based versus a cost-based negotiation manages to reverse this trend.

“Showing companies how start-ups are able to generate value in the patient care process is much more effective than guaranteeing them margins. This is the language we teach start-ups,’ Furjes concluded.

Over the last four years, InnoStars received over 1,000 eligible applications for their business creation programmes and supported around 190 start-ups, which gathered approximately €40 million of external investment.

[Edited by Nathalie Weatherald]