Healthtech pioneer Anne DeGheest will deliver a keynote at the HealthTech Investor Summit in December titled ‘American unicorns: how to build healthtech success in the US’. Ahead of the Summit, here is some of her advice for European start-ups.

Anne DeGheest has been working in healthtech before the sector even had a name – as an entrepreneur, angel investor, corporate advisor and mentor capitalist. Originally from Belgium, with a master’s in business engineering from Solvay and an MBA from Harvard, she’s long been established in San Francisco in the US. There, she founded both HealthTech Capital and MedStars to provide funding and support for innovative healthtech, medtech, and digital health start-ups.

Q: How did you become a healthtech mentor capitalist?

Anne DeGheest: I coined the word ‘healthtech’ back in 1986 and have been building the sector ever since. For many years, I was on my own: a ‘crazy Belgian’ in the US, helping companies pitch products that investors struggled to wrap their heads around.

This is due to the nature of healthtech: Most of the VCs at that time were only familiar with biotech and medical devices (medtech)– products that take years to develop and approve, but with a clear mechanism of action that can be protected by IP. Essentially, these investors were used to high product risk and low market risk.

But healthtech is the exact opposite – low product risk and high market risk – using existing computer technology and software, but often having to create a brand-new market and convince people you have a creative solution to their problems. In healthtech, the main question isn’t ‘Does the product work?’, it’s ‘Who pays and why?’.

Time and time again, we were met with skeptical investors. It was a hard sell but – step by step – the sector started gaining momentum. I’ve had a bunch of portfolio companies grow into major success stories, with eight IPOs and over $27 billion in market cap creation. The world has finally caught on to the vast potential of healthtech solutions.

Q: Having mentored so many companies, what do you think is the key to healthtech success?

Anne DeGheest: In the tech industry, all you have to do is create a product that works, that people are happy to use. In healthtech, it’s more complicated. First, you may need regulatory approval, and then you need to identify all the stakeholders  and develop a product they are willing to prescribe, use or pay for. You need to demonstrate that your product will save them resources and create value.

“To be successful in healthtech, you have to know who is going to pay for your product and develop a solution for that specific stakeholder.”

This is particularly complex in the US, where payers are varied and have different – often conflicting – interests. I tend to refer to the buyers here as the ‘five Ps’: Patients, Pharma, Providers, Payers and emPloyers. Not only do these stakeholders differ from Europe, but the landscape is also continuously changing. To be successful in healthtech, you have to know who is going to pay for your product and develop a solution that meet the needs of each  stakeholder impacted by your solution.

Q: The US is often seen as a bit of an ‘El Dorado’ by European startups; is the golden gleam a mirage?

Anne DeGheest: There are over 330 million Americans and the US spends twice as much per capita on healthcare as Europe. That’s the good news. The bad news is that the market is complicated. It’s very rare that you can cut-and-paste your European business model. Even if you think you are targeting the same type of stakeholder in the US, they usually require a different value proposition. This means you have to adapt your business plan. It’s certainly not a free-for-all gold mine.

Q: What is your advice for start-ups looking to enter the US market?

Anne DeGheest: The takeaway is that you can’t just put your European product directly on the US market. You have to validate your value proposition in the US, collecting evidence to demonstrate that your US business model is going to work.

“Having employees and advisors who know the local landscape is absolutely critical.”

Essentially, you have to invest in an American entity. The European companies I’ve seen succeed in the States are the ones that have moved all or part of the team to the East or West Coast, then hired employees and advisors who are already embedded in the US healthcare system. Having employees and advisors who know the local landscape is absolutely critical.

Q: Are there advantages to focusing on the European market instead?

Anne DeGheest: The EU is very generous in their funding of research and entrepreneurship. I suggest you leverage that, because there is less support available here for early-stage companies. It also gives you time to scope out the competition in the US and examine their business models. Once your company has matured in your local market and your product is effectively de-risked, then I think you can look towards the States.

Q: Do you think events like the HealthTech Investor Summit are important for the sector’s success?

Anne DeGheest: Absolutely! To make healthtech successful we need a whole ecosystem of stakeholders working together: innovators, investors, regulators, payers, providers and patients. It’s like a symphony orchestra, not a solo artist. Events like the HealthTech Investor Summit are important because they allow these different players to hear each other’s voices and understand each other’s needs.

“Events like the HealthTech Investor Summit are important because they allow these different players to hear each other’s voices and understand each other’s needs.”

The other thing I think is particularly valuable about the Summit is the pitching sessions. They’re not only a way for entrepreneurs to connect with the investors they need – they’re also inspiring to other innovators. Hearing about other’s challenges and success stories can help people think outside the box and overcome obstacles without having to reinvent the wheel. I think it’s crucial that healthtech entrepreneurs help each other, and this event is a great opportunity to connect.

Q: Do you have any special advice for women in healthtech?

Anne DeGheest: We know there is still a bias working against women in leadership positions. Women CEOs have a harder time fundraising and are often asked more negative questions by potential VCs. The overall result is less funding, despite studies showing that companies with women in their C-suite have higher returns that those without.

My advice is to prepare for the extra challenge: anticipate the tough questions and strategize on how you’re going to turn the conversation back towards the positive. Keep demonstrating that women in healthtech are perfectly capable of providing stellar solutions with high returns. This is an impact- and profit-minded industry: Eventually, the tide will turn in our favor.

Q: Do you have a take-home message for all healthtech entrepreneurs?

Anne DeGheest: Focus on the problem, not the technology. Far too many people focus on the cool tech, but they really don’t understand their stakeholders needs: what is their issue, how will you solve it, and how will you prove that to them? When people pitch to me, I always say: ‘Tell me the problem first – then you can tell me how you’re going to fix it.’

By Amy LeBlanc

The HealthTech Investor Summit on 9-11 December in Bruges, Belgium is the main event in Europe connecting healthtech entrepreneurs with the investors and mentors they need to succeed. Register at: healthtechinvestorsummit.com