The current global digital health market size is $197 billion and it is predicted to be $536 billion by 2025. What’s interesting is increasing number of new startups and investments.Though digital health startups are still behind to reach the status of unicorns most of them have already received a decent amount of funding. This also predicts digital health as one of the leading industries in coming years.
Here are 8 major steps to starting a digital health startup
- Select a segment in the healthcare industry.
Which industry is your interest? Where are your strengths? Find out whether it’s biotech/medical device/medical diagnostics/pharmaceutical. It’s important to choose the one which has the most growth potential. Once you select a segment, then do some market research online. Find out market size, market prediction, major players, technologies in the selected segment and their transformation into digital health applications if any.
- Find the pain in the segment and list them.
After choosing a segment of your interest in the healthcare industry, it’s time to find the pain in that segment. While doing market research, find out some areas of the selected segment where a certain level of technological advancement is still not done. Here you will find primary sub-interest of your research. Understand why this research product is not currently available on the market. Analyze the pain and opportunity simultaneously.
- Find mitigations for the pain.
Once you identify pain in your selected segment, its time for you to find possible solutions. In my case, while searching for alternative ways of detecting cancer, I found breathalyzer based diagnostics using volatile organic compounds. Similarly, after identifying the problem (pain), you can search for available solutions and why are they not working. Sometimes reasons can be their approach or technology. What’s more important is you understand the possible solution and then either make advancements in it or bring some other technology that can take over the current solution.
- Make a rough draft mind map of the working functionality of the product.
Next step is to write up your idea and make a mind map. A mind map is mind mapping tool which helps in putting your thoughts and execution process in a graphical form. It can be shared with other team members. Multiple people can work simultaneously on different sections of a mind map.
- Find developers and co-founders.
It’s time to recruit now. Yes, now it’s time for you to decide who all are best matches for your team. Find people from your known groups and see if anyone who matches the required position. In my first startup, I found my other partners from an Entrepreneurship competition where I was a participant. I also got my mentor from that competition as well.
It’s important to share your thoughts and see if you can find like-minded people in communities near you or sometimes conferences/competitions as in my case. The most critical aspect is asking. You need to ask people. There should be an initiative from someone to move further in the process. In my case, it was me who tried to ask in that program, and it worked out for me.
If you are not a computer coder, don’t worry. There are hundreds of them to choose from on freelancing websites. In my other product which is a Gmail to Pdf conversion engine, I got one of my developers from a freelancing site. Although it’s a not a very easy process if you do a smart search by talking and testing their skills by putting some fees on the table, it’s entirely possible.
But before proceeding further in sharing your idea with people, it’s suggested to draft a Non-disclosure Agreement or Confidentiality Agreement. Always, get yourself documented before sharing the idea with anyone.
- Register your startup.
Once you have engraved your idea in a mind map and have hired your team, it’s now time to register your company. In the USA there are multiple options like LLC, C Corp, S Corp, LLP, etc. Regarding funding, the best choice for company formation is C Corporation. It’s a little complex but if you are looking for international investment, its the only option in the USA. While if you do not require investment and just looking for product sales, then LLC is an option.
The two main reasons why you should register your company after hiring your team-
a) To avoid any direct lawsuit/ personal liability
b) To distribute equities and open for funding if required.
- File provisional patent.
Congratulations! You are almost there. Now it’s time for you to make your idea secure. Yes, a lot of times we share our thoughts with friends. You never know, what if someone just shares your idea with their friends and if someone copies it. Hence its essential take the next step after registering your company or even before, to file a provisional patent in USPTO. Trust me it’s straightforward, as long as your product is novel and non-obvious. Write few pages about your product and make sure you list all your claims. The cost of filing a provisional patent application in the USA is less than $500, and by submitting a provisional patent, you are secure for at least one year to provide full proof of your idea. Later within a year after provisional patent, you must file a non-provisional patent with complete details so that you can get your patent approved and published.
A patent not only protects your product idea but also increases your valuation and credibility.
- Raise funding.
After validation of the idea, team formation, product development, IP, next step is to think of raising funds if required. You need a business plan, financial model, validation report and pitch before you apply for investment from an investor. Financial model and assumptions are some of the most critical factors for investors especially when your product is in research.
Once you are ready with your investment packet which includes a business plan, pitch, financial documents, you can move forward for funding. You can search online for companies related to your industry and then find investors for each of them. You can contact the investors directly through email or via LinkedIn.
Other options for getting funding is to apply to government agencies and participate in investment related conferences. Having a small booth in conferences attract people including investors to stop by and look into your product.